Pine River China Fund to Start With as Much as $150 Million

Pine River Capital Management LP, manager of one of the most profitable U.S. hedge funds last year, will start a China fund with as much as $150 million in October, a marketing document seen by Bloomberg News showed.

Pine River China Fund will employ strategies including equity long-short, relative-value credit, event driven, convertible bond and quantitative arbitrage, according to the document. It will also exploit valuation gaps between yuan-denominated shares traded in China and Hong Kong-quoted China stocks, it added.

Pine River, which has had an Asia fund since 2004 focused on convertible arbitrage, is broadening its regional trading after profits and assets have swelled. The company more than doubled its assets to $13.6 billion as of July 1 from August 2011, according to the document.

The Pine River Fixed Income Fund, overseen by Steve Kuhn, returned 35 percent last year, in part by investing in mortgage bonds. The performance placed it second among hedge funds with at least $1 billion, according to rankings by Bloomberg Markets.

Patrick Clifford, a New York-based spokesman for Pine River at Abernathy MacGregor Group, declined to comment on the plans because of their private nature.

Relative-Value Strategy

Relative value strategies seek to profit from valuation gaps of related securities without betting on market direction.

The multistrategy relative-value China fund is expected to start with at least $100 million, according to the document, which didn’t identify the source of the initial capital. It will be led by Dan Li, one of 16 Pine River partners globally and co-ahead of Asian trading of the Minnetonka, Minnesota-based company, it added.

Kuhn was sent by his former employer Goldman Sachs Group Inc. to China in 2005 to educate employees of sovereign-wealth funds and the central bank on the U.S. mortgage market. He also taught finance at Tsinghua and Peking Universities during his stay in the country.

Pine River last year hired Li from competitor Magnetar Capital LLC, the hedge-fund manager that profited from subprime defaults in 2007, according to the document. Li was a managing director at Magnetar between 2005 and 2011, heading its China business and financial engineering group, the document said. He was a director at Citadel LLC before Magnetar.

Pine River has 70 employees working on research, software development and trading in Beijing, Shenzhen and Hong Kong, said a person with knowledge of the matter late last month. Its Asia fund now manages about $270 million in net assets, the person said at the time.