VisionGain Capital, founded by Tina So and Ye Xiang, announced at its launch late last year that it had sold a 19% strategic stake to a mainland financial institution.

So said today that Citic Securities International was that seed investor.

"We are very fortunate to have their confidence and their trust... They will provide us with no less than $20 million in two stages, which is basically seed money in our first fund, and in addition they also take a 19% stake in our company, so they are shareholders as well."

So was previously a managing director and chief investment officer at Bank of China International Investment Managers, where Ye was an executive director and consultant. Both also previously worked for the Hong Kong Securities and Futures Commission.

The tie-up with Citic Securities, the largest investment bank in mainland China, has obvious advantages for VisionGain. It links the fund with a network of analysts and investment bankers covering mainland-listed companies and working on most of the big investment banking deals in China.

VisionGain Capital also plans to develop hedge funds in Hong Kong in partnership with Citic Securities International, which could lend portfolio management and analysis experience.

The company's first fund, the VisionGain Capital China Absolute Return Fund, is a multi-strategy fund that attempts to invest with an inside edge by interpreting what Beijing policy decisions mean for Chinese markets. Trading starts March 3.

Citic Securities International, which was set up in May 2006 to focus on investment banking and securities brokerage in greater China, is keen to expand into hedge funds and asset management. It is jointly owned by Citic Securities and Citic Capital Holdings, both backed by mainland China's government. It is charged with helping its Chinese parents expand into overseas markets.

Citic Securities invested $1 billion into Bear Stearns in October 2007, capitalizing on the subprime crisis that destroyed two Bear Stearns hedge funds.

That deal may now be renegotiated to give Citic a 9.9% stake instead of the original 6%, given the decline in the Bear Stearns stock price since the deal was inked.

Citic and Bear Stearns also agreed to form a joint venture combining their Asian businesses outside China, in which they each own 50%.

Citic Securities owns 88.4% of Citic Securities International, with Citic Capital holding the remaining 11.6%. Citic Capital also specializes in asset management and runs hedge funds, but the VisionGain Capital investment is a separate initiative.