By Summer Zhen and Selena Li
HONG KONG, Oct 22 (Reuters) – Beijing-based quant fund Lingjun Investment’s offshore arm has attracted at least $300 million from US and Southeast Asian investors, a top executive said, as it resumes fundraising two years after facing trading restrictions by Chinese regulators.
Lingjun’s assets dropped to around 50 billion yuan ($7.49 billion) after stock exchanges in Shanghai and Shenzhen barred it from trading for three days in early 2024 for breaking rules.
The action by the two Chinese exchanges came amid a Chinese regulatory crackdown on quantitative funds, which use statistical techniques and automated algorithms to make investment decisions, blaming them for exacerbating a market selloff.
Computer-driven quantitative trading has grown rapidly into a major force in China’s capital markets. The sector has drawn heightened regulatory scrutiny as authorities seek to protect smaller investors.
Global interest in China’s quant sector has been reignited by AI-fuelled innovation and better return prospects following the implementation of improved risk controls – factors that helped Lingjun to regain access to international capital.
The firm’s Hong Kong unit, Lingjun Capital, has secured more than $300 million from a US institutional investor and several Southeast Asian clients, Cai Meijie, chairwoman and founder of Lingjun Investment, told Reuters.
The firm is also in advanced talks for a $150 million allocation from a Southeast Asian sovereign wealth fund and is actively marketing its strategies to investors in the Middle East, she said.
Cai, who founded Lingjun in 2014, said the success of AI startup DeepSeek, which was incubated by a quant fund called High-Flyer, has sparked a re-rating of Chinese assets and improved perceptions of the country’s quant funds.
“People are looking at Chinese quant funds from a new angle. It’s increasingly about how AI can be applied in investment,” she said, a shift from the traditional view that quant funds simply profited from algorithmic advantages.
Lingjun managed 100 billion yuan ($14.98 billion) at its peak to become one of China’s top four quant funds before the regulatory crackdown two years ago.
“We didn’t conduct any fundraising activities for two years,” Cai said. “We only restarted onshore fundraising in March and just resumed fundraising overseas, because we wanted to see whether our reforms were truly effective.”
The firm’s governance was insufficient at the time, she said, adding that the regulatory action was a “hard-learned lesson.”
The measures Lingjun has taken since then include doubling the size of its risk-management team, embedding risk checks into trading systems and forming a five-member investment committee to standardise decision-making procedures.
Its flagship equity fund became one of the top-performing hedge funds in China last year, delivering a return of more than 70%, data from fund distributor Simuwang.com shows. And in the first nine months of this year, it gained more than 10%.
By comparison, China’s benchmark CSI 300 was up 18% last year, though it is down 6% this year through September.
($1 = 6.6741 Chinese yuan renminbi)
(Reporting by Summer Zhen and Selena Li; Editing by Sumeet Chatterjee and Thomas Derpinghaus)
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