America’s billionaire investors are charging headlong into China despite the torpedoes. Money has been managed for Chinese customers for 30 years by billionaire Ray Dalio. Not just now, anyhow. Investing in China is a risky proposition, according to billionaire Howard Marks. He won’t be moving, though. Recently, a number of mutual funds aimed at Chinese clients were introduced by billionaire Larry Fink, CEO of BlackRock, the largest asset manager in the world. He has no intention of changing his mind.
With a few significant exceptions, well-known American billionaire investors haven’t changed their minds about China. Nothing seems to be able to change it, including Covid-19 lockdowns, protests against Covid-19 lockdowns, the Chinese government’s response to the protests, the genocide of the Muslim Uighurs, slave labor in Xinjiang, any stock fraud involving Chinese companies, the crackdown on democracy in Hong Kong, the 30% decline in the Hang Seng since 2019, persistent intellectual property theft by Chinese firms, or American companies moving to manufacture overseas.
The well-known international businessman Jim Rogers, who essentially wrote the book on investing in China, told Forbes that “China is still going to be the most successful country in the 21st century.” “America was the most prosperous nation in the 20th century, but there were many terrible moments as well. However, we still had success. The money would have been lost if you had given up on America.
Dalio’s Bridgewater secured $1.25 billion for its third China fund in November 2021. According to the Wall Street Journal, Bridgewater has been managing private funds in China since 2018, with its initial fund predicting a 19% annualized return until 2021. Bridgewater rose to the position as one of the largest foreign managers of private funds in China because of that fundraising. In Bridgewater’s history of doing business with China, the rise was only the most recent. The Chinese government is one of Bridgewater’s biggest clients, according to a Bloomberg story from the previous year. According to the article, China has been a client of Dalio’s company since 1993. Of the state’s assets as of the previous year, the hedge fund was in charge of $5 billion. Dalio and Bridgewater declined to make any more comments.
And I have to think that they won’t forsake it, Marks said to Forbes. They, among other things, “want to keep the economy thriving and the people pleased.”
That explains why Oaktree has remained eager to conduct business in China while others have been hesitant.
According to Marks, “China is viewed as an uninvestable country and has been for the past year.” “I don’t see it as being uninvestable. We’ll probably keep making investments in China, but we’ll be cautious since we don’t. The future’s prospects are uncertain to us.
Oaktree’s entry into China hasn’t gone smoothly. The biggest property developer in China, Evergrande, missed a payment on an Oaktree-backed loan. According to the Financial Times, Marks’ company sold Evergrande collateral in November and was able to collect its investment plus interest.
Despite China’s stern response to the outbreak, Fink’s BlackRock launched mutual funds aimed at Chinese investors last year. In an editorial for the Wall Street Journal headlined “BlackRock’s China Blunder,” another billionaire investor named George Soros referred to the disclosure as a “tragic miscalculation.” Requests for more information on BlackRock were unanswered.
Not just billionaires have maintained their interests in China. The enormous California State Teachers’ Retirement System started seeking China-focused equities managers in August.
The pension fund made a point of pointing out that there is no assurance that any of the managers in the request would actually receive an allocation; rather, the request will just create a prospective pool of managers who may receive cash.
The SBA of Florida, one of the state pension funds in the United States, has temporarily suspended investing in China. The endowments at Harvard and Yale, two of the largest such funds in the world, are among those who have said in the last year that they will reassess their holdings of Chinese assets due to worries over human rights violations in the nation.
Nothing short of U.S. government action will stop American money from pouring into the nation, according to Kyle Bass, the founder of the hedge firm Hayman Capital Management and a longstanding opponent of China and those who invest there. Bass made this statement to Forbes.
According to Bass, executive directives from the president or actions taken by our regulatory organizations are the only things that will persuade investors to avoid making investments in China. We would all be speaking Chinese tomorrow if the private sector handled national security in the United States.
The ongoing billionaire investment in China brings to mind a passage by William Faulkner that talks about how we love our partners despite their flaws rather than because of any of their charms.