New York (HedgeCo.net) – It seems like anything and everything in terms of Chinese investments are hot these days. The performance of the Chinese stock market over the past year is well documented, but apparently the slow economy has created another investment vehicle that has hedge funds clamoring for more.

According to a recent article from Bloomberg Business, non-performing loans in China jumped by $22.6 billion in the first quarter alone and the total has now reached $158.6 billion. As the economy continues to slow, these amounts could continue to grow.

The article points out that fund manager Shoreline Capital Management Ltd. raised $500 million for its third Chinese distressed debt fund and Belos Capital Ltd. is buying more bad loans than they were one year ago.
Because the demand for the debt instruments is growing, the returns are going to be lower. The bad loans are going for over 50 cents on the dollar or more.

Rick Pendergraft
Research Analyst
HedgeCoVest