Considering China’s stock market is only 20 years old, and its asset management industry a mere 10 years old, it may appear premature to discuss the current state of its alternative investment market. But in 2010, the fund management industry grew some 40 per cent to reach $392bn under management, according to a report by Z Ben Advisors, a Shanghai-based consultancy firm, and 38 mutual funds have already been launched in 2011.

However, hedge funds currently play a limited, almost zero, role on the mainland, at least legitimately. There are two distinct markets. On the one hand there are the big asset management companies running domestic hedge fund strategies approved by the China Securities Regulatory Commission, the state regulator, which are legally entitled to raise money from wealthy individuals on the mainland.

Then there are the unregulated private fund managers operating in the shadows. Roughly 100 or so are “sunshine private funds” that are created through trust companies (which themselves are regulated); but there are also unknown numbers of fund managers, many of whom are finance industry professionals, running a classic “two guys in a garage” operation.