HONG KONG, Dec 19 (Reuters) – Wealthy Chinese individuals are paring holdings of local securities and are increasingly looking at assets in the United States and elsewhere overseas – a trend that is set to gather pace in 2023, fund managers and industry sources said.
Hit hard by losses this year, rich Chinese have become more concerned by the uncertain outlook for a domestic economy grappling with COVID disruptions as well as the geopolitical impact of Russia's invasion of Ukraine on China, they said.
Underlining the bleak return prospects at home, hedge funds with Greater China strategies have lost 12.9% for the year to end-November – on track for their worst year since 2011, according to Eurekahedge data.
Rich Chinese are also fretting about Xi Jinping's "common prosperity" drive to reduce income inequality, asset managers said, adding that they are looking at overseas private equity and property investment opportunities in countries like the United States and Japan.
Although investing outside of mainland China is not a new development, a significant chunk of that wealth has usually been invested in Chinese assets such as Chinese securities listed in the offshore markets.
"Previously, the wealth creation for these people was not (about) buying American stocks, or buying American real estate…it is starting to change," said Jason Hsu, founder and chairman of Rayliant Global Advisors.
The Boston-based asset manager has been receiving many queries from Greater China family offices to learn about U.S. economic policies and investment rules, he said.
One Hong Kong-based portfolio manager for a family office that has more than $1 billion in assets told Reuters he slashed his portfolio's exposure to Chinese assets to a third from the 80% he had at the end of last year and is looking to further trim that exposure.
The portfolio manager, who asked that he and his firm not be identified as the issue is sensitive, has instead increased investment in overseas energy and property sectors – particularly in Japan and the United States – as well as in venture capital.
A managing partner at a separate Chinese family office with more than $1 billion under management said his firm was spending "a significant amount of time" studying money managers and investment opportunities in Japan and the United States, while also keeping an eye out for opportunities tied to China's reopening.
Underscoring the heightened interest, the U.S. consulate in Hong Kong held two virtual meetings in October and November to connect family offices based in Greater China with U.S. money managers, according to an email reviewed by Reuters and two sources familiar with the matter.
In one of the meetings held last month, Greenlight Capital president David Einhorn, who made his name by shorting Lehman Brothers, and Ken Goldman, who runs the family office of former Google CEO Eric Schmidt, were invited.
The two sources declined to be named as they were not authorised to speak to the media.
The U.S. consulate told Reuters that it frequently explains investment and economic trends in the United States to a wide variety of audiences. Goldman said he attended the session while Einhorn did not respond to Reuters queries.
Wealthy Chinese might have made a lot of money from their home market in the past few years but now they find this does not always work, said Eva Lee, head of Greater China equities at UBS Global Wealth Management Chief Investment Office.
"Investors have learned a lesson this year, they realised diversification is just so important," she added.
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