The Permal Group, one of the world's oldest and largest hedge funds, is in talks with several large Chinese financial institutions to foster the overseas investment plans of cash-rich firms.
Permal will also seek investment opportunities in China's capital market as the country pushes forward more sophisticated financial tools next year, its CEO Isaac R. Souede said yesterday during a Beijing visit.
China is considering the introduction of new advanced financial tools like index futures, margin trading and short selling in its stock markets as early as next year to improve and further deregulate the financial market.
"I think over the next 10 years we can see a major change in the nature of the Chinese market as financial tools become more available, more discriminating and more fundamentally driven," said Souede, a veteran of the US hedge fund industry.
However, he noted that inflation is what Permal's risk- preferring fund managers are most worried about, fearing that it would drive speculation in the market, particularly in the real estate sector.
The Chinese government is aiming to cool the red-hot property market through changes in taxation, credit and land policies. The State Council last week re-imposed the 5.5 percent tax on transactions involving residential property that has been held for less than five years.
Souede said now is not a proper time to buy property as asset prices have soared sharply but it may be a good opportunity to invest in property stocks, which have been depressed by investors' uncertainty about Beijing's policy to cool down the real estate market.
When asked about the prospects for the hedge fund industry in China, Souede described it as a nascent one that has just started to boom and said more prominent Chinese hedge fund firms would emerge once the regulators introduce more financial products to liberalize the market.
Established in 1973, Permal is one of the world's largest and oldest firms investing in hedge funds and has approximately $20 billion in assets under management.
