China Hedge Funds Surge: 2025 Winners Revealed

At the start of 2025, the investment landscape for China appeared fraught with risk. A new protectionist administration in the United States, a teetering domestic real estate market, and the looming threat of a TikTok ban created a climate of uncertainty. Yet, twelve months later, many of these fears have proven to be overblown.

Hedge funds willing to bet on the Chinese economy were handsomely rewarded. Managers including Bridgewater, Tekne Capital, and Pinpoint benefited from a strong year for Chinese stocks, driven by government stimulus and increased corporate buybacks. The average China-focused fund outperformed the broader industry, signaling a potential shift in global investment sentiment.

Chinese leader Xi Jinping and his ruling party actively pushed to stimulate the economy, leading public companies to significantly increase their buybacks. This strategic focus helped stabilize the market despite initial headwinds. The volatility that characterized the start of the year gave way to a period of sustained growth.

Concerns regarding technology and artificial intelligence also diminished. While American companies initially seemed to surge ahead, China's AI scene—led by startup DeepSeek—is keeping pace with Western peers. Furthermore, the US government announced that Nvidia will be permitted to sell its powerful H200 chips to Chinese companies, easing restrictions on critical hardware.

The headwinds facing the country made strong companies very cheap.

This sentiment, expressed by Tekne Capital's Beeneet Kothari, proved prescient. Investors who identified undervalued assets during the early 2025 turmoil reaped significant benefits as the market corrected.

The performance of specific funds highlights the depth of the rally. Bridgewater, which manages $92 billion across all its strategies, generated a 34.2% return in its China Total Returns fund. This performance underscores the firm's confidence in the region's economic trajectory.

Smaller, specialized firms also posted impressive numbers. Tekne Capital, managed by Beeneet Kothari—a onetime lieutenant of billionaire Stanley Druckenmiller—was up more than 50% last year. The $1.5 billion firm holds stakes in Chinese companies such as:

• DiDi Global
• Kanzhun (recruiting firm)
• GDS (data-center builder)

According to HSBC's Hedge Weekly report, funds based in China and investing in the country performed well. Pinpoint, with $3.4 billion in assets, saw its China-focused strategy return more than 24%, while its multistrategy offering—investing across Asia—rose 11.6%.

Many funds are heavily invested in ByteDance, the China-based owner of TikTok, which faced existential threats in early 2025. A possible US ban on the popular social media app imperiled the company, one of China's biggest tech giants. However, ByteDance navigated these challenges successfully.

The company sold a majority stake in its US TikTok operations, effectively mitigating regulatory risks. This move, combined with continued global growth, has made ByteDance more valuable than ever. HSG, the venture capital firm formerly known as Sequoia China, recently valued the company between $350 billion and $370 billion.

Major investors continue to back the social media giant. Tiger Global and Coatue are both significant backers, positioning themselves to benefit from ByteDance's continued expansion. The company remains a central focus for funds looking at the Chinese tech sector.

The data from Hedge Fund Research confirms the broad strength of the sector. The average China-focused fund rose nearly 18%, comfortably outpacing the industry average of 10.7%. This gap highlights the alpha generated by managers who correctly timed their entry into the market.

George Jiang's long-running Golden China fund made close to 33%, while Epimelis Capital—run by Hutchin Hill and Goldman Sachs veteran Fei Sun—made 35% in its China-centric strategy. These returns demonstrate that success was not limited to a single firm but was widespread among dedicated China specialists.

The surge in returns reflects a broader recovery in Chinese equities. As the government continued its stimulus efforts, public companies increased buybacks, providing support for stock prices and boosting investor confidence.

As investors look toward 2026, the focus shifts to sustainability. The volatile relationship between the US and China remains a key variable. Market participants will be watching closely for developments in trade agreements, particularly those connected to semiconductor chips.

Geopolitical tensions, including any indication that China might invade Taiwan, could introduce new volatility. However, the resilience shown in 2025 suggests that the market may be better equipped to handle such shocks.

ByteDance will continue to be a focal point for funds as the social media giant grows. The performance of 2025 has set a high bar, but the underlying fundamentals of the Chinese economy suggest that opportunities remain for those willing to navigate the complexities of the region.