China Money Podcast - Video Episodes

http://www.chinamoneynetwork.com In this episode of China Money Network, founder of Qiming Venture Partners, Gary Rieschel, shares his thoughts on the Chinese economy, the technological evolutions of the Chinese Internet sector and why he is confident that Qiming will be well within the top quartile performers among China's venture capital firms, if he is not being too conservative. Founded in 2006, Qiming Venture is one of the most successful venture capital firms in China, having invested in and successfully listed companies including Jiayuan, ChinaCache and Touchmedia. Qiming recently closed its second RMB fund, raising RMB700 million in merely four months. Gary Rieschel talked to China Money Network in Shanghai. Listen to the full-interview in the audio podcast, watch the shortened video version, or read a transcript summary. INTERVIEW EXCERPT: Q: Let's start with the macro economy. It looks certain that the Chinese economy will grow at the slowest pace in more than ten years. How has your businesses been impacted? A: The Chinese economy this year will grow slower than in the past, but I don't think that's a great surprise. I think it's a natural evolution as China starts to go to (an economic model) more of a consumption driven, more higher valued-added products in the economy. There is some hesitancy by foreign investors, so you have seen a slight drop in foreign direct investment this year. But I think this is all relatively healthy as China starts to go through a transition. I think what's happening in our business is that you have to be more selective. You are not going to be bailed out of your mistakes by the fact that the market is growing very quickly. In the past for Qiming, we've made approximately 70 investments during the last six and half years. We had less than 10% of the companies fail, which is extraordinarily low for the kind of investing that we do compared to what would have been in the U.S. or other markets. So as our (venture capital) market matures, we expect more failures among early stage companies. In the U.S., somewhere from a third or half of the start-ups fail, but we have been nowhere close to that. This means we have to pick better CEOs, look for more complete management teams, and have a better idea of how technology will evolve. So for example, in healthcare and clean tech, we align ourselves more with government policy initiatives, such as the twelfth five-year plan as the leadership decides how they want the sector to develop. Gary Rieschel is founder of Qiming Venture Partners, a $1 billion-under-management venture capital firm started in 2006. Previously, Rieschel was the founder or lead investor in SOFTBANK Venture Capital, Mobius Venture Capital, SAIF Partners (China) and Ignition Partners. Earlier in his career, Rieschel held senior executive positions in Cisco Systems, Sequent Computer Systems and Intel.

http://www.chinamoneypodcast.com In this episode of China Money Podcast, founder of Qiming Venture Partners, Gary Rieschel, shares his thoughts on the Chinese economy, the technological evolutions of the Chinese Internet sector and why he is confident that Qiming will be well within the top quartile performers among China's venture capital firms, if he is not being too conservative. Founded in 2006, Qiming Venture is one of the most successful venture capital firms in China, having invested in and successfully listed companies including Jiayuan, ChinaCache and Touchmedia. Qiming recently closed its second RMB fund, raising RMB700 million in merely four months. Gary Rieschel talked to China Money Podcast in Shanghai. Listen to the full-interview in the audio podcast, watch the shortened video version, or read a transcript summary. INTERVIEW EXCERPT: Q: Let's start with the macro economy. It looks certain that the Chinese economy will grow at the slowest pace in more than ten years. How has your businesses been impacted? A: The Chinese economy this year will grow slower than in the past, but I don't think that's a great surprise. I think it's a natural evolution as China starts to go to (an economic model) more of a consumption driven, more higher valued-added products in the economy. There is some hesitancy by foreign investors, so you have seen a slight drop in foreign direct investment this year. But I think this is all relatively healthy as China starts to go through a transition. I think what's happening in our business is that you have to be more selective. You are not going to be bailed out of your mistakes by the fact that the market is growing very quickly. In the past for Qiming, we've made approximately 70 investments during the last six and half years. We had less than 10% of the companies fail, which is extraordinarily low for the kind of investing that we do compared to what would have been in the U.S. or other markets. So as our (venture capital) market matures, we expect more failures among early stage companies. In the U.S., somewhere from a third or half of the start-ups fail, but we have been nowhere close to that. This means we have to pick better CEOs, look for more complete management teams, and have a better idea of how technology will evolve. So for example, in healthcare and clean tech, we align ourselves more with government policy initiatives, such as the twelfth five-year plan as the leadership decides how they want the sector to develop. Gary Rieschel is founder of Qiming Venture Partners, a $1 billion-under-management venture capital firm started in 2006. Previously, Rieschel was the founder or lead investor in SOFTBANK Venture Capital, Mobius Venture Capital, SAIF Partners (China) and Ignition Partners. Earlier in his career, Rieschel held senior executive positions in Cisco Systems, Sequent Computer Systems and Intel.

http://www.chinamoneynetwork.com In this episode of China Money Network, co-founding partner of Baird Capital Partners Asia, Huaming Gu, talks about his fund's fund raising during the depth of the financial crisis, and how his firm works with small and medium enterprises in China to clean up corporate governance and establish financial discipline, while hoping to achieve nice returns. Listen to the full-interview in the audio podcast, watch the shortened video version, or read a transcript summary. Q: China's private equity industry faces many challenges right now. Many fund managers say that right now is the time for private equity firms to add value. What have you done to deepen your own niche and create value? A: For us, it's actually a good thing. We never bank on IPOs as our primary exit route. We are more toward building a business for M&A exit. We are very operational intensive. We tend to look for companies that we can help them to make them better. We are investing more into operating expertise to our portfolios, an essential part of our strategy. For example, we add an in-house financial director to a portfolio company and try to put in place financial discipline at the company. Q: What kind of specific financial discipline do you try to instill in the company? A: The companies we invest in are smaller companies, which are probably run by an entrepreneur. Often times, they don't have a good financial controller. They probably will have bookkeeper or a cashier. We go in there to help them to first keep the records straight. We also install the discipline of expenditure, making capital investments and collecting money. Some industries in China are known for longer receivables. We help companies to manage cash flows to support their continued growth.

http://www.chinamoneypodcast.com In this episode of China Money Podcast, co-founding partner of Baird Capital Partners Asia, Huaming Gu, talks about his fund's fund raising during the depth of the financial crisis, and how his firm works with small and medium enterprises in China to clean up corporate governance and establish financial discipline, while hoping to achieve nice returns. Listen to the full-interview in the audio podcast, watch the shortened video version, or read a transcript summary. Q: China's private equity industry faces many challenges right now. Many fund managers say that right now is the time for private equity firms to add value. What have you done to deepen your own niche and create value? A: For us, it's actually a good thing. We never bank on IPOs as our primary exit route. We are more toward building a business for M&A exit. We are very operational intensive. We tend to look for companies that we can help them to make them better. We are investing more into operating expertise to our portfolios, an essential part of our strategy. For example, we add an in-house financial director to a portfolio company and try to put in place financial discipline at the company. Q: What kind of specific financial discipline do you try to instill in the company? A: The companies we invest in are smaller companies, which are probably run by an entrepreneur. Often times, they don't have a good financial controller. They probably will have bookkeeper or a cashier. We go in there to help them to first keep the records straight. We also install the discipline of expenditure, making capital investments and collecting money. Some industries in China are known for longer receivables. We help companies to manage cash flows to support their continued growth.

Like our Facebook page and follow us now on Twitter @chinamoneypod. For more great episodes, please go to http://www.chinamoneypodcast.com In this episode of China Money Podcast, guest Bob Partridge, managing partner of transaction advisory services at Ernest & Young, explains why it is a good time for overseas institutional investors to invest in China's private equity right now, and what is in store for the industry next year. Listen to the full-interview in the audio podcast, watch the shortened video version, or read a transcript summary. Q: China's private equity industry is in a challenging position right now with a large capital overhang and difficult exit channels. Some are calling for an industry consolidation. What's your view? A: There are a lot of concerns going on in the public markets right now, and that's driving activities on both sides of the deal picture. On exits, there are certainly lower opportunities for private equity to exit. But on investing side, it creates better valuation opportunities. As a result, we are seeing a mixture of expected lower valuations, and the old problem that we always have in this market, that sellers always want to hold out as long as they can before they recognize changes in valuations. But overall, deal volume and fundraising are up, so it's not a bad time to invest in PE in China. Q: How has fundraising and deal volume been? A: In the first quarter, we had a good quarter. The second quarter, fundraising came down on concerns of what RMB funds really mean for the industry. In fact, last year, all the funds raised are unrealistic. The most recent quarter, deal volumes are up 9%. Because we see things before they become public, I can say deal pipelines are very strong. We predict that the third quarter will be up slightly because of the summer months. The fourth quarter, deal volume will continue to go up. Overall, total dollars deal volume will be up in 2012 year-on-year. Q: The somewhat strange phenomenon in the Chinese markets now is that valuations in the public markets are lower than private markets. What does that mean for investors? A: There is lots of insanity out here. It's easy to zero in on some high valuation deals. But a lot of things here aren't as transparent as New York or London. Entrepreneurs expect high valuations, when they hear a public deal getting done at 20-times multiple, for example, they think their company should be worth at least 21 times. So you have mixtures of exaggerated reporting and embellishment of what the real valuations are. But in general, we are seeing valuations are coming down on a historical perspective. Bob Partridge is managing partner of transaction advisory services of Greater China at Ernest & Young. Since 2000, Partridge has assisted many major global and regional private equity firms and multi-national corporations in investing in China. He has led numerous private equity transactions in China, focusing on technology, telecom, financial services and manufacturing sector.

Like our Facebook page and follow us now on Twitter @chinamoneypod. For more great episodes, please go to http://www.chinamoneynetwork.com In this episode of China Money Network, guest Bob Partridge, managing partner of transaction advisory services at Ernest & Young, explains why it is a good time for overseas institutional investors to invest in China's private equity right now, and what is in store for the industry next year. Listen to the full-interview in the audio podcast, watch the shortened video version, or read a transcript summary. Q: China's private equity industry is in a challenging position right now with a large capital overhang and difficult exit channels. Some are calling for an industry consolidation. What's your view? A: There are a lot of concerns going on in the public markets right now, and that's driving activities on both sides of the deal picture. On exits, there are certainly lower opportunities for private equity to exit. But on investing side, it creates better valuation opportunities. As a result, we are seeing a mixture of expected lower valuations, and the old problem that we always have in this market, that sellers always want to hold out as long as they can before they recognize changes in valuations. But overall, deal volume and fundraising are up, so it's not a bad time to invest in PE in China. Q: How has fundraising and deal volume been? A: In the first quarter, we had a good quarter. The second quarter, fundraising came down on concerns of what RMB funds really mean for the industry. In fact, last year, all the funds raised are unrealistic. The most recent quarter, deal volumes are up 9%. Because we see things before they become public, I can say deal pipelines are very strong. We predict that the third quarter will be up slightly because of the summer months. The fourth quarter, deal volume will continue to go up. Overall, total dollars deal volume will be up in 2012 year-on-year. Q: The somewhat strange phenomenon in the Chinese markets now is that valuations in the public markets are lower than private markets. What does that mean for investors? A: There is lots of insanity out here. It's easy to zero in on some high valuation deals. But a lot of things here aren't as transparent as New York or London. Entrepreneurs expect high valuations, when they hear a public deal getting done at 20-times multiple, for example, they think their company should be worth at least 21 times. So you have mixtures of exaggerated reporting and embellishment of what the real valuations are. But in general, we are seeing valuations are coming down on a historical perspective. Bob Partridge is managing partner of transaction advisory services of Greater China at Ernest & Young. Since 2000, Partridge has assisted many major global and regional private equity firms and multi-national corporations in investing in China. He has led numerous private equity transactions in China, focusing on technology, telecom, financial services and manufacturing sector.

In this episode of China Money Podcast, Goodman Group's Hong Kong-based managing director, Philip Pearce, discusses opportunities in China's logistics property market, and why his firm is expanding investments in China ten-fold in the next five years. Listen to the full interview in the audio podcast, watch the shortened video version or read an excerpt. Philip Pearce is a managing director at the Goodman Group, a Sydney-headquartered logistics property developer and manager with $2.5 billion under management in Asia. Based in Hong Kong, Pearce is responsible for Goodman Group's investments in Greater China. Before joining Goodman in 2002, Pearce was at Ascendas-MGM Funds Management and AMP Henderson Global Investors.

In this episode of China Money Network, Goodman Group's Hong Kong-based managing director, Philip Pearce, discusses opportunities in China's logistics property market, and why his firm is expanding investments in China ten-fold in the next five years. Listen to the full interview in the audio podcast, watch the shortened video version or read an excerpt. Philip Pearce is a managing director at the Goodman Group, a Sydney-headquartered logistics property developer and manager with $2.5 billion under management in Asia. Based in Hong Kong, Pearce is responsible for Goodman Group's investments in Greater China. Before joining Goodman in 2002, Pearce was at Ascendas-MGM Funds Management and AMP Henderson Global Investors.

http://www.chinamoneypodcast.com Like our Facebook page and follow us now on Twitter @chinamoneypod. In this episode of China Money Podcast, Pantheon Venture's global head of investment, Chris Meads, talks about how private equity in China has to shift strategies to succeed in the future, and how his firm is looking to back more control-oriented funds. Listen to the full interview in the audio podcast, watch the shortened video version or read an excerpt. Our Guest Today: Chris Meads is the global head of investment at Pantheon Ventures, a global fund of funds investment firm with $25 billion under management worldwide and close to $3 billion dedicated to Asia. Previously, Meads was at HSBC Hong Kong, Brierley Investments and CS Frist Boston. He was also a former economist for the National Bank of New Zealand and the Reserve Bank of New Zealand.

http://www.chinamoneynetwork.com Like our Facebook page and follow us now on Twitter @chinamoneypod. In this episode of China Money Network, Pantheon Venture's global head of investment, Chris Meads, talks about how private equity in China has to shift strategies to succeed in the future, and how his firm is looking to back more control-oriented funds. Listen to the full interview in the audio podcast, watch the shortened video version or read an excerpt. Our Guest Today: Chris Meads is the global head of investment at Pantheon Ventures, a global fund of funds investment firm with $25 billion under management worldwide and close to $3 billion dedicated to Asia. Previously, Meads was at HSBC Hong Kong, Brierley Investments and CS Frist Boston. He was also a former economist for the National Bank of New Zealand and the Reserve Bank of New Zealand.

In this episode of China Money Network, guest Amir Gal-Or discusses investing in deals that transfer foreign technologies to China, partnering with local governments to run RMB funds and how to instill professional management to state-owned enterprises. Listen to the full interview in the audio podcast, watch the shortened video version or read an excerpt. Our Guest Today: Amir Gal-Or is the founder and managing partner of the Infinity Group, a China focused private equity firm with 2 billion RMB and over $700 million under management. Gal-Or is the chairman of 12 local Chinese companies, and has led three IPOs and 12 M&A deals, most of them in China. He holds an MBA degree from Tel Aviv University, and is a former pilot in the Israeli Air Force.

In this episode of China Money Podcast, guest Amir Gal-Or discusses investing in deals that transfer foreign technologies to China, partnering with local governments to run RMB funds and how to instill professional management to state-owned enterprises. Listen to the full interview in the audio podcast, watch the shortened video version or read an excerpt. Our Guest Today: Amir Gal-Or is the founder and managing partner of the Infinity Group, a China focused private equity firm with 2 billion RMB and over $700 million under management. Gal-Or is the chairman of 12 local Chinese companies, and has led three IPOs and 12 M&A deals, most of them in China. He holds an MBA degree from Tel Aviv University, and is a former pilot in the Israeli Air Force.

In this episode of China Money Network, guest Chris Brooke discusses whether China's property market recovery is real, and how can foreign investors make money in the crowded commercial real estate market in China. Listen to the full-interview in the audio podcast, watch the shortened video version or read an excerpt. Q: CBRE entered the Chinese market very early in 1988. Have you seen the commercial real estate part of the market as hot as it is now? A: As we stand here in the middle of 2012, the commercial sector has obviously grown considerably. In terms of investment volume, RMB88 billion of investment properties in the commercial property sector traded, compared to RMB84 billion in 2007. So it’s on a similar level to even the peak of the market. During the first half of this year, we’ve had RMB42 billion. We are expecting this year to turn out similar to 2007, even though it has been a bit subdued during the first half. Q: Since China loosened monetary policy, the overall property market looks to be recovering, is it? Or is this just a temporary blip on the way down? A: Well, you got to distinguish the residential or commercial part of the market. In residential, sentiment has definitely improved with sales and transactions recovered to some extent. I think the government will still remain a restrictive policy around anything that will result in more speculation and a rebound in prices. So residential prices will stay stable at least until the end of this year. Obviously, the leadership transition next year means policy uncertainties, so it’s difficult to see beyond that. On the commercial side, we still see rents increasing in major cities like Beijing. We are also seeing tenant demand moving to the western regions, like Chengdu, Chongqing and Wuhan. Q: Where do you see the biggest risks right now in China’s property sector? There have been lots of commercial building, and there is concern that they might not attract enough people to keep them afloat? A: I think that’s a genuine risk, particular in secondary cities or provincial capital cities. There is definitely a mismatch between the timing of supply and demand. A lot of cities are developing new CBD (Central Business District) areas and new commercial districts, and a lot of that supply are coming on simultaneously. Another broader risk relates to what happens globally. If demand continues to be impacted by uncertainties in the U.S. and Europe, it would mean some organizations might delay decisions on expansions, which will clearly impact the demand of office space.

In this episode of China Money Podcast, guest Chris Brooke discusses whether China's property market recovery is real, and how can foreign investors make money in the crowded commercial real estate market in China. Listen to the full-interview in the audio podcast, watch the shortened video version or read an excerpt. Q: CBRE entered the Chinese market very early in 1988. Have you seen the commercial real estate part of the market as hot as it is now? A: As we stand here in the middle of 2012, the commercial sector has obviously grown considerably. In terms of investment volume, RMB88 billion of investment properties in the commercial property sector traded, compared to RMB84 billion in 2007. So it’s on a similar level to even the peak of the market. During the first half of this year, we’ve had RMB42 billion. We are expecting this year to turn out similar to 2007, even though it has been a bit subdued during the first half. Q: Since China loosened monetary policy, the overall property market looks to be recovering, is it? Or is this just a temporary blip on the way down? A: Well, you got to distinguish the residential or commercial part of the market. In residential, sentiment has definitely improved with sales and transactions recovered to some extent. I think the government will still remain a restrictive policy around anything that will result in more speculation and a rebound in prices. So residential prices will stay stable at least until the end of this year. Obviously, the leadership transition next year means policy uncertainties, so it’s difficult to see beyond that. On the commercial side, we still see rents increasing in major cities like Beijing. We are also seeing tenant demand moving to the western regions, like Chengdu, Chongqing and Wuhan. Q: Where do you see the biggest risks right now in China’s property sector? There have been lots of commercial building, and there is concern that they might not attract enough people to keep them afloat? A: I think that’s a genuine risk, particular in secondary cities or provincial capital cities. There is definitely a mismatch between the timing of supply and demand. A lot of cities are developing new CBD (Central Business District) areas and new commercial districts, and a lot of that supply are coming on simultaneously. Another broader risk relates to what happens globally. If demand continues to be impacted by uncertainties in the U.S. and Europe, it would mean some organizations might delay decisions on expansions, which will clearly impact the demand of office space.

In this episode of China Money Network, guest Monte Brem, CEO of private equity firm StepStone Group, shares his firm's investments in China and how offshore investors can protect themselves when investing with local Chinese managers. Q: You have been relocated to China for more than two years, and StepStone’s office in Beijing opened about two years ago. How have your businesses in China grown during this time? A: We’ve increased the amount of capital we invest into China by a huge amount. We used to invest around $25 to $30 million into Chinese managers and deals. Now we are investing around $300 to $500 million a year. So on the investment side, there has been huge growth. Q: So where do you see attractive opportunities right now? A: Almost all the money we invest into China is somehow connected to the consumer market. (Because) a lot of markets like mining and resources are very difficult. Most of them are not accessible to foreign investors anyway. The consumer markets tend to be more open and less politically oriented. We’ve invested in a firm called QiMing Venture Partners, which is a private equity firm that does both consumer and health care investments. The other one is CDH (insert name) that has a focus on consumers. We’ve also done some nontraditional investments as well, such as Citi Capital, which does SOE (State-Owned-Enterprise) buyouts. Q: What kind of return are you targeting? A: Most investments are targeting return of 30 percent IRR as China is such a growth oriented market. Globally, the target is in the range of 20 percent on a growth basis. Q: Do you mostly invest in overseas funds or Chinese locally run USD funds? A: As a firm, we tend to favor local managers, particularly in China, so those managers with local approach and have a local team. When we invest in local managers, one of the challenges we face is that we can’t invest in RMB funds because we are not a local Chinese entity. So today we are investing in offshore USD funds of Chinese managers. Most of these managers manage both a USD fund and a RMB fund. Q: There may be potential conflict of interests when a manager invests both a USD and a RMB fund. What’s your observation on how managers handle this? A: Overall, it has been a major headache. It’s one of the things that makes the Chinese market more complicated and less appealing. But those managers who are committed to their offshore businesses have gotten very good in balancing the conflicts and put together structures that protect the offshore investors. I think the most important thing is that you have to find the managers who really value the offshore part of their strategy. That’s the main protection you have as many managers understand that foreign capital tends to be more institutional and long-term.