(Yicai Global) Sept. 23 -- New York-based Two Sigma Investments, one of the world's largest quantitative hedge funds, has successfully registered its wholly owned Shanghai unit as a private equity fund manager with the Asset Management Association of China, the country's fund industry association.

The license, which was issued on Sept. 11, will allow Shanghai Tengsheng Investment Management to offer investment products to qualified Chinese businesses and individuals similar to a domestic provider, Securities Daily reported yesterday, citing an announcement made by the firm on Sept. 20.

China has been opening up its capital market to foreign wealth management firms in recent years. New York-based BlackRock, Pembroke, UK-based Fidelity International and Zurich-based UBS Asset Management are among those that own Shanghai-based operations.

By allowing such a strong competitor into the Chinese market, Two Sigma will have a catfish effect, forcing smaller minnows to up their game to survive, said Yin Yong, chairman of private equity fund Beijing Zhongcheng Zhiyuan Investment.

Two Sigma specializes in systematic trading using quantitative models derived from machine learning and Big Data. Set up 2001, it manages assets worth over USD58 billion. The company's goal is to apply cutting-edge technology to the data-rich world of finance, according to its website. The firm invests mostly in stocks, commodities and foreign exchange in open markets.

"We will continue to expand the China team and local infrastructure to support our development of a domestic fund management business and use our data science methods and advanced technologies to serve clients in China, as we have done for our clients in other markets," Kenny Lam, head of the Asia Pacific region and chief executive of Two Sigma Asia Pacific, said in a statement.

Quantification is always a gamble though, according to Yin, and it is quite normal for strategies that perform well overseas to fail in China.