The Boao Forum for Asia brings together a stellar list of people from government, finance and industry, but the mix can sometimes go flat, like a cocktail missing a key ingredient.
This week saw some of the biggest names in Asia’s investments industry gather together in a room, but the session pricked mostly ire instead of wisdom.
Gao Xiqing, the very funny and impressive vice-chairman and president of China Investment Corporation, got fed up with repeated mistakes by the moderator, a reporter from the Financial Times, who kicked off the roundtable by quoting grossly inaccurate figures about foreign investment into China and then proceeded to refer to CIC as “China Capital”.
That finally moved Gao, who was badgered throughout the long session to give up some inside information, to tell the moderator: “You must say ‘China Investment Corporation’ 500 times.”
It was a window into the frustrations that people at the top in the investments industry often face when confronting a media that doesn’t really understand their business.
Otherwise the panelists blandly endorsed the China investment story. Blackstone’s Antony Leung says valuations in private equity are high but more attractive in various segments of real estate. Hony Capital’s John Zhao says 2012 was a slow year across the board, but by its end his firm was making aggressive investments into themes around urbanisation and consumption.
Carlyle Group’s David Marchick says his firm last year put $700 million to work in China, noting that consumer spending rose by 12% year-on-year, and even higher in certain sub-sectors.
Bill Owens, of AEA Investors, identified IT, telecoms, data centres, big data and data analytics as exciting industries. “How can you not afford to be in that market?” he asks.
Neil Shen, of Sequoia Capital China, notes that the recent ability of local institutional investors such as insurance companies to go into PE has created a better environment for general partners.
Zhang Yichen, of Citic Capital, was the only one to issue a complaint about the environment for PE (as opposed to a complaint about the media). It has never been made clear which regulator is responsible for private equity firms: the China Securities Regulatory Commission or the National Development and Reform Commission.
“We face uncertainty as the CSRC and NDRC fight over the supervision of this industry,” he says. “Our dilemma is we don’t know which rules to follow and who to file with.”
As for Gao, he says that CIC invests “everywhere” in “everything”. In terms of geography it hews roughly to countries’ economic size, and has stakes in more than 100 markets. Its time-frame is long term, with a 10-year performance evaluation, which allows it to put more than 50% of its assets into alternatives, direct investments and other non-public market plays.
He says that although the US is a big part of the portfolio, in line with its economic size, “The US has not been very welcoming for us. For some reason during the global financial crisis we felt welcome, and were invited in. But since then we feel stigmatised” with regard to particular investments.
CIC does not seek to take strategic or majority stakes, Gao says. Given its size ($500 billion in AUM), it needs to pick big projects, and wants to write tickets of at least $100 million. Its internal risk guidelines require it to own no more than 10% of a given company or project, so that means CIC is always looking for $1 billion-plus sized deals.
This is a challenge when it looks to go to smaller countries, and many emerging markets. Gao says long term, he likes many emerging markets, so to get around issues of size, CIC is negotiating with several governments across different regions about financing cross-border infrastructure.
Finally pressed by the moderator on his next real estate deal, Gao quipped: “The White House.” It got a big laugh from the audience.