China’s crackdown on debt has slammed the country’s nascent hedge fund industry, as a bear market in bonds prompts banks to withdraw funds they had parked with external bond managers, cutting a key source of funds. Hedge funds barely existed in China five years ago, at least not formally, though a small group of superstar fund managers had operated in a regulatory grey zone.

The industry boomed during the stock bubble of 2015, with the number of hedge funds increasing to more than 15,000 at the end of that year from less than 4,000 a year earlier. A wave of experienced asset managers left jobs at state-owned mutual fund companies and investment banks, lured by the possibility of bigger pay packages linked to the rising market.

The bursting of the stock bubble in the summer of 2015 dealt a blow to equity hedge funds, but a subsequent run-up in the bond market sustained the industry through 2016.