Xiaojie HUANG: Giving up the Schooling and to be In-business is My Biggest Investment

2008-06-01

The investors’ each penny should be treated as the money for our aged parents. I make friends with each manager from my invested enterprises. Post-20-year securities market and industrial sector in China will surge forward with great momentum.RXY九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

In China’s PE circles, Xiaojie HUANG, president of Jiuding Capital, was honored with the youngest PE manager (born in 1978) and the most efficient investment fund manager. Within only one year, Xiaojie HUANG has created his own investment team, raised a fund of more than RMB 1 billion yuan, invested several promising enterprises, such as Goldcup Electric Apparatus (ranking first in the wire and cable industry in the central China), Billions Chemicals (ranking third in the titanium dioxide industry in China) and Linoya Electronics (ranking first in the electronic connector industry in China), and driven some enterprises into the express way of IPO. With such a short time and such a quick speed, in China’s investment circles that give birth to a multitude of heroes, this youth deserves to be treated with awe.RXY九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

HUANG had got two firsts in the entrance exams for master’s and doctoral degree programs in the Graduate School of the People’s Bank of China, known as “Huangpu Military Academy in China’s Financial Circles”, taught there after his graduation and acted as the section chief soon, and cut a striking figure in the research of investment theory and rural finance. Regardless of the bright future in the official career and the academic sector, he resigned beyond all expectations. His answer for the resignation was brief and clear: “I was keen on the investment, thought deeply of the investment, and basically comprehended the truth of the investment. Moreover, it was an era with the huge opportunity. So, I resigned to do what I want to practice my single life goal. That’s all.”RXY九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

It is luck to obtain HUANG’s letter of resignation: “Over the past 10 years, from 20 years old to 30 years old, I have studied, worked and lived around the Graduate Faculty...In view of my personal causes, I ask for resigning my current post and job, and will dedicate myself to the development of personal investment undertaking...” Simple though it was, it told us his true motives clearly. HUANG emphasized that single goal is the basic elements of the life success. Likewise, it is hard for an enterprise to do well the diversified operation. “There is no doubt that, in the investment, the selection of industry is of great importance. To select PE industry, it was my biggest and most thorough investment - I invested myself.”RXY九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

For the youth, he answered, “The wisdom in investment is not directly proportional to the age. I thought that, in terms of investment, besides the physiological age, the more important thing is to observe the depth and breadth of the reflection on the investment, and to observe if one comprehends the truth of investment and if one has formed correct investment philosophy, and determines to implement it in his/her whole life.” The simplicity, prudence and firmness in his speech and deportment, in no conformity with his age, were very impressive. RXY九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

 “In the ten years to come, the stable growth of economy and the continuous innovation of technology and business mode will provide the fertile soil for VC. The securitization is an irreversible trend, which will create huge industrial opportunity for PE. Subsequently, with the withdrawal of state-owned enterprises and the departure of the entrepreneurs of the first-generation privately-owned enterprises, the merger is sure to emerge. It is historically inevitable that the growth of economy and the advancement of securitization in China determine the prospect of the PE industry. The emerging of Blackstone Group, Sequoia Capital and Carlyle Group is historically inevitable in China. It is a great luck for us to participate in creating the history!” When talking about the prospect of China's PE industry, he was calm and firm.RXY九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

On June 2nd, Jiuding Capital raised a regional fund for the investment in Chengdu. Xiaojie HUANG expressed that, in October 2016, Jiuding Capital is to re-raise a fund of RMB 1 billion yuan. “Currently, our scale is medium. But we hope that our investment philosophy and investment performance are not medium but pivotal.”RXY九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

The investment wins in no loseRXY九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

 RXY九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

Digital Business Times (hereinafter referred to as “DT”): The stock market declines more than a half, but the market value evaporation of the stock market seemingly has no impact on the financial liquidity of PE market. The competition between the PE institutions is still cruel and fierce. Currently, domestic PE institutions, big or small, are up to several hundreds. Are you aware of sense of urgency?RXY九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

Xiaojie HUANG: What you have mentioned is of great significance. In fact, I think about how to survive each day. Regardless of the optimism of external conditions, I force myself to think about such question. RXY九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

It has been said that only the bankrupt cherishes each penny as life. Compared with those with the ups and downs of life, I have met with a few setbacks. For this reason, I am particularly afraid that I am lack of consideration into the risk and the survival ability under the extreme conditions, so I remind myself to reflect on the question of survival each day firstly. Although I have been gone well, I in fact was gingerly like walking on the ice. Perhaps that is why I have been gone well. In our team, some co-workers have lived through the marked ups and downs. In this respect, we are complementary. RXY九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

In practice, we will try to avoid making the mistake of the first kind, that is, we never invest into some bad enterprises. To this end, we'd rather give up some seemingly-attractive investment opportunities. It is absolutely correct and important that the investment wins in no lose. RXY九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

DT: How do you balance income and risk?RXY九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

Xiaojie HUANG: This is the first thing for investment. In my opinion, risk is not terrible. If you are afraid of risk, you can only purchase the U.S. treasury securities. If all the investment managers buy the U.S. treasury securities, they are too failed. In terms of investment, it is inevitable to take a risk. The premises are as follows: firstly, you must understand the risk; secondly, you must understand how to control the risk; thirdly, you must bear the risk by your own. The great investment is a kind of torment. Before you invest, you must think painfully, even live through a long wait. The great investment is also a kind of happiness, because you have understood the risk, you can bear the risk and enjoy corresponding income from investment calmly. RXY九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

In practice, we often remind each member in our team to treat the investors’ each penny as the money for our aged parents. For this reason, although our investment time is not long, our investment style is generally thought by insiders to be stable. This is our real pursuit. RXY九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

DT: Since 2007, the investment price in PE market has kept going up. Currently, the substantial economy is going downhill, and the macro economy is facing the economic contraction. But the entrepreneurs seemingly remained their mindset in the bubble economy period of the year 2007, with high expectation for P/E ratio. How do you treat and handle such contradiction?RXY九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

Xiaojie HUANG: What you have mentioned is true. Some of entrepreneurs hope to balance their own PE share price with 6000-point share price. But some of investors are willing to buy the shares with high price. I think that the share price in the secondary market will keep close to value pivot. In the short run, the stock market is the voting mechanism; in the long run, the stock market is a scale. Correspondingly, the primary market should have a corresponding reasonable price. Therefore, there is relatively-stable specific value between the two. RXY九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

The investment manager, who must be responsible for the investors and the enterprise, is the bridge between the investors and the enterprise. Both over-high price and over-low price are irresponsible. In our investment practice, we haven’t received the over-high price and sought for the over-low price, and hoped to obtain corporate equity with relatively reasonable and fair price and to create enterprise value through joint efforts. In such process, income is expectable, risk is controllable, and cooperation is pleasant. RXY九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

Enjoying the shareholders’ rights and bearing the shareholders’ obligationsRXY九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

DT: Most of PE institutions are puzzled about how to handle the relationship with the invested enterprises. Some are indifferent to anything. Some excessively participate in the enterprise’s daily routine. For this case, how do you handle it?RXY九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

HUANG: Just as an old saying goes: “too much is as bad as too little”. It indicates that indifference or excessive participation is wrong. RXY九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

I always emphasize that, after investing an enterprise, the fund manager should enjoy the shareholders’ rights and bear the shareholders’ obligations. For example, if our invested enterprise needs a loan (RMB 100 million yuan), I account for 20%. I think that I have to obtain a loan at least RMB 20 million yuan. If I couldn’t do it, I am upset. I think that it is the responsibility that each shareholder should bear. RXY九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

According to the practice, because our invested enterprises were relatively-mature ones, the enterprises’ management teams have been proved by the previous practices to be the best ones in the industry; therefore, we usually don’t intervene in the enterprises’ daily operation and management. In other aspects, e.g., providing company listing collaboration, merger arrangement and financing channels, improving corporate governance, optimizing profit mode, etc., because we have more abundant resources and richer experience, we often bear more responsibilities. RXY九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

In truth, the intercourse with the invested enterprises is a very pleasant thing. I have made friends with each manager from my invested enterprises. In fact, some of managers from my invested enterprises have become my limited partners. So, the investment is a thing with strongly-positive feedback. If you can do it well, your business is easy to be strong. If you can’t do it well, your business will vanish soon. RXY九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

DT: So far, we have witnessed that many PE institutions failed to handle the relationship with the investors. Sometimes, the investors withdraw capital suddenly, and even make their own PE. RXY九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

Xiaojie HUANG: What you said certainly exists in the industry, but is not universal. RXY九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

In such case, we, as the managers, will reflect on ourselves firstly. At least, at this particular phase, I fail to win enough trust from the investors and to handle the problems well. But I think that, for me and my team, the investment career is lifelong, we will adhere to our own concept, and prove that our investors’ selection is correct. RXY九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

In practice, we have emphasized selection and communication of investors, and never absorbed the investors blindly for the fund scale expansion. The fund scale doesn’t matter. The key is that we can unify our thoughts to hold fast to our common investment philosophy. I never think that a good PE fund must be a big one. As long as we hold fast to correct philosophy and do well our own things, it is certain to be the best company. You must understand that, in terms of investment, time is the best touch stone. RXY九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

Looking forward to embracing the post-20-year merger marketRXY九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

DT: According to your disclosed information, you focus on the PE investment. Had you invested at the early stage of the enterprises development?RXY九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

Xiaojie HUANG: In terms of investment, it is certain to select the investment with the highest income under the condition of the same risk, or to select the investment with the lowest risk under the condition of the same income. In terms of China’s current development stage, because the development of the securities market lags behind that of economy, many promising enterprises don’t move towards IPO. The investment in such enterprises has relatively-low risk and relatively-high income, which provides rare investment opportunities for China’s current private equity investment. We, as the investment managers, are certain to invest such enterprises.RXY九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

However, from the perspective of development, with the development of market, PE’s profit margin will continuously drop within the expected time to average market profit. This requires that the investment manager must move towards the front end of the enterprises, that is, the venture investment stage. If we are not ready for it, once we have to move towards the venture investment, we will lose our heads. At current stage, although we think that the current foundation of venture investment in China is not good enough, we still do it for the purpose of accumulating some experience. RXY九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

Our team has some advantages in PE’s information acquisition, project judgment and IPO promotion. In terms of VC, we are still lack of experience. At this stage, our investment in VC projects mainly uses our management team’s capital instead of the capital raised from the investors. When our VC investment mode in China is mature through years of accumulation, we will expand our scale to raise corresponding VC fund.RXY九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

DT: You have mentioned that, with the withdrawal of state-owned enterprises and the departure of the entrepreneurs of the first-generation privately-owned enterprises, the merger is sure to emerge. Does it mean that the merger fund will be your next target?RXY九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

Xiaojie HUANG: Currently, China’s merger market is not mature. According to the data of last year, only 8% of all the projects were related to the merger, and the rest were based on VC and IPO. According to the development trend, my judgment is that, 20 years later, China’s merger market is sure to emerge. Why? I think that there are three basic conditions: firstly, through 20-year development, China’s investment fund will have reached a relatively-large scale, and only large-scale merger can contain such a great power, that is, the merger’s driving force; secondly, 20 years later, in some competitive industries, state-owned enterprises will withdraw, and the entrepreneurs from the privately-owned enterprises (most of them started up the business in 1980s, and will be aged 70-80 at that time) will basically quit the stage of the enterprises, which will provide the merger targets; thirdly, with the further development of China’s financing market, junk bond, highly-leveraged financing, etc. will be possible. Based on the above three aspects, I think that post-20-year securities market and industrial sector in China will surge forward with great momentum. It is lucky for us to go through such an era. Therefore, we are making good preparations in research and industry. 20 years later, I am looking forward to embracing such an era that gives birth to a multitude of heroes.RXY九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

Personal information for Xiaojie HUANGRXY九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

Born in Zizhong, Sichuan, PhD in Finance, worked at Shanghai Futures Exchange and People's Bank of China, and then established Beijing Huida Jiuding Investment Management Co., Ltd., launched and managed several equity investment funds. The member of Securities Association of China Securities Practitioner Qualification Examination Proposition Committee, the member of China Financial Planner Standards Council Textbook Team (Investment Analysis); published some financial books, including Investment Analysis.RXY九鼎投资(600053.SH)_上交所私募股权投资领域上市公司


RXY九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

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