China’s stellar technology investor Boyu seeks to manage Xi era of ‘shared prosperity’

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Alvin Jiang was 24 years old and began his career at Goldman Sachs when he was hired by one of China’s leading retailers to help launch Boyu Capital, a Hong Kong-based private investment firm.

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

This initially gave Boy a reputation as a “princely” company, a term used to describe the children and grandchildren of senior Chinese Communist Party leaders, although Tong and its founding partners, including some of the country’s top executives, had big business experience.

Ten years later, this low-profile company closed a nearly $ 7 billion US dollar fund, just like the Chinese investment industry become caught in unprecedented regulatory turmoil.

A company that has suffered a Chinese technological boom over the past decade to become one of the most successful investors now needs to adjust its strategy to Beijing’s vision for the sector, which emphasizes “common prosperity” instead of capital market success.

“Some sectors are recording much less activity, especially consumer internet companies,” said one person familiar with Boyu’s development strategy. “But others enjoy many political winds, things like semiconductors, electric vehicles and other alternative energy technologies. Investors also need to be much more cautious than before about regulatory risks. ”

Boyu is best known for making billions of dollars on major early technology bets, including Alibaba, Jack Ma’s e-commerce platform that was listed in 2014, while also focusing on new consumer, financial and healthcare companies.

Hong Kong-based Boyu Capital has experienced a Chinese technological boom and become one of the most successful investors in the country. It must now adjust to Beijing’s attacks on the sector and focus on wealth inequalities © Tyrone Siu / Reuters

The company was ready to repeat its Alibaba trick in late 2020 as an early investor in Ma’s online finance department, Ant Group, before regulators blocked which would be the world’s largest initial public offering ever.

Boyu was also hit by a coup private education companies in July – the company was the first investor in online tutor provider Yuanfudao.

However, he avoided the bullet when he threw out most of his share Didi Chuxing ahead of the group’s June initial public offering in New York, people familiar with its investment claim. Didi’s share price fell after the Chinese government launched an investigation into its data security practices.

In addition to Didi, people close to Boy said he has invested in seven or eight companies that successfully launched IPOs last year, including Cloudy village, NetEase’s music streaming unit and biotech start-ups such as Brii Biosciences and KeyMed Biosciences.

“A few years ago, you would still have very large ecosystem companies on the market – like Alibaba, Anta, Meituan and ByteDance,” said investor Boyu. “But this market is much busier than before, and the likelihood that the company’s ecosystem will come out so high is getting smaller. Boy needs to focus more on winners in niche sectors. ”

Boyu’s early success with Alibaba had its roots in a chance encounter. In the early 1990s, Ma, then a university professor of English, was a judge at an English language competition in his hometown of Hangzhou in eastern China. Tong was one of the high school students who competed in the event, people familiar with their relationship claim.

Ma, which later became a state the most famous entrepreneur, was impressed by Tong’s performance and congratulated him. It was the beginning of three decades of friendship.

Tong was in his mid-thirties when he founded Boyu. He met Jiang when he was an intern at the General Atlantic office in Hong Kong.

Children and grandchildren of Chinese leaders have traditionally enjoyed access to decision-makers, and foreign companies in the country have turned to them as leaders.

Liu Tianran, son of Deputy Prime Minister Liu He, a confidant of Xi Jinping, founded Skycus Capital in late 2016, Skycus invested in units of Chinese technology giants Tencent and JD.com, which are Antu and Alibaba’s biggest rivals. Wen Yunsong, the son of former Prime Minister Wen Jiabao, founded A new horizon investment fund in 2005, when his father was in power.

But since Xi became leader of the Communist Party in 2012, the influence of princes has reduced, said investors and analysts.

“Those princes who are still active in finance are extremely modest, staying in narrower sectors, with much less funding than Boyu,” said the veteran, who was involved in restructuring state-owned enterprises. “What makes Boy different is the caliber of his general partners, the size of the fund. . . and success, which means he doesn’t have to trade ties with princes. ”

Kerry Brown, an expert on China at King’s College London, said “now it’s probably as much a responsibility as it is to have these numbers [princelings] connected to you ”.

“There are so many people outside of these now [elite] networks with excellent skills, ”he added. “Why rely on someone just to be related?”

Boyu, Tong and Jiang declined to comment on this article.

For Boyu, launching with industry veterans was key to his success, say people who have worked with the company. In addition to Jiang, Tong also hired Louis Cheung, former president and chief financial officer of Ping An, China’s largest insurance group, and Mary Ma, who was finance chief at Lenovo when the Chinese company bought IBM’s PC business in the famous location. 2005 transaction. She later joined TPG Capital, an American private investment company.

“If it weren’t for Sean, Mary and Louis, we’d be worried [Boyu’s] setting up, ”said the CEO of one of the company’s longtime partners.

From 2011 to 2019, Boyu raised four U.S. dollars, and last year he finalized a fifth worth $ 6.8 billion, according to several people involved. It is the largest U.S. dollar fund in China controlled by an independent trustee, according to the AVCJ, the data provider. Boyu has also completed three smaller funds denominated in renminbi and is now collecting fourth.

The company has expanded its office space in Beijing and Shanghai, where Jiang is headquartered. He also opened an office in Singapore in late 2019; Tong moved there from Hong Kong in 2020.

But Boyu is now coping in a dramatically more politicized investment climate. Xi has made it clear that no industry is safe from regulatory risk if it does not contribute to “common prosperity” ahead of its bid for this year’s an unprecedented third term as party leader.

“Boyu chose well, but the same relationship won’t always give you the same outcome – look at Anta,” one investor told Boyu. “The thing with China is that you don’t know when regulatory risk could hit you.”

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