Managed futures is relatively young in the US – the vast majority of the industry (by AUM, anyway) is less than a decade old. But outside the US, it’s even rarer. A few months back we took notice when Winton led the pack on bringing managed futures to China – they were the first CTA to move into the market, which up until recently was blocked by Chinese laws. Winton may have been first, but it doesn’t look they’re going to be alone for long. Via Futures and Options Network:
Last month, the China Securities Regulatory Commission (CSRC) issued its first batch of asset management licences to 18 domestic futures brokers paving the way for the launch of managed futures in China.
Many of the 18 companies are now on the hunt for international partners in a bid to replicate the Winton Capital Management model that led to the creation of the first managed futures fund in China in September.
Other firms are emulating the Winton model – partnering with a Chinese firm to serve as an “advisor” to the local firm’s trading activities – out of necessity. China’s laws may have relaxed a little bit, but American firms are still forbidden from directly buying and selling futures contracts on Chinese exchanges (though that, too is supposed to change eventually).
The million dollar (or yuan?) question at this point is whether the regulatory framework in China is robust enough to keep investors safe. As much trouble as US regulators have been having recently, we’re not exactly convinced that China’s government will be able to root out fraud, especially considering their track record. The article continues:
Another upcoming launch that signifies the liberalisation of the markets is the reintroduction of trading in Chinese government bonds after a 17 year hiatus following a trading scandal that led to investors losing hundreds of millions of RMB. The launch will be the second contract on the CFFE, which began trading on the CSI 300 in 2009.
Whether the Chinese regulators can offer enough protection to enterprising managed futures programs will likely determine whether this market takes off or sputters. Futures trading is complex and risky as it is – mix in a government and regulatory regime with a less-than-stellar reputation…
At any rate, it’s certainly a development worth keeping an eye on.