CHINA’S insatiable appetite for equities is stoking the fastest growth in years for its US$385 billion hedge fund industry.

New fund offerings swelled to about 1,500 in July after running at a 1,217 monthly pace in the first half, the fastest since at least 2015, according to fund tracker Shenzhen PaiPaiWang Investment & Management Co.

The influx could give fresh impetus to the equity market.

Regulators have encouraged the development of products for institutional investors like banks and pension funds and will allow insurers to own more stocks in their portfolios.

Still, critics caution that taking such market-supporting measures too far may lead to the whirlwind trading that fueled massive bubbles in 2015 and 2007.

Many hedge funds, known locally as private securities funds, borrow money to amplify returns so they can stand out from thousands of competitors.

“If a fund manager is lagging the market, the pressure will be huge,” said Zhang Qingyun, deputy general manager of China Vision Capital Management, a Beijing-based private fund.

Private funds cater to domestic institutions and qualified investors with the ability to commit a minimum 1 million yuan (US$143,000). While many of the funds are long only due to restrictions on securities lending, they charge management and performance fees in ways similar to hedge funds. The industry oversees about 2.7 trillion yuan across more than 45,000 funds. (SD-Agencies)