Dollar funds have long created the most wealth stories and urban legends in China's investment industry, so much so that people have long overlooked the existence of another important town: the vast renminbi fund market. But today, there is no doubt that China's local funds are already players that cannot be ignored. After decades of ups and downs, RMB funds have gained more chips in the capital game and encountered greater challenges.
The development and policy guidance of RMB funds are like shadows, the market is changeable and charming, stability is only a temporary illusion, and change is the answer to everything. But no matter how tortuous the road, the tide will not stand still, and capital will not retreat. Embrace change, to seek the long term, a moment of success or failure is not enough to talk about heroes; Instead of going with the flow, it is better to personally march on the tide, take social development as our responsibility, explore hard science and technology, and go straight into no man's land. As long as you are always "in the matter" and ready to go, there will be a better time in the future.
On September 21st, 36Kr "Inside the Matter" 2022 China Fund Partner Summit was held in Hangzhou, gathering pioneering forces, becoming witnesses and participants, experiencing the change of cycles and feeling the turbulence of the times.
Tidy up | Zhang Yi
Gary Blinson, the father of global asset allocation, found in an empirical study of more than 90 large funds that more than 90% of the return on long-term investments comes from asset allocation. The importance of asset allocation is self-evident, and reasonable asset allocation is the key to determining the success of investment. In 2022, when the private equity market is greatly adjusted, what are the new ideas and strategies for asset allocation at present? At a time when GP fundraising is difficult and LP fundraising may be more difficult, where is the source of money in the primary market?
On September 21, the roundtable discussion on the "new" asset allocation era was officially opened at the 2022 China Fund Partner Future Summit. Xu Wanning, Partner & Chief Operating Officer of Huiyi Capital, Zhong Yan, Head of Silicon Valley Capital China, Mei Sheng'an, Deputy General Manager of Shanghai Lupu Investment Management Group, Zhang Ru, Co-founder of Haomai Wealth, Li Shihua, Managing Partner of Zhongjing Capital, and Shi Jianzhao, Partner of Huayi Venture Capital & General Manager of Huishang Bauthorn, exchanged views on the same stage.
China Fund Partner Future Summit 2022
The following is the transcript of the round table, which has been sorted out -
Zhong Yan: Hello everyone, I am Zhong Yan, the capital of Silicon Valley Bank, which started in the United States and has only focused on one thing in the past 40 years, that is, to serve science and technology innovation enterprises and provide financial services for the life cycle of science and technology innovation enterprises. In the past 40 years, four pillar-type business sectors have been basically constructed: 1. Commercial banks; 2. Equity investment in the primary market; 3. Investment banking; 4. Wealth management.
Silicon Valley banks have been in China for about 13 or 14 years, and the time is not particularly long, nor is it short. In those 13 years, we've basically built a two-wheel-drive business model. The first round is also the basic plate business, that is, commercial banking business. But it is different from traditional commercial banks, or it is defined as the same as Silicon Valley banks in the United States, which can be called technology banks. The second round is SVB Capital China, engaged in equity investment business, mainly based on fund of funds investment, while managing two relatively smaller direct investment funds.
In the past 13 years, by investing in dozens of very outstanding head VC institutions in the market, we have witnessed the development of China's private equity industry and RMB funds from scratch and from existence to excellence. Despite the uncertainties brought about by the internal and external environment, we are still full of confidence in the future, because in the past 13 years, we have integrated some of the core methodologies of SVB, and the Chinese team has done some localization and development. We are more aware of our mission, and what we want to do will not change in the future, or to empower GP, and then empower science and technology.
Mei Sheng'an: Hello everyone, I am Lupu Investment Mei Sheng'an. Lupu Investment focuses on wealth management and asset allocation and other services of domestic professional institutions, Lupu Investment since 2013 to the present cumulative asset management scale of more than 350 billion, equity fund of funds is currently 18 billion scale, Lupu equity fund of funds business model is mainly based on the business of the fund of funds and co-investment funds, to provide our customers with better asset allocation varieties.
Shi Jianzhao: Hello everyone, I am Shi Jianzhao of Huayi Venture Capital. Huayi Venture Capital is a platform-based venture capital institution, originating from the former Tsinghua Holdings Investment Department, currently with an independent management scale of 8.5 billion yuan, Huayi Venture Capital's business line is divided into three sectors, fund of funds, direct investment funds and industrial funds.
The fund of funds mainly takes industry-based venture capital funds as the main investment direction, focusing on the field of science and technology manufacturing, and comprehensively allocating medical and health, cultural consumption and other industries. After nearly 10 years of development, the fund of funds has formed a mature methodological investment system, and has invested and cooperated with more than 70 GP teams and more than 100 sub-funds. I hope to have the opportunity to have a cooperative relationship with more GPs in the future.
Li Shihua: Hello everyone, I am Li Shihua of Zhongjing Capital. Zhongjing Capital is an entrepreneur-co-equity investment institution originating from Singapore, mainly in the FOF+ direct investment model. Listening to some of the speakers this morning, many investors are now running to Singapore, we came back in 2015, and have been optimistic about the RMB equity market for a long time.
We have 3 aspects of the feature:
1. An institution that smoothly transitions from industry to investment. The Zhongjing Capital team operated a listed company until 2014. The listed company made a deal in Singapore at the end of 2014 to sell the entire listed company to Everbright Group through RTOs. Now the company, called China Everbright Water, is listed in Singapore and Hong Kong.
At that time, we set a record for the highest overseas M&A in the entire environmental industry, with an exit of 5.8 billion yuan. We have been making equity investments since 2015, mainly FOF. Why do FOF? We have a deep understanding of ourselves, and in the cognition of investment, FOF is a more suitable way for us. So far, we have invested a total of 17 GPs, and there are about 350 low-level projects.
2. We are a dual-currency fund, and overseas funds are mainly based on active investment.
3. In terms of FOFs investment, we adopt an active allocation strategy.
Zhang Ru: Hello everyone, I am good at buying wealth Zhang Ru. We are a wealth management institution, in terms of equity, we mainly serve high-net-worth individuals, through special funds, funds of funds and follow-up investment for clients to allocate equity investment. The company has been established for 15 years, the history of equity business has 12 years, and there are about 80 cooperative GPs, and the 22nd enterprise invested and listed this year, Magnetic Valley Technology, is listed just today.
Xu Wanning (Moderator): Hello everyone, I am Hui Every Capital Xu Wanning. Huiyi Capital is a professional fund focusing on investment in the healthcare sector. With a dual-currency, multi-strategy fund investment model, we help early-stage and growth-stage healthcare companies grow rapidly.
We are a young organization compared to the LP and GP managers here, but everyone often says that we are "born of the golden spoon". With Asia's largest private equity fund and the world's #1 healthcare provider behind us, we are committed to building a professional investment platform with international vision and local execution.
In just over 3 years since its establishment, we have also created a record and investment record for RMB funds. At present, the management scale is nearly 4 billion yuan, more than 40 enterprises have been invested, there have been exit projects and 5 listed enterprises, and this number is also growing rapidly. Mr. Luo Rushu, founder of Huiyi Capital, was responsible for the investment of endowment fund at Mayo Clinic, which is also the world's largest endowment fund in the medical field, with more than $35 billion in assets under management.
Immutability and change
Xu Wanning (Moderator): Looking back on the past year, we can feel that there have been many changes, not only in the international environment, but also in the policy environment, the economic environment, and even the market sentiment. Just as the topic of this summit is "put in the matter", only when everyone can really be in the matter and make corresponding adjustments can we better adapt to the current era.
In the entire ecology of the private equity investment market, many of the current participants are also undergoing adjustments and changes. Here, first of all, I hope to discuss with you, from the perspective of asset allocation, what do you think is the more typical and benchmarking event in the past year? How do you feel and think about this?
Zhong Yan: In the face of the uncertainty brought about by the internal and external environment, we have not made special adjustments in investment strategies and asset allocation strategies. As mentioned before, we started from the day one to empower excellent GPs, and then empower science and technology. In fact, we have been following the general trend of the Chinese market, and the core has not adjusted.
However, there will be some technical adjustments, from the following two perspectives to share with you: 1) the adjustment of the specific industry track; 2) The stages of configuring GPs, as well as adjustments to the industries they care about.
These two aspects have a certain correlation. First of all, the industry, for example, in the Internet education subdivision track, at the end of 2019 and about the first half of 2020, SVB basically reached a consensus within the SVB and abandoned the industry, because through our team's extensive in-depth industry research and top-down combing, we focused on covering about 60 sub-tracks in several different industry sectors, tracking and predicting changes in external policies and regulations, and judging which industries are suitable for us for up to 8 years. The rewards are in a 10-year cycle. In terms of the security and return multiple of the investment, this example shows that we have been actively making some timely adjustments in the industry sector.
This year, we're very clearly focused on four big industries: the first is life sciences and healthcare, which are the industries that we've been focusing on for the past 15 years and allocating a little bit more every two or three years. The second is high-end manufacturing, the third is the digital economy, and the fourth is "carbon neutral" related fields. Dozens of subdivisions have been split out of these four industries, and we have conducted in-depth research on the industry and the start-up companies in the industry.
As mentioned earlier, we will actively make adjustments in the industry, and such adjustments will also bring about changes in cooperation with GPs. For specific industry tracks, there are some vertical funds, they have been working in these tracks for many years, especially the managers who came out of the industrial background at that time, and we have more and more communication with these vertical funds.
Mei Shengan: In fact, this year, everyone's views on the macro environment are basically the same. In addition to the adjustment of a series of industry policies since last year, geopolitics and repeated epidemics and other reasons will bring certain uncertainty and impact to the supply chain of enterprises and the operation of enterprises.
Because many investors and individuals are also entrepreneurs, they also have enterprises, because of the impact of the above reasons, everyone has a more direct feeling for the uncertainty of the future. Therefore, our equity fund of funds is fundraising, and the preferences of investors have also undergone major changes, and everyone will seek certainty in this uncertainty. Lupu equity fund of funds in the overall fund selection, will also prefer familiar with the invested fund manager, compared to the newly introduced manager, the invested funds and projects are easier to judge.
Shi Jianzhao: On the current situation of the market in the past one or two years, I would like to share with you my personal views:
1) The difficulty of raising funds is increasing. Including the impact of the epidemic this year, some local governments have diverted some funds to fight the epidemic or resume work and production, resulting in a decline in their willingness to contribute to fund investment.
2) The fundraising market of RMB funds has entered a stage of survival of the fittest and polarization. The head effect of the industry is becoming more and more obvious, and the institutions in the central part have gradually become differentiated and distinctive, and the living space of some small institutions is getting smaller and smaller.
3) The boundary between the LP and the GP of the institution is blurred, and the LP begins to be GP and GP fund of funds.
4) At present, the CVC and industry background GPs in the entire market have relatively large advantages in fundraising and project acquisition.
Li Shihua: Answer the moderator's two questions: the first is about the new changes in the market.
The landmark event is the introduction of the Chip Act and the Biotechnology Act in the United States, indicating that the entire technological decoupling between China and the United States has taken shape. From the perspective of Zhongjing Capital, as a market-oriented fund of funds, although the scale is not very large, it looks at nearly one or two hundred GPs every year, and sees some changes in the macro or large environment.
1. In terms of equity investment in the entire primary market, the United States is to the right, China is to the left, and the United States is the teacher of equity investment, and its development direction of equity investment has always led the advancement of technology and the pace of social technology revolution. China's renminbi fund, in turn, may make up for the so-called make-up classes to fill some of the shortcomings of these technologies, or the concept of domestic substitution. From the perspective of the entire market investment logic, in fact, we are going back, in this case, for the RMB fund, the challenge is very large, a lot of uncertainty comes from, if the Sino-US relations are eased, what to do?
2, at this moment, there are many GPs and some FOF funds, RMB funds to the time of the stand-alone, this time the RMB fund can not come out is also a critical period, in the past all the primary market equity investment, RMB funds are basically following the strategy, behind the dollar fund, what he does, what we do, including the investment of the target is the same, such as the United States has a better biomedical technology, in China to find the target, after finding the standard of the US secondary market, Go bet. If the technical decoupling between China and the United States is completed, your teacher does not take you to play, and some good technologies are difficult to get to the country, how can the RMB fund do it?
From the perspective of market demands and changes, we also see some phenomena, standing in the perspective of LP and fund of funds, GP has two points to share and resonate with those present.
1, in the GP market, it is obvious that it is chasing some hot spots, whether it is from the perspective of innovation or talent, innovation and talent are lacking. In this case of scarcity, a large amount of funds, a large number of GPs chasing a small number of targets is bound to push up the price of the asset, and the valuation will increase. This is an aspect that has a greater impact on the entire market.
2, we have not solved the gap between the primary and secondary market information, we are a listed company, although we do not do direct investment, but the research and judgment of the secondary market still have their own experience. For example, there are some biomedical targets, in the secondary market has mature companies, mature scientific research projects, or new products out, and also has some traditional business, but the valuation is not as good as the primary market to do the same thing, only into the clinical phase II phase III valuation is high, the first and second market risk inversion possibility, this phenomenon will have a great impact on the future table of the primary market.
In some investment areas, there may be some deviations in regulatory or policy judgments. Including some emerging industries, in the end how the secondary market and the CSRC look at this matter, in fact, the primary market GP is largely not considered, of course, there are some more forward-looking institutions will pay attention to, do not do too much elaboration, there are some information asymmetry and deviation in supervision.
The exit policy. The primary market GP in the exit, personal feeling or research is not thorough enough, in contrast to the entire dollar abroad, Hong Kong market, the US market exit strategy is very diverse, very convenient, although the RMB is limited by the policy, in fact, there are still some methods in it, why now most of the market-oriented funds require GP to do DPI must have a certain commitment and standards, everyone is scared by the IRR, feel that the IRR is not very real, so the pursuit of DPI.
Zhang Ru: Our company has coverage in the primary and secondary markets. In the past, the typical team of second-level managers was usually built relatively large and fought position warfare, and recently we have observed that many second-level managers are also gradually leveling up in research, especially in the aspect of advanced manufacturing, we have seen a lot of interesting integration.
Overall, we can appreciate many changes this year, including the world has become difficult to make money. But some things are constant. For example, people at the second level like to say that α + β, and the money you earn is either β, that is, the market gives you, or it is your own ability α. In fact, the first level is the same story, but it does not say that now everyone is engaged in hard technology, and the hard technology industry is full of β, I believe everyone can appreciate this matter.
Recently, we are raising a fund of funds to invest in a consumer GP, and another relatively consumer-oriented comprehensive GP in the industry told us that it is now difficult to find an LP that also invests in consumption. We understand that the acquisition of β comes not only from the fact that we drill into some things that we can run out of the future today, but also from some things that are now cheap and have better fundamentals.
Each generation of young people has their own consumption, there are new iterations, and there is a need to have such an understanding of β. Therefore, today, whether it is to invest in the old track or the new track, they must know whether they have a β, what their β is, and this β is not naturally with others.
As for α, it is similar to what makes money different from others in each agency. Just now everyone talked about hard technology, hard technology everyone has different ways of playing, big GP has a big GP way of playing, resources are more. At the same time, CVC and small and medium-sized GPs are deeply involved in industries and segments, which is also a very good way to obtain excess returns. Through industrial cooperation with leading companies, gaining the opportunity and depth in industry smell and industrial chain identification, as well as higher sensitivity, these are very good ways to obtain their own α.
Where does the money come from?
Xu Wanning (Moderator): In recent years, I have been talking about "the difficulty of raising funds", which has also become an old topic. Saying that GP fundraising is difficult, it may be more difficult to raise LP, and these FOF funds of funds are even more difficult to raise. Therefore, I would also like to share that the funding sources of all of you are different, from the perspective of GP fundraising, how can you better obtain funds? Or from the perspective of LP's own fundraising strategy, what can I share?
Zhong Yan: The RMB fund of funds we are managing is raised in China, which is a characteristic of us. Like the fund-raising of the fund of funds mentioned by Mr. Xu just mentioned and the fundraising of GP, the fund-raising of the fund of funds is definitely more difficult.
Today, from the perspective of GP, under the increasingly difficult fundraising environment, how can I raise funds, I am willing to share some feelings with you. Usually almost every day with GP friends, many of them are actually some common sense, for example, each fund has a very clear investment strategy, investment logic, methodology, project channels, etc.
I believe that many GPs, each with their own way of playing, are worth trying and respecting, but our ideas are relatively simple, we will now combine our own institutions' preferences for these industries, based on our understanding of the future long-term value of some industries, we pay more attention to these industry tracks can really take root in the industry, have a deep industry background, and at the same time have a certain investment experience of what we call vertical funds. At such a point in time, under the more cautious environment of investment, we are more and more optimistic about industry precipitation.
Mei Sheng'an: The difficulty of raising funds is not something that only exists today, and it has not been easy in the past few years, but in a specific market environment like this year, everyone feels particularly bitter. There is a special phenomenon, many of our GPs in the application for some of the country's large funds, industrial fund support, these funds require a certain degree of marketization of the capital contribution, but often this kind of industrial fund capital contribution time is relatively low, because it is slow, there is a certain process.
In such a special environment this year, investors do not like blind pools. Let's not discuss the efficiency of the use of invested funds, everyone will be more worried, fundraising is such a state. It's a paradox that you have to have money first, start investing in or locking in a project, and then go fundraising, but it's a dilemma. In the first half of last year, the overall market environment, including the confidence of entrepreneurs, was very different, but after the second half of the year, the world turned upside down.
There are no special fundraising proposals. We can only find certain cooperation opportunities from the GP of long-term cooperation. In this year's particularly difficult market environment, everyone has to work harder, think about it, and do more and more detailed work.
Shi Jianzhao: Where is the source of the money mentioned in Xu Zong's question just now? In recent years, the influence of local government guidance funds and local state-owned assets in the entire industry has gradually become larger, and local governments hope to set up local guidance funds or investment funds to achieve local industrial coordination, and at the same time hope to attract investment through investment funds, and then drive local economic development, which is their current demand.
As a fund of funds, it naturally has the amplification effect on local governments to attract investment funds, and the efficiency of the use of funds has been improved. At the same time, the fund of funds is a relatively high security of the product, for state-owned assets, they first of all to ensure the preservation and appreciation of funds, the second to achieve investment promotion, these two aspects, the fund of funds naturally has the preconditions for cooperation with local governments.
In addition to local governments guiding government funds, insurance funds will also be a major fund of funds in the future. As a bridge and link between the fund of funds and the GP, the fund of funds is highly compatible with the insurance funds in all aspects of property requirements, safety requirements, professional operation and building an investment ecology with them.
In addition, for some strategic investors, they can use the fund of funds as a resource grasp, realize strategic transformation and upgrading through the fund of funds, and create a foundation for cultivating teams. In short, the fund of funds fundraising market needs to have enough patience for long money.
Li Shihua: From the perspective of fund raising funds, first of all, our own anxiety is relatively small, because our funds mainly come from the funds withdrawn by listed companies, including the funds made by several entrepreneurs around us, do not pursue scale, and we must do a good job.
To explore the fund-of-funds fundraising, we must return to the origin of the problem, the source of funds. There is no shortage of liquidity and capital in China, and recent reports say that nearly $1.8 billion of funds in China's real estate market will flow into the primary and secondary markets, which is an important positive. Overall data, the United States and China's market is not the same, China's market, whether it is a large entrepreneur or an individual, in the past few years in the real estate market allocation is relatively high, basically accounted for 77%, the allocation of financial assets is about one or twenty percent, while the allocation of financial assets in the United States is forty or fifty percent.
From this point of view, from the first-line real estate funds to financial assets will have a great improvement, there are very important things, how this part of the funds flow to the primary market in an orderly manner. Next to it is Zhang Zong, who belongs to a wealth management institution, and may have to make full use of high-net-worth users and funds through some professional asset allocation, across the primary and secondary markets. There is also a category of people this part of the funds to transfer to the equity investment market, the entire economic situation has undergone some changes, a large number of entrepreneurs and business owners in the industry will be affected and contained, and even the new industry has not been well developed, this part of the funds to withdraw, exit this part, first of all will certainly supplement the entire GP funds, a part of the flow to the fund of funds, the fund of funds first to achieve specialization, in order to attract the arrival of these funds.
From the perspective of the large fundraising market, everyone is also seeing the whole change. Previously, the main funding came from financial institutions. After the new asset management regulations in 2018, there were some delays in financial institutions, and the government guided the funds to come out. The government guidance fund itself is still a stage of money in it, because at present, whether it is land finance, or fee reduction and tax reduction, including public health expenditure, resulting in great pressure on local government fiscal expenditure, it is difficult for him to come up with these funds to support these markets of GP, and there will be a possibility of decline.
The possibility of a downturn has a very big impact on the GP of the entire primary market, because this is your source of living water. Now the marketization of this part of the funds poured into the primary market, my biggest feeling is not yet mature, or has not been educated, but also need a process of iteration and evolution, a large extent of funds into the after, into the equity market, injured, may not be put in the back of the investment, this process whether for LP and GP, to withstand the process of transformation and iteration. After the process matures, everyone can deeply understand the fundraising of GP or fund of funds, and this part of the funds will form long-term funds, which is conducive to the rapid development of the industry.
Zhang Ru: The difficulty of raising funds has been there since last year, and this year, especially since the third quarter, it has been particularly obvious. Our company is a company with a relatively heavy equity sector, and we also account for a relatively high proportion of equity funds in the primary market and many products in the secondary market.
Since this year, it is more obvious to see that the proportion of fixed income product sales is rising, there is a big news this evening, that is, FED will raise interest rates, we expect 75 to 100 BP, many friends here do not necessarily pay attention to the income of several points, but in fact, the current US monetary fund has a return of about 2.5%, this time the interest rate may be increased to more than 3%, in fact, it is a rare level, in contrast, the cost performance compensation of other volatility investments will decline. In addition, it is more obvious that the customer's DPI requirements have increased significantly, and now it is difficult to convince the customer if you just say that the IRR on the book.
Although these are the obvious preference characteristics of the funding side, for the PE industry, there are still some long-term things to focus on. We believe that the feedback from our clients on our expectations as a fund of funds, a screening GP institution, and finally the investment in the underlying fund comes from two aspects: 1) whether you have a return and what the return is. 2) What our expectations were for him at the time.
To some extent, we are the bridge between the GP and the ultimate funder, so we have to do two things: 1) the goal of the action is to focus on creating returns for the fund, whether it is in the GP selection or in the efficiency of the use of funds, we have always tried to strive for a variety of better conditions for investors. 2) We will tell customers some objectively scientific and true things, including not mything PE's earnings, expectations of DPI, etc. We felt we should tell our customers something real to manage expectations.
In addition, in fact, the first and second levels are different, to some extent, the equity market is still relatively comfortable, because the secondary pricing is the market to market, and it is very unbearable to see the fluctuation of net worth every day. On the other hand, even if a good GP is selected in the primary market when it falls, giving a certain amount of time, in fact, there is still a very high probability that it can finally achieve the preservation and appreciation of wealth.
About direct throwing
Xu Wanning (Moderator): Regarding asset allocation, a very prominent change in the past two years is that there is an increasingly GP-based situation of LPs in the market, and many LPs personally go down to do direct investment. Are the institutions where the guests are here also doing the relevant transformation, or do they already have such a configuration?
Zhong Yan: We have not changed in this regard. Because although historically we have mainly managed the fund of funds, since day 1, we have allocated direct investment funds to follow.
In the 13 years that we have been doing fund management in China, RMB funds have gone through a cycle. So far the management of the fund is basically 10 to 12 years, the longest is 14 years, we still have to be able to calm down to find valuable enterprises in the long term, short-term fluctuations and difficulties are there, at this time do not dare to be blindly optimistic, so we can be described as firm, humble forward.
In the final analysis, at such a point in time, putting aside some technical operations, we take a look at the cocoon in fact, confidence is still quite important, but your investment rhythm can slow down in stages. Internally, we often give an example, before we were like driving on a wide highway, driving very casually, we can merge left and right, but in the state of high-speed running, we need to be cautious, and now we are at best a free line of left and right, but the momentum to keep rushing forward is still there.
Mei Shengan: Regarding direct investment, first of all, let's talk about our own company's business strategy, including the strategy of selecting GPs.
Mr. Haomai said that GP may focus on changing investment preferences based on the understanding of the industry and policies of the current market to arrange the industry and the track. Like today, medical care, health, and consumption are cold, because they are too much advocating science and technology, which is right. It's just that when everyone is concentrating on this piece of hard technology investment, there may be better investment opportunities for consumption.
Strictly speaking, from the first day of our equity fund of funds to the present, the industries we are concerned about have not changed much, or information technology, advanced manufacturing, advanced materials, equipment, hardware, consumption, consumer supply chain, medical health, equipment, etc. These industries themselves have not changed much in the industry classification, when we choose GP, these industries will be covered accordingly, each GP ability preference may not be the same, we make such a combination and choice on this basis. This is the current stage of understanding, but now behind the attributes of science and technology, the background of the attributes of all walks of life will be a little stronger.
Regarding direct throwing, this piece is more cautious. Just now, Mr. Li of Zhongjing Capital said that he must have a full understanding of his own direct investment and an understanding and understanding of the boundaries of his own ability. This is not to pull a few people may do, a GP company must have its own investment judgment, investment transactions, teams, mechanisms, and even have the corresponding investment ecology, so that some comprehensive factors below, can do a good job.
Without the blessing of comprehensive factors, if the GP of the market head is not done well, we have no reason to do this thing well. Regarding the direct investment of the market, it is very cautious, in essence (many direct investment) is to seek cooperation with the GP who has been in a cooperative relationship for a long time. Because of the long time, there is a relationship of trust, the efficiency of communication will be relatively high, so as to seek business cooperation.
Shi Jianzhao: We have three sectors: fund of funds, direct investment funds and industrial funds to work together.
First of all, in the investment upwards, the main investment direction of our fund of funds is the industry-type VC fund, the investment field is based on science and technology manufacturing as the main direction, from a macro point of view, the drive of scientific and technological innovation is a systematic opportunity in the next 10 years or even longer, which is the reason why we do layout in this field at the macro level.
In addition, from the perspective of its own business composition, we can form an effective synergy between our three sectors: the fund of funds can provide project sources and intellectual support to direct investment funds and industrial funds; Direct investment provides project support and in-depth judgment ability for fund of funds and industrial funds; Industrial funds can effectively enhance the post-investment empowerment of fund of funds and direct investment.
Such a business model, the first can bring more synergy effects, the fund of funds to do breadth, direct investment to do depth, industrial funds from the landing dimension to make judgments. The investment logic can be verified by each other, which is also a strong contribution to the growth of the three teams. The second can lead to more coordination and integration of resources. In the Huayi ecosystem, a very good interactive relationship has been formed between the LP, the GP invested by the fund of funds, the direct investment, and the industrial fund, and the parties in the ecosystem can produce more cooperation.
To take a more typical example, Daxin Semiconductor is an early project of our fund of funds, the direct investment fund is followed up, and then the introduction of industrial funds lands in the locality, and our three businesses are involved. With each step we support, the valuation of new revenue and profit is rising, and the interaction effect is obvious.
Li Shihua: Today our panel topic is the new asset allocation era, from the perspective of equity investment assets, it belongs to alternative assets, alternative assets and real estate including some works of art is a large category, from our own point of view, the equity investment in the primary market is currently going to both ends, the so-called two ends of the walk We will invest some very comprehensive, some funds with a very large background, GP, another end of the segmented field, the degree of specialization is relatively high GP, this is our relatively big change.
In my opinion, the main basis for the change comes from two very big characteristics of equity investment:
1. The law of double powers. It is not normally distributed, and only 5% and 10% of GPs can achieve high returns. For GP projects, only 5% and 10% of projects receive high returns. In this case, from the perspective of asset allocation, finding these GPs and projects that can bring you returns can make progress in asset allocation.
2, from the perspective of the characteristics of the primary market, today at noon with the dangerous peak Zhao Zong (dangerous peak K2VC Zhao Yang) to do an exchange, the typical characteristics of the primary market is equivalent to a train to the future, at a certain point in time, if you do not invest in this company, there is no opportunity to invest in the future at which stage. For example, if you don't go into Facebook's A round, there is a high probability that you will not be able to vote for his A round later, and you will not come back after driving over. The secondary market is equivalent to walking a dog, this dog may be far away from your body, it always has to run back, after running back there is still a chance to enter. In this case, we have also undergone some changes in asset allocation, to find a good GP, professional field and comprehensive field is relatively strong.
I am skeptical of the GP of LP, the art industry has a specialty, including Zhongjing Capital itself, we have operated listed companies for many years, our understanding of the industry is also relatively profound, but we have not made up our minds to do direct investment, we have a psychological concept in investment, that is, overconfidence. LP looks at the vote very well, think want to go down, in fact, 90% of the drivers think that their level is higher than the average, how can it be, this data is not reasonable. The GP of LP may also have some impact on the market.
Zhang Ru: As an LP, we must play our own methodology, how to do a better fund of funds, how to better screen GPs, and provide services for our fund side and GP. But from the very beginning of our company, we have been very clear that we want to limit ourselves to this, we will not go too far into the bottom of the asset.
For example, our secondary market research team is much larger than the primary market research team, we have about 40 fund researchers in the secondary market, specifically selecting secondary funds, but we will not do secondary market stocks, stocks are a very low threshold thing, everyone can buy, but we will not do direct investment in stocks at all.
As originally said, although we will know a lot of industries and individual stocks better than many people, we still have a very big gap compared with the best asset management in China, so our advantages are not in this aspect, we still have to do our own areas of strength. This is always a very clear thing for us.
Moderator: Because of the time relationship, today's asset allocation roundtable topic is here, we can have more discussion offstage. Thank you very much for sharing!
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