US investors are increasingly demanding special investment vehicles from Asian fund managers to avoid violating $361 billion in Chinese tech restrictions. American investors held substantial Chinese assets as recently as end-2024, but new rules threaten fines and imprisonment for investments in sectors like semiconductors, quantum computing, and AI. Several US states have also restricted public pension funds from Chinese investments.

Asset managers in Singapore and Hong Kong report growing demand for "parallel funds" that exclude sensitive Chinese sectors. These requests come primarily from compliance staff at US pension funds, endowments, and family offices rather than investment teams. The most common solution involves managers creating two separate funds—one with full regional exposure and another excluding China entirely.

Minnesota's State Board of Investment secured an opt-out from a Blackstone Asia fund for China investments, while Arkansas banned public pension funds from Chinese companies altogether. Asset managers are repurposing fund tools like "side pockets" originally designed for illiquidity to manage geopolitical friction between the world's two largest economies.