Managed futures are used the world over by sophisticated investors, but one rapid growth space where they’ve yet to gain a foothold has been China. Despite the nation’s stellar economic growth, it’s been slow to move into the managed futures space, but one of the largest, oldest CTAs in the world is looking to change that. As a Financial News article explained today,

Winton Capital Management, the largest managed futures firm in Europe, has teamed up with Shanghai-based Fortune SG Fund Management for what is believed to be the first Chinese managed futures fund. […]

Futures are a relatively new development in China, which is why managed futures in China has not existed as a strategy until now. The China Financial Futures Exchange, or CFFEX, was established in Shanghai in September 2006. In early 2008, it launched the CSI 300 index futures, the first contract of CFFEX. The exchange has since introduced financial derivatives such as other index futures, index options, government bonds futures and currency futures.

For overseas managed futures firms such as Winton, the liberalisation of Chinese futures trading offers opportunities. Tim Wong, the chief executive of AHL, told trade magazine the Hedge Fund Journal in July: “Over the next few years China will be an extremely important chapter for the CTA universe.”

Foreign companies are not at present allowed to trade in China, this is on the cusp of changing. Wong said that the Chinese authorities are planning the launch of a crude oil contract on the mainland that would be open to foreigners to trade, although how the contract will be structured and whether it will be priced in reminbi or dollars remains undecided.

This could be an interesting development, or a non-event. There are two components here. The first is that Chinese futures markets have been closed off to outside investors, and if this changes, there could be implications for managed futures programs already in existence. If the trading data out of China is accurate, they certainly have some impressive volume in their markets, so any kind of opening to foreign investment could present a slew of trend opportunities for the managed futures space as a whole. The second component is the idea of existing managed futures programs accessing the millions of high net worth investors in mainland China and that market opening up for asset raisers. Either way, this is definitely a story we’ll be following closely.