Star Chinese technology investor Boyu seeks to navigate Xi Jinping’s “common prosperity” era

Alvin Jiang was 24 years old and started his career at Goldman Sachs when he was hired by one of China’s top dealers to help found the Hong Kong private equity company Boyu Capital.

For Sean Tong, who founded Boyu in 2010 after managing the Chinese investment portfolio of US private equity firm General Atlantic, Jiang is an attractive prospect. This young Harvard graduate with glasses was the grandson of Chinese President Jiang Zemin from 1993 to 2003.

This initially gave Boyu the reputation of “Princeling”, a term used to describe the descendants of senior leaders of the Chinese Communist Party, although Tong and his founding partners, including some of China’s most senior managers, have extensive business experience. . .

Ten years later, this low-key company closed a US dollar fund worth nearly 7 billion U.S. dollars, just like China’s investment industry. Caught up In unprecedented regulatory turmoil.

The company that surpassed China’s technology boom and became one of its most successful investors in the past decade must now adjust its strategy to fit Beijing’s vision for the industry, which emphasizes “common prosperity” rather than capital market success.

“Some industries have much less activity, especially consumer Internet companies,” said a person familiar with Boyu’s evolving strategy. “But others are enjoying a lot of policy tailwinds, such as semiconductors, electric vehicles and other alternative energy technologies. Investors must also be more cautious than before with regard to regulatory risks.”

Boyu is best known for making billions of dollars on early technology bets, including Jack Ma’s e-commerce platform Alibaba, which went public in 2014 and also focuses on emerging consumer, financial and healthcare companies .

Boyu Capital, headquartered in Hong Kong, rides on China’s technology boom to become one of China’s most successful investors.Now, it must adapt to Beijing’s suppression of the industry and emphasis on wealth inequality © Tyrone Siu/Reuters

In front of regulators, the company is ready to repeat its Alibaba trick by the end of 2020 and become an early investor in Jack Ma’s online financial arm, Ant Group. Blocked This will be the largest IPO in the history of the world.

Boyu was also hit by government suppression Private education company July-The company was an early investor in Yuanfudao, an online tutorial provider.

However, when it unloaded most of its shares, it escaped. Didi Chuxing According to people familiar with the matter, the ride-hailing group preceded its IPO in New York in June. After the Chinese government launched an investigation into its data security practices, Didi’s share price plummeted.

In addition to Didi, people close to Boyu said that last year they had invested in seven or eight successfully listed companies, including Yuncun, NetEase’s music streaming department, and biotech startups such as Brii Biosciences and KeyMed Biosciences.

“A few years ago, there were still very large ecosystem companies in the market-such as Alibaba, Ant Financial, Meituan and Bytedance,” said an investor in Boyu. “But this market is much more crowded than before, and it is less and less likely that an ecosystem company will emerge. Boyu must pay more attention to the winners of the niche industry.”

Boyu’s early success at Alibaba originated from an accidental encounter. In the early 1990s, Ma Yun, then a college English teacher, served as a judge in an English competition in his hometown of Hangzhou. According to people familiar with the matter, Tong is one of the high school students who participated in the event.

Horse, later became national The most famous entrepreneur, Was impressed by Tong’s performance and congratulated him. This is the beginning of three years of friendship.

When Boyu was founded, Tong was in his 30s. He met Jiang Zemin during his internship in General Atlantic’s Hong Kong office.

The children and grandchildren of Chinese leaders have always enjoyed the opportunity to reach decision-makers, and foreign companies in China have turned to them As a facilitator.

Liu Tianran, son of vice-premier Liu He, a confidante of Xi Jinping, established Sky Capital At the end of 2016, Skycus invested in subsidiaries of Chinese technology giants Tencent and, which are the biggest competitors of Ant Financial and Alibaba.Founded by Wen Yunsong, son of former Premier Wen Jiabao New horizons In 2005, when his father was reigning, he invested in funds.

But since Xi Jinping became the leader of the Communist Party in 2012, the influence of the princelings has reduce, Investors and analysts said.

A senior transaction matchmaker involved in the restructuring of state-owned enterprises said: “Those princelings who are still active in the financial sector are very low-key, staying in a narrower field, and the scale of funds is much smaller than Boyu.” “Boyu’s difference lies in its ordinaryness. The quality of the partners, the size of the fund… and track record, all of this means that it does not need to transact through princeling relationships.”

Kerry Brown, a China expert at King’s College London, said, “Getting these numbers now may be both a burden and a help. [princelings] About you”.

“There are so many people outside now [elite] A network with excellent skills,” he added. “Why rely on one person because of whom they are related to? “

Boyu, Tong Hejiang declined to comment for this article.

According to people who work with the company, for Boyu, working with industry veterans has played an important role in its success. In addition to Jiang, Tong also recruited Louis Cheung, the former president and chief financial officer of Ping An, China’s largest insurance group, and Mary Ma, who served as the treasurer of Lenovo when the Chinese company acquired the IBM PC business. 2005 deal. Later she joined TPG Capital, US private equity company.

“Without Sean, without Mary and Louis, we would be worried [Boyu’s] An executive of a long-term partner of the company said.

According to several related sources, from 2011 to 2019, Boyu raised four US dollar funds, and last year finalized the fifth one, valued at US$6.8 billion. According to data provider AVCJ, it is China’s largest US dollar fund controlled by an independent manager. Boyu has also completed three smaller RMB-denominated funds and is currently raising a fourth one.

The company added office space in Beijing and Shanghai where Jiang is located. It also opened a Singapore office at the end of 2019; Tang moved there from Hong Kong in 2020.

But Boyu is now in a more politicized investment environment. Xi Jinping has made it clear that if on the eve of this year’s bidding, any industry that does not contribute to “common prosperity” will not be affected by regulatory risks. An unprecedented third term As the party leader.

“Boyu chose very well, but the same relationship will not always give you the same results-look at the ants,” said a Boyu investor. “The problem with China is that you don’t know when regulatory risks will hit you.”

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