Shanghai hedge fund manager Li Bei says she learned quickly that the low-volatility approach to investing behind the rise of Bridgewater Associates was doomed in China for a startup like hers.

Steady returns did little to draw investors used to short-term rewards, so she put in her own money, cranked up leverage and produced an industry-leading 258% gain last year.

Li is a pioneer in macro hedge fund management in China, where homegrown firms are taking on foreign giants that are struggling to adapt in an industry where even low-fee mutual funds generate sizable returns. While her Shanghai Banxia Investment Management Center only manages about 500 million yuan ($102.4 million), she says firms like hers are best placed to assess how China is driving the global economy.

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