HONG KONG (Reuters) - Crowds of investors rushing to buy Chinese companies are not doing their homework and paying over the odds, making the market more susceptible to corrections, said the chairman of alternative investment firm Oaktree Capital.
"It seems everyone wants to be invested in China ... this momentum play is slightly worrying," Ralph Parks, chairman of Oaktree Capital (Hong Kong) Ltd., told the Reuters Hedge Fund and Private Equity Summit in Hong Kong.
The race to deploy money in China means some funds are not doing as much due diligence in an effort to beat competitors to the prize.
Smaller funds also lack the global resources necessary to instill the sound corporate governance in Chinese firms which is needed to protect investors and help create a sustained improvement in the company's valuation, said Parks, who joined Oaktree in February.
"It does have the affect of absorbing supply of new investments that come on to the market and also has the effect ... of changing some of the valuation parameters," said Parks, who is based in Hong Kong and heads the firm's Asia operations.
Los Angeles-headquartered Oaktree manages over $33 billion in alternative investments globally, including private equity, real estate and niche debt markets, and has invested in about 110 companies around the world.
Parks, who was previously JPMorgan's (JPM.N: Quote, Profile, Research) chairman and chief executive for the Asia-Pacific, said Oaktree hopes to draw upon this experience to help Chinese companies improve their corporate performance.
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