In issue 188 we reported how Richard Li, son of Li Ka-shing, invested $1.1 million for 20% stake in Tencent in 1999 and walked away with a profit of $10 million two years later. (The stake would be worth $33 billion if he sold it this week.)
Zhang Lei didn’t repeat the same mistake. He started investing in Tencent as early as 2005, a year after the company went public in Hong Kong. But he has hung on to his holding in the internet firm, a decision that has turned him into arguably the richest fund manager in China.
Getting started
Born in 1972 in a Henan village, Zhang is the son of a junior government official. He scored the highest mark in the province for the college entrance exams, winning a scholarship to study finance at Renmin University in Beijing.
Zhang wanted to further his studies but the only graduate schools that would give him scholarships were in the US. So he went to Yale. Zhang still needed to find a job, as the scholarship was just for one year. He found one in the investment office of Yale’s endowment fund under its renowned chief investment officer David Swensen. Swensen saw potential in his Chinese student and taught him the art of investing. (The Chinese version of Swensen’s Pioneering Portfolio Management, An Unconventional Approach to Institutional Investment was translated by Zhang.)
After earning a Master’s in international affairs in 2002 in addition to an MBA degree, Zhang worked briefly for a Washington-based emerging markets hedge fund, as well as serving as the chief representative to China for the New York Stock Exchange.
Big break
In 2005 Zhang returned to China to start his own fund, Hillhouse Capital. It was named after Hillhouse Avenue, one of the main streets running through the Yale campus. The Yale connection helped further: Swensen gave him an initial $20 million from Yale’s reserves to kick-start Zhang’s asset management firm.
Zhang has invested wisely. Hillhouse has been an early backer of a number of the faster-growing internet firms, including Tencent and JD.com. Reportedly it has made a 95-times return on its Tencent holding, which it is still to sell.
One delighted investor told Forbes magazine that Hillhouse had returned an annual average of 39% since it was founded.
Zhang now has an investment war chest of $18 billion and Hurun ranked him as the 78th richest Chinese tycoon last year, with a personal net worth of $2.3 billion.
Need to know
Zhang only came into the media spotlight in 2010, when he donated $8,888,888 to his American alma mater.
Zhang is also the youngest governing board member of the China-United States Exchange Foundation, which was set up in 2008 by Hong Kong’s former chief executive Tung Chee-hwa to improve Sino-US relations.
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