A UBS Group AG hedge fund unit is considering giving investors direct access to its China strategy, after it navigated through a raft of regulatory actions.

The strategy has booked double-digit gains this year, with “very positive” returns in both July and August, said Kevin Russell, New York-based chief investment officer of the US$9.6 billion UBS O’Connor unit.

He declined to give precise performance numbers or say whether it’s creating a separate China fund, citing regulatory restrictions.

Clients can only access the China strategy through UBS O’Connor’s US$3.2 billion multistrategy investment pool at the moment. China accounts for 13 percent of its gross assets— the combination of bullish and bearish investments — and has contributed just over 15 percent of its “top decile” return this year, he added.

“Global investors continue to be underweight China,” Russell said. “They continue to think that they need to be invested in China, because it’s very compelling from the growth and liquidity perspectives. But they are looking for safer ways, more conservative ways to invest in China.”

China’s regulatory actions have clouded the prospects of erstwhile investor darlings in industries including e-commerce, ride-hailing and after-school tutoring.

The Hang Seng China Enterprises Index is the second-worst performer among major stock indexes tracked by Bloomberg globally this year, after the tightening prompted investors to slash holdings.

Some of the most seasoned regional hedge fund managers are licking their wounds after double-digit losses in July, the worst month for China stock-pickers since March 2020, according to data from Goldman Sachs Group Inc. and Eurekahedge Pte.

The market volatility has widened the performance differentials of Chinese stocks, providing more opportunities for so-called relative-value traders like O’Connor that seek to profit from pricing gaps of related securities.

“Despite the market being one of the worst performing markets in the world, despite some of the regulation and intervention surprising, there have been terrific opportunities for relative-value investors,” Russell said. (SD-Agencies)