UG Investment steps outside greater China as risks of Taiwan conflict grow

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UG Investment, one of the oldest hedge funds specialising in Chinese markets, is planning to open its first office outside greater China to step up investment in south-east Asia in a move that would help it guard against the risks from any conflict between China and Taiwan.

The fund, which manages assets of about $4bn, will open an office in Singapore, according to three people with knowledge of the details. It launched in 1998 and currently operates from Taipei and Shanghai.

Tensions between the US and China have increasingly centred on Taiwan, with Russia’s invasion of Ukraine in February fuelling speculation that Beijing could try to annex the democratically governed island in the next few years. China claims sovereignty over Taiwan and the Chinese military has significantly increased its activity in the region over the past two years.

Two people with knowledge of UG’s plans said the risk of invasion was one factor in its decision to open a Singapore office. Other factors included talent retention and recruiting new staff to invest in south-east Asia, one of the people said.

UG’s management, including its chief investment officer Rachel Tsai, are not expected to relocate from Taiwan and the fund will not close its offices in greater China, according to one of the people.

UG’s chief operating officer Brandy Chen, who joined the hedge fund from JPMorgan 13 years ago, visited Singapore in June to look into regulatory licences and office space, the person added.

UG said in response to a request for comment on its move to Singapore that the Financial Times’s information did “not reflect truthfully” its standpoint, but did not elaborate further.

Investment professionals in the region described the opening of an office in Singapore as a sensible precaution.

One founder of another investment firm with links to Taiwan and Hong Kong said it was a “prudent move” but added that he believed the risk of a Chinese invasion of Taiwan was minimal.

“South-east Asia, especially Vietnam and Indonesia, is where Taiwanese money is generally going in any event,” he added.

Singapore is working to bolster its reputation as a leading financial centre in Asia. Hong Kong has historically been the main hub for global financial services groups in the region, but Beijing’s national security law and draconian pandemic control measures have damaged its reputation.

Singapore launched a new corporate structure in 2020 to encourage hedge funds to move assets.

One of the people with knowledge of the business described UG as one of the “best-kept secrets” of Asian hedge funds.

The low-profile fund was launched by Eugene Wang in 1998 with $20mn of seed capital after he left Taiwanese brokerage group Yuanta Securities. It was one of the first hedge funds in Taiwan and one of the earliest foreign investors in Chinese markets.

It was granted a qualified foreign institutional investor licence shortly after China launched the scheme in 2002, which permitted foreign investors to trade on stock exchanges in Shanghai and Shenzhen for the first time.