Supported by CITIC ex-FX Concepts executives start a new fund

CITIC is a unit of Chinese sovereign wealth fund, will focus on trading emerging FX, Renminbi

Just a week after former CEO of FX Concepts John Taylor has announced that he is going back to business, two other executives, namely Robert Savage and Ron DiRusso have announced that they are starting their own venture. More than that, the main investor in it will be a unit of the Chinese sovereign wealth fund CITIC Capital Holdings Ltd.

According to sources cited by Reuters negotiations have been in place since February last year, so it has been a long time coming for these two to separate their way from FX Concepts’ road to bankruptcy. According to a Reuters article the new fund will recruit some of the bankrupt company’s promising junior employees. The venture has been negotiated and set up without the knowledge of former FX Concepts boss John Taylor.

According to a separate Bloomberg report the new outfit will focus on trading emerging market currencies and will pay special attention the Renminbi. According to a phone interview cited in the same article former chief strategist at FX Concepts Robert Savage said that the Chinese Yuan is becoming a viable currency and investors from the region will need an optimized currency portfolio to handle the changes associated to this transition.

According to Citic Capital the fund will start operating in the first quarter and will handle investments from North American, European and Asian institutional investors. Savage added that the fund’s team expects that the Renminbi is going to continue its move to full convertibility and will eventually become a reserve currency in the next decade.

In light of recent frequent liquidity squeezes that the Chinese financial markets are facing trading the Renminbi certainly does not sound like a very safe business. Ongoing credit expansion has been imploding in recent years with overall credit levels increasing from $9 trillion in 2008 to $23 trillion last year. Companies have been rushing to refinance their long-term obligations with short-term funds leading to a dramatic spike in interest rates.

While the Bank of China fights this credit squeeze with substantial liquidity injections the symptoms of a classic credit bubble could put some hurdles before the Renminbi globalization effort.

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