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Zhang Lei: A Young Chinese Buffett?

Courtesy of the Wall Street Journal, a look at Zhang Lei, a rising Chinese investor who some consider may be his way to becoming a young Warren Buffett:

Zhang Lei is fast becoming a big man on campus.

One of China’s most successful investors, Mr. Zhang has attracted several billion dollars in commitments from elite university endowments from Yale to Princeton. Stanford University is the latest to join in, with plans to invest about $200 million, people familiar with the matter said.

The Stanford pledge means Mr. Zhang’s more than $18 billion Hillhouse Capital Group will be investing money for at least six of the 10 wealthiest universities in the U.S.

While boosting a stake in China right now might seem a risky proposition, Mr. Zhang is a known quantity.

University investors, coveted for their long-term commitment and prestige, appear to be taken with Mr. Zhang, who cuts a low profile in Asia and abroad and runs a firm known for secrecy. A series of winning bets on Chinese technology companies, including a big, early wager on online games company Tencent Holdings Ltd., have added to Mr. Zhang’s aura as one of China’s top investors.

Representatives from Hillhouse and Stanford declined to comment on investment activities. Mr. Zhang was unavailable for comment.

Mr. Zhang’s technology ties run deep. Jack Ma was a guest speaker at an early Hillhouse annual investor meeting in Beijing, where the Alibaba Group Holding Ltd. founder and chairman talked about his life story long before it was widely known, according to a person familiar with the matter.

“He’s a rare individual in the investment business,” said Stephen Roach, a former chairman of Morgan Stanley’s Asian operations who teaches courses at Yale and knows Mr. Zhang well. “He doesn’t get thrown by market gyrations. When they go down, he views that as an opportunity and not a risk.”

A onetime intern in Yale University’s investment office, Mr. Zhang started his firm a decade ago with $20 million from its chief, David Swensen, overseer of Yale’s money for the past three decades and pioneer of an unconventional strategy favoring hedge funds and private equity over stocks and bonds. Mr. Swensen is known for his superior returns and a diaspora of acolytes who now run some of the country’s biggest university endowments.

Mr. Zhang was so enamored of his time at Yale that he named his firm after a two-block avenue that cuts through the university’s New Haven, Conn., campus. As a graduate student at the university, Mr. Zhang translated Mr. Swensen’s 2000 book, “Pioneering Portfolio Management,” into Chinese. Doing so required him to create new Chinese characters for the English words “endowment” and “fiduciary,” according to the university. In 2010, he gave a $8,888,888 gift to the business school, a number that is considered to carry good fortune in Chinese culture. It was one of the largest-ever donations from a graduate.

The list of university investors in Hillhouse includes Princeton, the Massachusetts Institute of Technology, University of Pennsylvania and the University of Texas System. All but the Texas endowment are led by former employees of Mr. Swensen. Like Mr. Zhang, Stanford endowment chief Robert Wallace is a Yale graduate who got his start under Mr. Swensen.

Hillhouse discloses little about its investment performance but tends to hold on to bets for the long haul, a style that has set it apart in China’s short-term investing culture. A five-year-old stake in Chinese online retailer JD.com Inc., for instance, has risen more than 15 times in value, to over $4 billion. The company went public in the U.S. last year.

Hillhouse also has obtained stakes in some of Silicon Valley’s hottest companies. This year, it led a convertible-bond deal with San Francisco-based ride-sharing company Uber Technologies Inc. and was an investor in home-rental service Airbnb Inc.’s latest fundraising round.

Speaking in April to students at Columbia University’s business school, Mr. Zhang said that Hillhouse sometimes takes on only one new position a year, according to a student attendee.

Some observers spot a distinct Swensen influence in Hillhouse, which like Yale advocates taking a patient approach with investments. “One thing that I took away from him was life is too short,” said Peng Zong, a 31-year-old Columbia M.B.A. student, who blogged about the presentation and spoke with The Wall Street Journal. “That’s how he evaluates investment opportunities—is this thing worth my time?”

That patience has been tested recently with some investments likely affected by a recent rout in Chinese stocks. JD.com shares, have slid 28% from a record in early June.

Stanford’s new pledge to Hillhouse is one of the first large moves made by Mr. Wallace, who took over the nation’s fourth-largest endowment in May and was quick to make changes.

Last month, several senior-level managers were let go as Mr. Wallace shifts the endowment’s strategy to the Yale playbook of fewer external money managers and bigger bets with a select group of outside firms that remain, said people familiar with the matter.

A Stanford spokesman said staff exits are “not unusual” when there is a change in leadership.

Mr. Wallace already has hired at least two senior-level managers who had prior ties with him at Yale and London investment firm Alta Advisers, where he served as chief executive after leaving Yale in 2005. They include Greg Milani, who had been his No. 2 at Alta, and Jay Kang, a Yale graduate who most recently worked for another Swensen understudy at the Conrad N. Hilton Foundation. A Stanford spokesman said both Mr. Milani and Mr. Kang had been hired.



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About This Blog And Its Author
Global Buffetts is dedicated to compiling a compendium of elite international money managers & investors.  While the U.S. is indeed home to a number of world-class financiers, the rapid economic development and dynamic rise of financial acumen around the world has changed the playing field in the past decades.  There are now a number of global "Buffetts" plying their trade & demonstrating their expertise in their own markets.  Often, however, there is little written about such individuals as most popular media is focused on the big names in U.S. investing.  This personal interest blog is one individual's attempt to uncover other elite money managers from around the world.

Educated at Yale University (Bachelor of Arts - History) and Harvard (Master in Public Policy - International Development), Monty Simus has lived, worked, and traveled in more than forty countries spanning Africa, China, western Europe, the Middle East, South America, and Southeast & Central Asia, and his personal interests comprise economic development, policy, investment, technology, natural resources, and the environment, with a particular focus on globalization’s impact upon these subject areas.  Monty writes about frontier investment markets at www.wildcatsandblacksheep.com and geopolitical pressures in the global agricultural sector at www.seedsofarevolution.com.