Collation of Investment Philosophy of Hillhouse Capital Zhang Lei (Recommended Collection)

Source: Sina Finance

From $30 million in 2005, when it was founded with the Yale University Investment Fund Office, to one of the largest investment funds under management in Asia, with a scale of $60 billion, he himself became the first Chinese trustee in Yale University's history.

He used most of the $30 million that founded Hillhouse Capital to re-position Tencent stocks with a market value of only $200 million at that time, and today everyone knows that Tencent has exceeded $300 billion, which has long been cashed in batches and has made extremely high returns.

He is also known for his bottom-reading stock market. The most classic is in 2014, due to the anti-corruption, plasticizer incident, Yanghe shares stock price fell sharply, Hillhouse Capital bought 1 billion yuan in Q1, the second year at the end of the bull market liquidation, a big profit. After the stock market crash, Zhang Lei repositioned Gree and Midea for 2 billion yuan, becoming the top ten shareholders of these two leading enterprises.

He was one of jd.com's earliest investors, and in 2010, Liu Qiangdong, who was not optimistic at the time, asked Zhang Lei for a $75 million investment, but Zhang Lei gave him $300 million. This was one of the largest single investment transactions in the investment of early Domestic Internet companies at that time, when many people laughed at Hillhouse and said that "money is stupid". However, Zhang Lei sees the strong development potential of JD.com. In May 2014, JD.com successfully listed on the NASDAQ, its market capitalization rose to $26 billion, and its investment received $3.9 billion.

As a shareholder of both Tencent and JD.com, he contributed to JD.com's acquisition of Tencent's e-commerce company, with Tencent acquiring about 15% of JD.com's shares and subscribing for an additional 5% stake at JD.com's IPO. According to this agreement, after JD.com's IPO, Tencent's book return reached billions of dollars.

In 2017, hillhouse capital's most notable investment was that it threw 53.1 billion Hong Kong dollars to control the "generation of shoe king" Belle, and dozens of investment companies to manage companies with 120,000 people, especially investment companies involved in entity operations, which is rare and has huge challenges. In October 2019, Hillhouse Capital spun off part of Belle's business and went public independently, and the new company, Taobo (6110. HK) has a total market capitalization of HK$58.2 billion, higher than Belle's privatization price of HK$53.1 billion. It can be said that the successful listing of Toppo has earned back the money of privatized Belle for Hillhouse Capital, the remaining business of Belle belongs to the "white send", the transaction has been returned, and the follow-up depends on whether Hillhouse Capital can turn the tide of Belle's women's shoe business, which will be a key step in whether Hillhouse Capital can become China's KKR and 3G capital. It can be said that this is the top level of private equity funds.

In October 2018, Hillhouse Capital raised US$10.6 billion for the new fund, the largest private equity in Asia. Under the cold winter of capital, it can also obtain huge investments from international and domestic capital, which is the best proof of the recognition of Zhang Lei and Hillhouse Capital under his leadership.

According to the latest news, on the evening of December 2, 2019, Gree Electric Appliances issued an announcement that the controlling shareholder and actual controller of Gree Electric Appliances changed, and Gree Group changed from holding 18.22% of the total share capital of Gree Electric Appliances to 3.22%, and Hillhouse Capital became the new largest shareholder. The upgrade for Gree refers directly to "advanced manufacturing". Yi Qingqing, partner of Hillhouse Capital, said: "In the future, we will give full play to the experience of long-term investment, global research and helping the transformation and upgrading of the real economy, add weight to Made in China, actively introduce strategic resources, and work with outstanding enterprises, including Gree Electric Appliances, to achieve a historical leap from advanced manufacturing to intelligent manufacturing driven by scientific and technological innovation." "Based on the transformation and upgrading of Hillhouse Capital's acquisition of Belle, the positive impact on Gree Electric Appliances after this transaction needs to wait and see."

Zhang Lei is a low-key person, there are not many people in China who know Zhang Lei and Hillhouse Capital, and the brilliant achievements of Zhang Lei and Hillhouse Capital have not been widely reported.

Since its inception, Hillhouse Capital has taken a full-stage investment strategy, covering from angels/VC/PE to the secondary market, and what is more rare is that it can not only make money by investing in traditional industries such as liquor, laundry detergent, air conditioning, refrigerators, but also kill all parties in the Internet track such as e-commerce, social networking, O2O, short videos, and shared bicycles.

Fourteen years after its establishment, Hillhouse Capital invested in star companies such as Tencent, JD.com, Meituan-Dianping, Didi, NIO, Uber, Airbnb, Belle International, GLP, BeiGene, Junshi Bio and WuXi AppTec.

I am very surprised and curious is that unlike the rest of the capital big guys like to show their faces to do publicity, nor like Sequoia Capital backed by the Parent Body of Sequoia Capital in the United States, Fosun Group's powerful partners and other capital groups have the starting advantages in the early days, Zhang Lei is halfway out of the house and no one is optimistic when he started, the people under the initial configuration do not understand financial investment, 30 million US dollars of starting funds can be said to be borrowed, and later achieved such a scale, vertical and horizontal primary and secondary markets, equity stock strategies are skilled, and have the ability to assist entity operations from an investment perspective. This is not something that ordinary investors can do, how does Zhang Lei do it? With these questions in mind, I have sorted out the relevant reports and Zhang Lei's own remarks and views in the hope of peeking into the leopard.

1. Whoever has more profound research can put a price on risk

Over the past year, Zhang Lei has personally served as chairman of Belle, running the retail giant with 120,000 employees. He spends a lot of time studying shoes and thinking about digital transformation. He even fell in love with shopping just to see how women buy shoes. Prior to founding Hillhouse Capital, Zhang worked for his mentor David Stevenson at the Yale Endowment Fund. Zhang Lei was assigned a job to study the timber industry, and a few weeks later, he handed over a one-inch-thick research report.

One thing Zhang Lei still likes to say now is that Hillhouse has nothing to do with connections, we just do research. When asked by the Beijing News why Hillhouse can invest in a number of excellent companies such as Baidu, Tencent, and Meituan, Zhang Lei's first sentence is: "Attach importance to basic research, which is the core of Hillhouse." ”

2. Ultra-long-term investment

Ultra-long-term investment is Zhang Lei's belief and belief. Zhang Lei said that to be a super-long-term partner of the enterprise, this is my belief and belief. The Hillhouse Fund's model is also unique in Asia, we are an "evergreen fund".

Zhang Lei believes that investing in companies is investing in people, the real good companies are limited, and the entrepreneurs who really have a pattern view, have a mind and have the ability to execute are also limited, it is better to find the best company to hold for a long time, and help entrepreneurs to play the best ability. Therefore, Hillhouse hopes that the invested companies will be held from the early, mid-term, late stage, listing and even after listing. Instead of investing in an IPO, listing and selling, and then keep looking for it. The characteristic of evergreen fund is that there is no need to worry about exit pressure when investing in PE projects, and after the company is listed, as long as the business development prospects are promising, the foundation continues to hold.

Ultra-long-term investments place high demands on investors (LPs) and require great trust in investors (GPs). The LPs chosen by Hillhouse are all ultra-long-term capital, such as university endowments, family funds, pensions, and sovereign funds, all of which are to be passed on to future generations. Hillhouse only manages money for such investors, who also really understand our strategy, and there is the least estrangement between us. This trust is also based on people, one day I will quit when I don't do it, as long as I continue to do it, I will support it forever for decades. Only if your capital is long-term, you have the ability to spend time and energy to think about what is a business model with long-term prospects, and what kind of business is worth holding for more than 30 years.

This kind of ultra-long-term investor, in summary, the first point is to make the fund into a fund with a super-long-term structure, and the second point is that the concept of the invested company and the investment fund should be completely consistent.

3. Find firm practitioners with a great view of the pattern.

A very small number of people, a very small number of companies can have this pattern, execution, can push the company's vision to such a high level, we have to look for such people. How did you find this person? There are two modes, one is the sea of people model, going everywhere to participate in various meetings, running from place to place. Hillhouse adopts a research-based model, that is, through research to find out which is the best business model, and then we look for the best entrepreneurs who fit the best business model, and we develop together.

This mode of research gives us a deep understanding of things. If the results of the understanding can be achieved through the secondary market, we buy stocks to hold for a long time, if there is no such company, we look for a private market, if there is no private market, we incubate ourselves. This is the ability of people who invest for a long time.

For example, in 2008, when we studied the upgrading of consumer goods in China, many basic consumer goods categories were occupied by multinational companies, and Procter & Gamble and Unilever occupied the household washing market. We saw that these multinational companies are inherently burdened with history and cannot grasp the trend of China's consumption upgrading, so we found Luo Qiuping, the founder of Blue Moon Company, who was making hand sanitizer at that time, and encouraged him to make laundry detergent. We are now Blue Moon's only outside investor. And on the first day, when we invested, the company itself was making money, but we successfully persuaded him not to make short-term money, to have the courage to enter new categories, beat multinational companies, and become the first place in China's laundry detergent. So after we invested, we changed it from a profitable company to a loss-making company first, but this is only a short-term loss, and the money earned today is ten times the original, how to do this? It is through deeper research; the conclusions that come to us are able to tolerate short-term losses, which leads to a larger pattern. This entrepreneur has this dream, which is completely in line with our philosophy, so we can make a career together. Our investments are a bit like incubators in a way, but more like incubators of ideas.

4. Invest in key changes at critical points in time

Zhang Lei believes that identifying key points in time, investing in key changes should be studied, and only research can make you understand the changes. Research is based on a profound study of the nature of things, the methods are different, some people look at one or two quarters, some people look at one or two years, some people look at profits, I look at things to see five years, ten years, twenty years of things. What I look at is not the form, I look at whether a person essentially creates value for society, as long as you create great value for society, sooner or later you will create value for the company you create.

Zhang Lei roughly divides investment into two categories, one is a zero-sum game, and the other is a cake game. A lot of people invest in the former, such as pre-IPO, and I personally don't believe in zero-sum games. I like to make the cake bigger game, that is, my thoughts and capital cannot create value, and I will not invest.

From this point of view, it is all the more necessary to grasp the key points of time and key opportunities. What is the critical point in time? It's when everyone can't understand it. What are the key changes? If it is a fixed thing, it is actually easy to see, and the eternal only change in this world is change. Only in the process of change can we have different views from others, and we can produce very long-term different views.

Zhang Lei is concerned with the opportunity to create much value, which is in-depth basic research. In this process, we have been adhering to the continuous and in-depth cross-time, cross-regional, cross-industry, cross-category, cross-online/offline industry research for many years, so Hillhouse can deeply understand the long-term internal development laws and business logic of these industries, so as to accurately grasp the changes in the industry and the market and the timing.

5. Bring the best business model to the best entrepreneurs

Zhang Lei believes that various business models have very different changes. For example, it is simple to sell products, but if the added value is increased, it may become a service, and if you seize the key opportunity, it may become a platform, so that people who sell products and services can use this platform. The business model is broad and profound, in this process an entrepreneur can clearly see what the essence of the business is, and his concept and pattern view are different.

Zhang Lei said that in the judgment of enterprises, Hillhouse has two advantages. First of all, we have the privilege of dealing with the best entrepreneurs every day, and it is the period of dealing with them that has undergone drastic changes, often involved in the creation process of great enterprises, whether it is Baidu, Tencent, JD.com, or today's Blue Moon, Qunar. You have a great advantage in this process, because if you only do one company, you may be limited to your own industry and your own business, when you deal with a variety of enterprises every day, from consumption, the Internet to advanced machinery manufacturing, and even cement, you can find the common ground of great enterprises.

Second, I am also an entrepreneur in myself, from this point of view, I am also an entrepreneur, in this process I learned a lot, understand the culture, philosophy, life of the various trade-offs. I am also able to share and communicate my experiences and emotions with excellent entrepreneurs. Whether you can have synaesthesia and whether you can think in empathy is very important. The process of starting my own business helped me better understand entrepreneurship.

6. What is the real moat of the enterprise

Zhang Lei often stresses within the company that we should be good at identifying "false moats", which may collapse at any time. Creating the greatest value in the long run, and creating the greatest value in the most efficient way and at the lowest cost is the essence of the "moat" of the enterprise.

Zhang Lei believes that the "real moat" is to create the greatest value in the long run, and to create the greatest value in the most efficient way and at the lowest cost. How to create this value is different in different environments and different eras. In the United States, in the 1950s, the brand was the "moat" that maximized and quickest to create value, and with the impact of the Internet on the brand, the moat of brand value was not necessarily the most efficient way, and some people said that it was more efficient to create value through opinion leaders online. The world is eternal only change, the moat can not be unchanged, excellent companies are when the Internet tide hits, can dig deep into their own "moat", take the initiative to embrace the changes brought by the Internet. If a business is immutable, it will never be worth the investment. The "moat" that Zhang Lei values most is a moat dug by firm practitioners of the great pattern concept, who can constantly react to changes. Those who make quick money will gradually find that his path is getting narrower and narrower, and the path of those who insist on doing long-term things will become wider and wider.

7. The biggest risk control is to select people

Zhang Lei said that the most important focus is to select the most suitable entrepreneurs. "Whether this person can have both a pattern view, and an executive ability, as well as a deep sensitivity to change, and an understanding of the nature of things, I think this kind of person is difficult to find, most people are in a certain period of time to a certain aspect will be very good, but some people can improve themselves through communication with the outside." 」

For example, Zhuang Chenchao, the founder of Qunar. Zhuang Chenchao, although young but has participated in the process of entrepreneurship many times, has a strong learning ability and insight into things, he was able to sell the controlling stake to Baidu in a critical period, indicating that he has a great view of the pattern, and his life dream is to become The largest travel search platform in China. Luo Qiuping could have lived a very comfortable life without taking such a big risk, but his dream in life was to become the first place in China's daily chemical industry and defeat multinational companies, and the change gave him this opportunity, and he also seized the key opportunity. In this process, he is willing to give up the company with a profit of one or two hundred million yuan a year, and he will not hesitate to make the company a loss in the previous year or two, so as to open up a new world for the future, which is a very strong pattern view.

Such a risk control concept is a process of self-selection, long-term vision, want to do big things and have a big picture of the entrepreneur is easy to fit with us, and people who focus on small profits and play zero-sum games are not very suitable for us, and they can't go together, but they save a lot of effort for us.

Of course, some entrepreneurs may be influenced by different people in a certain field, and suddenly at a certain point in time, they will not pursue the maximization of corporate value as the goal, some people want to make quick money, and some people choose a more comfortable life, which I think is understandable. The most important thing in this process is that everyone is very honest with each other, and if you want to have this change, tell me very frankly. Fortunately, I haven't encountered this kind of thing so far.

Zhang Lei feels that the key to forming a benign and long-term partnership with entrepreneurs is to put investors in the right position. Hillhouse's best thing in recent years is to always put himself in the position of an investor and maintain a very flexible cooperation with the founder of the company, which also makes us relatively detached, avoiding too deep involvement in the company's operation, and at the same time helping the company through in-depth research to form a strategic pattern view.

8. Zhang Lei's Three Philosophical Views

Hillhouse's entire company looks like a Western way of doing things, but Zhang Lei's real investment philosophy originated in China.

Zhang Lei has three philosophical views, which are also repeatedly emphasized and practiced in the company. They are: "Shou Zheng uses Odd", "Weak water three thousand, but take a scoop" and "Peach and Lee do not speak, the next is their own". "Shouzheng uses odd" to derive lao tzu's "rule the country with righteousness, use soldiers with odds"; "weak water is three thousand, but take a scoop" is extended from the "Analects", which means that if you see a good company or business model, you must make a heavy bet. And "Peach and Plum don't say anything, the next is a mystery" from the "History", which means that as long as you do the right thing, you don't have to go around publicizing, good entrepreneurs will find us.

Zhang Lei's naïve pursuit of what he believes in has always remained the same, and what he believes will continue to pursue, and even this process will seem very naïve.

Becoming more tolerant is being able to better understand the complexity and diversity of the world and society. After being more tolerant, it is easier for people to understand others and consider other people's problems from the perspective of others.

9. The influence of Mr. David Swenson

Zhang Lei is more recognized by long-term holding, from David Swenson, more importantly, to learn that he believes in his own beliefs like religion, he can go to Wall Street to make a lot of money, but he does not earn, just to adhere to his beliefs.

What are the qualities needed for a successful investor?

Zhang Lei said that when I founded the company in 2005, I said three words about the characteristics of the employees I wanted to recruit, that is, curiosity, independence and honesty. For those who want to do great things and want to have higher achievements, in addition to these three points, they must also have a very tolerant, very able to appreciate others, and have a strong imagination. You can unleash your imagination, and the third is a good body.

Attached to the content of Zhang Lei's public speech:

01 How to understand value investing?

The nature of investment

Zhang Lei: Mr. John Borg said that the essence of investment is to pursue long-term and sustainable investment returns after risk and cost adjustment, overcome fear and greed, and believe in simple common sense, which I very much recognize.

Zhang Lei: The essence of investment is the allocation of capital and resources, the best capital, the best resources, allocated to the most capable enterprises, to help the society create value. The capital market should be detached from the virtual into the real, and the capital should be focused on the enterprises that have the most ability and need help.

The premise of value investing

Zhang Lei: The value management mentioned by Wei Bin in "The Way of Value: Best Practices of Corporate Value Management" focuses on the whole process of enterprise value creation and growth, from the perspective of capital return, asset allocation, capital management, etc., returning to the essence of enterprise development. To some extent, value management is the premise of value investment, and without the value management of entrepreneurs, all investments are probably empty checks.

Excess returns on value investing

Zhang Lei: For today's Chinese capital market, value investment is no longer a new term, and more and more believers and practitioners are constantly exploring new unknown worlds in their own way of thinking. Value investing creates an emotional bond of mutual trust and respect between investors and entrepreneurs, and it is this bond that allows entrepreneurs to dare to try great ideas, focus on the next 10 or 20 years, and examine the changes in future production and life from an ultra-long-term perspective. This ultra-long-term investment, which originates from the concept of value investment, injects the most solid impetus into the enterprise. To some extent, sharing the risk of innovation for outstanding entrepreneurs constitutes the essential origin of the excess return on value investment.

Value investment moat

Zhang Lei: My understanding of the moat is actually a moat in dynamic change. The core of this moat is a sentence, can not continue to create long-term value, crazy. If you can't create long-term value, this moat is a paper tiger.

Long-term structural value investments

Zhang Lei: The so-called "long-term structural value investment" is relative to cyclical thinking and opportunism, and the core is anti-arbitrage, anti-speculation, anti-"zero-sum" game, and anti-game thinking. For serving the real economy, the key to the role of value investment is to find a feasible path for enterprise transformation and upgrading on the basis of keen insight into the trend of technological and industrial change, and to help enterprises form a sustainable and difficult to imitate "dynamic moat" through the integration of resources with the help of capital, talents and technology empowerment, and complete the optimization and iteration of the core production, management and supply chain system of enterprises.

02 How to understand new era investment?

Technology 2.0

Zhang Lei: Information technology represented by the Internet is changing with each passing day, constantly leveraging new development and changes in all walks of life, and the scientific and technological innovation model is also upgrading the "version". Previously, the core feature of "Technological Innovation 1.0" was "connectivity". Search engines connect people and information, social tools connect people and people, e-commerce connects people and goods, online car-hailing, bicycle-sharing, group buying APP connects people and services... By focusing on "connectivity", Chinese Internet companies have achieved great success in business model innovation.

With the pace of learning and catching up with the global trend of science and technology, the mode of scientific and technological innovation is switching to the "2.0" version: it is no longer simply copying the experience of others, simply superimposing various technologies and application models, but forming a scientific and technological innovation with originality. In the field of science and technology, especially in the Internet industry, Chinese high-tech enterprises have gradually converted from following and running to being able to lead in some areas of innovation, changing "copying to China" to "innovation originating from China", which is the embodiment of "scientific and technological innovation 2.0".

The new economy

Zhang Lei: Everyone's understanding of the new economy can be broader, and I think that the new economy represents the new driving force of economic development, new productive forces, new production efficiency, new economic organization methods, new production and living formats, these are all new economies. The new economy is not just the Internet, nor is it just a simple Internet +, I believe that for example, life sciences, before a lot of intelligent computing, deep learning came out, our understanding of life sciences, gene sequencing is very simple, these new economies are breaking through.

The more interesting phenomenon in China is that industry 1.0, 2.0, 3.0, 4.0 all exist, how can we combine development in an orderly manner? I think that the new economy is not so much a simple Internet new economy as a new concept, and the new concept can be transformed into the driving force of economic development, a new organizational format, an organizational method, and we see a lot of enthusiasm for these things.

03 How to look at investment in China

China's development problems

Zhang Lei: In the past decade or so, China's scientific and technological innovation has spawned many richest people and eliminated many traditional enterprises. But I don't think that's the key to solving China's development problems.

The development of China's economy and society in recent years has a lot of positive cycles in itself, but if there is a chain that is weaker and slightly worse, it is the research of our basic science, especially the basic science of new research universities, and the cultivation of basic science talents.

Heavy warehouse China

Zhang Lei: I think China has started since the WTO. Before that, you can say that it began with reform and opening up. The real introduction of market-oriented competition in China has been since the WTO, and it has been more than a decade. I think this is just a very early stage of the whole great cycle of history. By 2050, the middle of the twentieth century, the Chinese nation will achieve great rejuvenation, and this is a very early stage.

The twenty-first century is the century that belongs to China, we are only very early, the tip of the iceberg has just emerged, we have not yet surfaced in its entirety, and there is still a great opportunity to move forward. Why? You look at a few countries in the world like China, where the people work so hard, embrace innovation so much, embrace change. You go to a lot of countries in Europe, you don't work on Thursday afternoon, and many people don't give money.

04 How to conduct investment practices

Fundamental research

Zhang Lei: Taking the concept of risk, which was talked about as numb after the financial crisis, as an example, most people's standard is to look at the fluctuation variance of investment returns. And I was asked from day one to see the essence behind the numbers, ignoring the standard deviations observed in the "rearview mirror": what kind of top-down fundamentals and bottom-up fundamentals are driving the generation and volatility of earnings? And what factors can bias the expected capital gains? What are the correlations and linkages behind these fundamental factors? From Swenson, I understand that only by looking at the essential fundamental risks clearly can we win the day when the investment returns are realized. This is called "focus on the downside and upside will take care of itself."

Underlying capabilities

Zhang Lei: First of all, we have the privilege of dealing with the best entrepreneurs every day, and it is the period of dealing with them that has undergone drastic changes, often involved in the creation process of great enterprises, in this process you have a great advantage, because if you only do one company, you may be limited to your own industry and your own career, when you deal with a variety of enterprises every day, from consumption, the Internet to advanced machinery manufacturing, and even cement, you can find the common ground of great enterprises.

Identify investment opportunities

Zhang Lei: More research is for less decision-making, and only by continuing to do the best in fewer and more important variable analysis is the simplest and simplest way to improve investment certainty and probability. This kind of "logical elevation" and "decision-making dimensionality reduction" is undoubtedly the best description of the truth. Investors cannot experience all aspects of corporate growth, let alone judge the unknowable factors of the market, and the limitations of individual cognition and the chaos of market changes naturally constitute contradictions.

It is in this way, in the long and long road of learning, with a humble heart, long-term attention to the limited key variables of "predictable, predictable, imaginable", and then return to the essence of research - bold assumptions, careful verification, find the "moat" of enterprise innovation and development, so as to make the best decision.

make sense

Zhang Lei: From the first day of Hillhouse's establishment, we and investors have had an agreement, that is, Hillhouse will make investments that can "make sense". Don't underestimate this "make sense", which is actually the biggest threshold, because there are many things in this world that don't make sense. As investors, we need to return to the source when looking at problems and use first principles to make value judgments.

Potentially dangerous

Zhang Lei: The biggest danger is that we live in bubbles and ivory towers day by day, the more successful you are, the fewer poor friends around you, on the one hand, you have to do public welfare, on the other hand, you have to keep in touch, really observe and look for these opportunities, in order to drive the development of enterprises. Zhang Lei: If the social value created is not large enough, just to take a larger share of the cake with limited scale, it is more dangerous to invest in this way.

Risk control

Zhang Lei: Financial risk control will be done, this is basic. But our most important focus is on choosing the most suitable entrepreneurs. Whether this person can have both a pattern view, and execution, as well as a deep sensitivity to change, and an understanding of the nature of things, I think this kind of person is difficult to find, most people are in a certain period of time to a certain aspect will be very good, but some people can improve themselves through communication with the outside. My risk control concept is more concerned about the entrepreneur's personality, long-term vision, want to do big things and have a big picture of the entrepreneur and we are very easy to fit, and people who focus on small profits and play zero-sum games are not very suitable for us, and they can't go together, which saves a lot of effort for us.

Admire two people the most

Zhang Lei: There are two people I admire the most, and probably not surprisingly, one is Buffett and the other is David Svenson. I had the opportunity to get in touch with both of them relatively closely. What I admire most about Buffett is his ability to invest. I also admire him for being a man of strong empathy, which is empathy in English. I like this kind of empathy; empathy allows him to get to know the young man better, to get to know people who are different from him, to understand management. So today I often talk to my manager about the need for empathy, and that's what I learned from him. Speaking of David Swenson, one of the things I admire most about him is that he has a very strong sense of morality and responsibility. Suffice it to say, he's the best combination of fiduciary duty and intellectual honesty I've ever seen. These two people will always be my role models, the people I admire the most.

entrepreneur

Zhang Lei: Entrepreneurs who really have a view of the pattern have a strong empathy for enterprises, employees, competitors, including all aspects, and can understand others.

Zhang Lei: Our most important focus is to select the most suitable entrepreneurs. Whether this person can have both a pattern view, and execution, as well as a deep sensitivity to change, and an understanding of the nature of things, I think this kind of person is difficult to find, most people are in a certain period of time to a certain aspect will be very good, but some people can improve themselves through communication with the outside.

Zhang Lei: Entrepreneurial spirit in line with Hillhouse Capital:

First, "long-term". Is this person able to understand the long-term philosophy, whether he is doing it for short-term goals, or to build his own career and dreams, and how long is this long-term? Good entrepreneurship can say that I can continue my life in the long run, surpass my own life, build a great enterprise, organization, and surpass myself.

Second, we can really put value investing into practice. Value investment I talked about not only our investor capitalists, every entrepreneur is a practitioner of value investment, because they are thinking about creating value every day, really good entrepreneurial spirit, non-game entrepreneurial spirit, is a value creation entrepreneur, every day to build a moat, to build a wall, a wide accumulation of grain, slow to become the king, peach and plum do not say, under their own, you do not have to talk about how good you are.

Third, we must have a great view of the pattern. Entrepreneurs who really have a view of the pattern have a strong empathy for the company, employees, competitors, including all aspects, and can understand others, such entrepreneurs are the objects we are looking for. These entrepreneurs are very interesting, why Hillhouse Capital insists on investing less and fine, manufacturing we invested in the United States, Gree, we spent a lot of time investing in such enterprises, spend a lot of time with it to invest in growth. We are a full-life cycle investment, giving us the opportunity to participate in long-term development, so that entrepreneurs have the opportunity to go very far, rather than staged investment. In the early days, we invested in Qunar, and then we went public, and we made IPO investments, and when we needed strategic losses, we invested in convertible bonds in the secondary market, and after the recent strategic merger with Ctrip, we invested up to $1 billion in Ctrip. Industry-wide investment creates value throughout the life cycle, a path that can go very far, rather than constantly looking for the next investment opportunity.

Be a friend of time

Zhang Lei: Finally, I would like to talk to you about inner peace. In this life, there are many ways to reach the other side of success, but what we care about is the use of the magic, with one mind. Maintain inner balance and peace, open up the second vein of Ren Dou, and finally the heavy sword is without a blade. How can this be done? I think this is a long-term choice of inner peace, and what I want to say today is that the investment made by Hillhouse is not necessarily the fastest way to make money, nor is it necessarily the path to make the most money, but it is the path that makes us most peaceful. When you recognize the value of time, when you have three or five confidants, you will not care about today's success or tomorrow's success, but more concerned about the value of compound interest, few people know the value of compound interest, it not only allows you to accumulate wealth, but also allows you to have peace of mind and the joy of life in the process of realizing value. With peace of mind, miracles will be born of you, and you will continue to create value and give back to society. Choosing who to walk with is more important than going far away, thank you all for choosing to walk with us.