There are times when bond prices fall off a cliff after the publication of a social media post — censored in 15 minutes — that mentions a closed-door government-led meeting where the issuer's financial problems are discussed. Moreover, some of China's bond issuers have a reputation for cooking the books and there is a lack of law enforcement to stamp out fraud.
"The market is certainly not getting more transparent," said Wang. "Investors and issuers don't trust each other."
Wang, a native of the northwestern province of Gansu, moved to Shanghai after graduating from college in 2009 and joined a local brokerage as a research assistant.
Three years later, he launched Raman in a 300 sq ft room with three partners and about Rmb5 million in assets. Life was "very miserable" back then, he recalled.
Like many start-ups, Raman struggled for many months to obtain capital. The turning point came after Chinese banks began looking for places to park investment products offered to rich customers. Such products promised high returns, but were kept off banks' balance sheets to bypass credit controls and other regulatory restrictions.
In 2014 Wang made a breakthrough with Industrial and Commercial Bank of China, the nation's largest lender by assets, which handed him Rmb450m to manage. Other banks soon followed suit, driving Raman's assets to a peak of Rmb8bn in 2016.
By then Wang had a lifestyle he could only have dreamt of, growing up in Gansu's capital, Lanzhou. His family of three moved from a Rmb8,000 per month, two-bedroom apartment to a five-bedroom house in an expatriate neighbourhood for Rmb50,000 a month. He bought cases of Château Beychevelle wine at more than Rmb2,000 per bottle, and drank them like beer.
"I was full of myself when there was easy money to be made," he said.
But in 2018 Beijing began a crackdown on shadow banking, introducing new rules on asset management that required banks to move wealth-management products back on to their books. That prompted banks to trim bond-backed funds with high risk weightings that could hurt their capital ratios.
The exodus slashed Raman's assets, which determine its fee income, by two-thirds within two years.
Worse still, his track record took a hit after several portfolio companies defaulted. "I have paid a price for being overly aggressive," said the fund manager. He dug in to his own pocket to provide Rmb100m of compensation for his investors, partially offsetting their losses.
Just over a year ago the Wangs downsized to a three-bedroom flat out of the expat enclave. Instead of taking first-class flights and booking five-star hotels, Wang downgraded to economy and Rmb80-per-night hostels.
The setbacks prompted Raman to shift its focus to seeking underpriced high-yield bonds, rather than distressed or special situations, a move that probably saved it from going under. Raman reported a return of 21 per cent last year, slightly higher than his six-year average of 19.4 per cent and putting the investor close to the top of its peer ranking.
However, Wang does not expect such performance to continue, as a rush of capital into the high-yield bond market makes bargains harder to come by.
"I clean my glasses three times a day to make sure I get all the numbers right," said Wang. "But I am just not sure which issuer is truly safe."
Written by: Sun Yu
© Financial Times