According to estimates, the total size of private equity funds in China has exceeded 1 trillion yuan. As of April 3rd, the market value of the Shanghai and Shenzhen stock markets has exceeded 13 trillion yuan, with private equity accounting for about 8%. Since 2005, with the improvement of the market environment and the increasing supervision of illegal securities consulting operations by management, a group of private equity funds that are moving towards standardized operations have gradually emerged.
"From the perspective of our company itself, due to our small number of personnel and low costs, we can achieve profitability as long as we have one or two clients. However, private equity companies also have a profit standard that is the profit from client investment." Ren Junjie, the CEO of Fifth Club, told reporters.
After working for several financial institutions for a long time, Ren Junjie initiated the establishment of the Fifth Club in 2005 and began investing in private equity funds. Specifically, this is an investment club that provides professional services to its members through the SMA (Separately Managed Account) model, and is also one of the many private equity funds that have emerged from the stock market boom in the past year. "Scattered among ordinary investors, but holding a large amount of money; with great energy, flexible in the stock market; outstanding performance, providing investors with amazing returns." Someone has given a "simple" definition to private equity funds.
Adhere to the concept of value investment
In his speech, Ren Junjie seemed quite satisfied with his performance in private fund investment. According to his introduction, the Fifth Club currently has fifteen or sixteen clients, with private equity funds reaching 100 million.
"As of the end of May, the net asset value of all signed investors' stock accounts in the club has shown positive growth. Except for one account, which is only slightly higher than the Shanghai Composite Index, all other accounts have significantly exceeded the stock index, with an average annualized return of around 280%. The annual turnover rate of personal and custodial assets has remained at no more than 0.25%." Ren Junjie proudly told reporters that in the face of the recent sharp decline, only one of the clients made a phone call apologizing for their intention to terminate the agreement, while the other clients "simply ignored it.". "We only found out after calling to understand the situation, that even this client ended up because of her husband's persistence. Based on our understanding, this lady still strongly agrees with our philosophy and has extensive knowledge in this area," Ren Junjie explained to the reporter.
Like many private equity fund managers in China, Ren Junjie also highly values the concept of value investment. He introduced to reporters that he had been paying attention to value investing since 1996 and had read many works by Buffett and Lynch. After returning from Hong Kong in 1999, he wrote a series of articles introducing value investment concepts, such as "The Long Term is Gold", "Buffett's Investment Philosophy and Chinese Stock Market Practice", "Securities Investment Methods", and so on. He told reporters that he had been buying Maotai and OCT stocks since 2003 and has not sold them until now, while China Mobile has been holding them for 10 years. He also emphasized one more point: "I took the initiative to hold it steady, which is different from being trapped."
Friends are customers
Regarding the sources of partners and clients that the reporter was puzzled about, Ren Junjie said, "The preparation for the club started in 2003. We also found some securities companies to cooperate with, but in the end, it was not successful. Because many securities companies did not agree with our long-term cooperation ideas, the Fifth Club was officially established in 2005, and in fact, there were hardly any clients when it was first established. The only few clients were still some acquaintances or friends of friends."
He said that even many of the current clients are introduced by friends, and they are all individual clients. "Once, the CEO of a company once discussed with us to pool their employees' funds and entrust them to us for custody. However, due to the sensitivity of this issue, they ultimately decided not to do so."
Ren Junjie said that although it is difficult to find clients, the club will not accept all newcomers to join. "We have also set some thresholds in the selection of clients. Because it is an independent account management, we require at least 1 million yuan in investment, and both parties will have sufficient communication when signing the contract. If clients do not accept our consistent value investment philosophy, we will not accept them. Currently, our clients are mainly executives of some enterprises and commercial institutions, so our philosophy can also be well recognized by them."
Private equity funds are emerging rapidly
Ren Junjie did not start private equity on a whim. In fact, he had the idea of starting a private equity fund when he started focusing on value investing in 1999, but at that time Ren Junjie did not rashly enter. Because since 1999, the stock market has gone through a 2-3 year high climb, reaching a peak of 2200 points, and the average PE level in the market has reached a embarrassing level of about 60 times. Ren Junjie believes that the risk of overvaluation was too high at that time, and the timing was not yet mature.
In fact, in today's world where the influence of private equity funds seems to be expanding, it is not just Ren Junjie who is interested in the private equity market. According to Li Yafang, a member of the National Committee of the Chinese People's Political Consultative Conference, the total scale of private equity funds in China has exceeded 1 trillion yuan. As of April 3rd, the market value of the Shanghai and Shenzhen stock markets has exceeded 13 trillion yuan, with private equity accounting for about 8%. Since 2005, with the improvement of the market environment and the increasing supervision of illegal securities consulting operations by management, a group of private equity funds that are moving towards standardized operations have gradually emerged. Geographically speaking, Guangdong is the most developed region, with some private equity funds in Shenzhen being more representative. Shanghai (including the Jiangsu and Zhejiang regions) and Beijing have a lower level of development, and from a national perspective, Shenzhen, Shanghai, and Beijing are still active areas for private equity funds nationwide. Since the beginning of this year, with the gradual improvement of the market and the increasing enthusiasm of investors, the development of private equity has also been unprecedentedly active. They have gained increasing attention with their high-risk and high-yield capital myth.
A senior executive from an investment company in Shanghai said that his company's performance is not inferior to that of public funds, and even far exceeds that of public funds. According to the data provided by him, the average annual return on all funds of the company was 23% in 2004, 15% in 2005, and an astonishing 263% in 2006. As of April 18 this year, the returns of the three fund managers of the company were 130%, 160%, and 180%, respectively.
Pursuing current account returns is one aspect, and only by focusing on the long-term can we seek development. Regarding the future strategy of the Fifth Club, Ren Junjie stated that the club is also constantly seeking development. "In terms of strategic cooperation, we are seeking strategic marketing partners with customer resources. In the past six months, we have signed cooperation agreements with two marketing companies in Shenzhen and Beijing," he concluded.