Stock Gold Rush: Real Estate, Mergers And Acquisitions, Bad Assets Who Ups And Downs?

In 2019, the investment environment of China's equity investment market was more severe than that of 2018 because of the factors such as the continuation of the new regulation. In the downlink market, what are the investment opportunities in the stock market? Who will dominate the two tier market of bad assets, real estate, mergers and acquisitions and PE? What are the investment disciplines and standards of investment in different asset classes, and how to control risks in uncertain external environment?

In November 20th, many guests from Hongyi investment, cornerstone capital, Hongyuan fund, CDH investment, Jinmao capital and Ding Yi Investment discussed the topic at the Ninth China innovation capital annual meeting sponsored by the southern financial and financial media group and the twenty-first Century economic report.

Bao Xiaobin. Data map

Bao Xiaobin, managing director of Hongyi Investment Co., Ltd.: investing in the stock commercial property of the first tier cities.

Hongyi investment is a comprehensive investment management company. Its business includes PE, real estate finance (RE), public offering fund, hedge fund and so on. I am mainly responsible for the real estate finance business. At present, we have two US dollar funds and two RMB funds.

Our investment strategy in the field of real estate finance is clear: focus on the stock of commercial property in the first tier cities. At present, tens of billions of assets we manage are mostly located in Beijing, Shanghai, Shenzhen and Guangzhou, which mainly focus on the core area of Beijing and Shanghai that have growth potential.

Specifically, our investment is mainly concentrated in three directions: first, we think that the stock with potential of appreciation, upgrading and upgrading of old assets; the two is pressure assets, that is, assets under pressure, but not necessarily bad assets; three, the region has the potential of new economic growth, and the value of assets can be improved.

As for the discipline of investment, my understanding is that we must first establish our own unique advantages and form a professional advantage so that we can control opportunities when others are at risk. You can magnify the benefits of investment when others have the opportunity.

Specifically, investment methods, first of all, we must create and maintain our own capability circle and crack down on sweet points. The most prominent feature of Hirotake's real estate financial investment is that we have built a strong asset operation capability that has been fully tested by the market. Although there is a certain pressure in the market, the rental ratio and rent ratio of Hongyi management assets have been greatly improved compared with last year. The reason is that we have strong operational capability, dig deeper into the market and enhance asset value in many dimensions.

Second, to make real estate investment, we must manage the lever well, which is an important discipline. As far as I know, some institutions are highly leveraged in real estate investment in China. If the market fluctuates, the liquidity and security of assets will be at risk.

Third, we must manage well the cycle and manage liquidity in the portfolio. This is also very important in real estate investment. There will be fluctuations in the real estate investment market, asset prices will have high and low points, if you can pass through the cycle, and the appropriate liquidity, you can get a good return.

Fan Yongwu. Data map

Fan Yongwu, President of cornerstone capital, investing in leading enterprises with high certainty

The cornerstone capital mainly focuses on investment in technology, health care, consumer services and culture and entertainment. At present, we pay great attention to the certainty of investment. For example, in our advanced manufacturing industry with emphasis on layout, we have recently launched a project to do automatic logistics equipment. Such an enterprise may not be as prosperous as it is now, but its growth is certain. Because no matter how the economy goes down, the import substitution trend of logistics automatic equipment is irresistible. The industry has an annual growth rate of 15%, far higher than the growth rate of GDP.

The cornerstone capital also extends to the upstream and downstream of the industrial chain and investment in mergers and acquisitions. First of all, the choice of subdivision is very important. One is to see whether the industry has prospects for development, and the two is whether we can enhance the value through mergers and acquisitions. Taking cornerstone as an example, we have built up the top ten chain retail pharmacies in the country in the past 3 years, through the holding merger and acquisition.

The cornerstone of choosing chain retail pharmacies is also based on industry judgment: China's retail pharmacy market is still in the early stage of merger and acquisition. The scale of medical retail, per capita retail consumption of medical products, single point sale of drugstores and GDP share of drug retail are far behind the mature markets such as the United States and Japan. It has great potentialities and large integration space. With the large population dividend, favorable consumption upgrading, favorable policies and the top industry, there is a huge space for integrated development in China's retail pharmacies.

In addition, as the pharmacy itself has a good endogenous income growth and extension development space, it can better get through the labor pains in the integration stage due to changes in the management level. After the cornerstone mergers and acquisitions, the performance of the vast majority of pharmacies fluctuated very little in the short term and increased greatly in the long run.

Second, we should try our best to choose leading enterprises to do mergers and acquisitions. To make investments, we must keep pace with the times. Changes in the outside world require us to pay more attention to the certainty of investment. The past is the era of increment, and everyone is rising, but now it is the transition period from increment to stock. This process is usually accompanied by the improvement of industry concentration.

So this year we see that the pressure of the enterprise is very large and the uncertainty is very high. Under such circumstances, leading enterprises can seize more market share in the tide of integration with stronger certainty. In addition, leading enterprises are more likely to enjoy the bonus of import substitution.

Sun Mingchen. Data map

Founder and CEO Sun Mingchen, Hong Kong Fund: stick to property based value investing

Hong fund is a young fund manager who mainly makes real estate investment. In my opinion, there are three stages in the development of real estate investment, that is, the incremental market stage, the stock market stage and the asset securitization market stage. Now we are in the transition stage from the incremental market stage to the stock market stage. The property we focus on is basically urban services, including office buildings, community businesses, apartments and so on.

Since the establishment of Hongyuan fund, we have achieved the withdrawal of one hundred percent of investment projects. The core is to stick to investment discipline. To be specific, the most important thing is to have strict implementation of all the adjustments, including finance, law, engineering and so on, and there is no shortcut in this regard.

Second, we must stick to the value based investment. In 2015 and 2016, when private capital was in a boom period, private capital had lots of hot money and a lot of cost free acquisitions. But we always stick to the standard value of property and invest in the matching period of capital attributes. One of the difficult problems that we need to face in investing is the temptation of interests. Managers must be able to resist these temptations and not to invest in deviating from the standard value.

Third, we must comply with the requirements of the state. Whether domestic investment or cross-border investment involves a lot of administrative management and supervision, it is necessary to achieve investment in the legal scope of national compliance. In the course of investment and management, contingency events also need to be dealt with by legal means of compliance and legality.

To put it simply, investment discipline must be defined and adhered to. We must persist in strict adjustment, and stick to the standard value and conform to the state regulations. We should always do a good job of value judgement, make risk identification, and control the project within the scope of the team's own capability, so that we are responsible to investors and responsible to all shareholders.

Li Lei. Data map

CDH investment director general manager Li Lei: the ability to create cash flow for invested companies is crucial.

CDH investment is one of the earliest team to make PE investment in the equity investment market. CDH was founded in 2002 and started in private equity investment. But in the past four or five years, our investment has been focused on M & A investment, and we also include investment in innovation growth period, and investment in innovative growth period is larger investment and mature enterprises, and also covers some early projects.

The driving force behind the changes in our investment strategy is that in the past 17 years, many of our investment companies have grown to a considerable size and size. They not only have strong demand and ability to integrate industries in China, but also hope to explore more opportunities for growth through expanding the global market. At the same time, on the basis of nearly 20 years of experience accumulation, CDH has established a network that is highly effective in communicating with the enterprise management team and key decision-makers, and has continuously created and excavated new projects through long-term cooperation with enterprises. Over the past five years, we have excavated a large number of mergers and acquisitions, especially cross-border mergers and acquisitions, and completed 11 acquisition projects involving transactions amounting to more than US $10 billion. This fully demonstrates the ability of CDH to perform reliably in large-scale and complex transactions.

As our PE fund business focuses more on M & A projects and large growth projects, we are particularly concerned about the creation of cash flow. Specifically, excellent enterprises should achieve continuous cash flow creation through their own business growth instead of continuous capital input.

In terms of investment discipline, first of all, equity investment is essentially an investment, and a team with integrity and integrity will not vote. Of course, integrity problems are not written on the face, we need more from the enterprise accounts, from entrepreneurs in the past how to deal with partners, and many other details to find clues, in order to make accurate judgments, which requires investment figures such as CDH has accumulated many years of practical experience and precipitation.

Second, we will try our best to avoid trading structures with potential inconsistencies. Because Ding Hui usually has to walk together with the invested enterprises for at least 35 years, so we should minimize the inconsistency of interests in the design of transaction plan.

Wang Dongliang. Data map

Wang Dongliang, chief investment officer of China Life Investment Equity Investment Department: investment strategy should be highly matched with capability endowments.

Since the beginning of this year, the money in the market has been significantly reduced. We have also seen that the time for more rational investment in the market has arrived in the whole cycle. Therefore, from the perspective of supply and demand in terms of cycle, capital and assets, I believe it also provides opportunities for fund managers.

Although the fund managers focus on asset classes and focus strategies, we have to invest in assets and increase their value no matter what kind of assets they face. Only in this way can we have the bottom line and create better returns for investors. The different strategies of different organizations are not important. The key is whether your strategy and ability endowments are highly matched. As long as you have enough asset management capability to execute your strategy, you will have relatively good investment results.

But sometimes people are unreliable and the system is reliable. If an organization can face evergreen in different cycles, the internal operation system and investment discipline, including risk identification and internal processing, are very important. It is also meaningful for an organization to respond to different strategies in different cycles.

Zhou Liye. Data map

Zhou Liye, general manager of Jinmao capital, carefully selected projects and put the interests of investors first.

Jinmao capital is the fund manager of China Jinmao. Therefore, most of our asset allocation is in the real estate sector. In real estate investment, our first category of investment is real estate development. Jinmao capital has a large proportion of asset allocation. Despite the impact of regulatory policies, the market is downward as we see it, but there will still be many good projects, and there will still be opportunities for real estate investment. Some of our investments in this sector are equity investments, some of which are interlayer investments, which are identified by the fund manager's judgement of the project.

The second type of investment is commercial real estate. The main factors we consider are the intrinsic investment value, the core city, the core area and the future potential. This part of the assets in the current market has the opportunity to counter cyclical growth, and there are many investors, including venture capital and offshore long-term funds, which is also an opportunity for our shareholders, China Jinmao.

In Jinmao capital PE investment, we mainly consider the PE investment projects that are synergy with real estate, such as innovative enterprises focusing on big technology, big culture and big health.

What kind of investment do we not do? To put it simply, we do not do things that are contrary to the interests of investors. Specifically, for the real estate development project invested by Jinmao capital, because the whole development project is a large volume investment, regardless of the choice of counterparties, there is also a flow of money in the whole development process, each project is billions of billions of capital. Therefore, we insist on the principle that Jinmao can control risks in projects, otherwise we will not do so. Only in this way can we control the risk of capital and safeguard the interests of investors.

In the real estate investment sector, it is more important for itself to have excellent information management capability. If the cost of building is really cheap, but if we can not achieve value added by means of capital management, then we will not do it. In addition, from the transaction itself, all transactions involve wind control, finance and engineering. The difficulty here lies in legal compliance. In this regard, we are cautious.

But we believe that with our professional strength, we can do a good job of risk judgement. Because in the process of investment, we can effectively control the subjective view and mentality, and achieve objective professionalism. We are not doing the project for the sake of the project. We choose the project well and manage the project well. I think at this level, we must control the company's investment discipline and make good coordination between the former, the middle and the backstage, which is very important.

Song Lingling. Data map

Song Lingling, managing director of Ding Yi Investment Co., Ltd.: establishing long-term investment through system operation plan.

Ding Yi investment was established in 2015. It is a special opportunity investment fund with the strategy of difficult assets and corporate restructuring. Special opportunity investment is the most typical way to find investment opportunities in the short term. At the same time, we build long-term certainty through systematic operation and practical path.

We believe that the special opportunity fund has great room for development in today's market. From a few sets of data can be seen more clearly: last year, the two level market "bailout" topic of concern is very high, as of 2017, as of now, nearly 400 listed companies have been frozen by the judiciary, the bond market default scale has accumulated nearly 300 billion yuan, is in a high explosive period. At present, the trust market has disclosed that the amount of breach of contract is nearly 400 billion yuan. According to the data disclosed by the CBRC, the amount of non-performing loans in the bank accounts for more than 2 trillion yuan, with more than 3 trillion yuan in loans.

The most important thing of special opportunity investment is to identify risks and control risks. In dealing with risks constantly, we must respect logic and respect common sense, and we must maintain vigilance and awe for a long time.

In the specific asset allocation, we first look at the top down, only focus on the core of a dozen cities, and once we enter a city, we will invest from point to area and scale, so as to build our own regional advantages. On the other hand, from bottom to top, from micro to macro, we value assets that have stable cash flow for a long time.

As for the discipline of investment, actually we have a complete set of processes when we invest. We require consistency evaluation before and after the launch, and we will keep looking back in the process. We will review the actual and expected deviations from two weeks to a month. Second in the whole asset portfolio, we will match the balance between short-term liquidity and long-term excess return, so we will achieve our investment discipline through a complete set of operating systems.