Euromoney, December 2018
It is worth over $50 billion and its deals are among the most important and influential in Asia, it is at the vanguard of Chinese private equity and yet it talks to nobody, but market participants in Asia and beyond need to understand it. What goes on inside Hillhouse?
When Hillhouse Capital closed a new private fund at $10.6 billion in October, achieving Asia’s biggest-ever private equity capital raising, it marked another step in the ascent of the region’s most talked-about investment manager.
Home-grown Chinese private equity is one of the great trends of the day: Hopu, CDH, Ping An Voyager and others all represent part of the story, but Hillhouse is the one that has made the most waves.
It has done so quietly, however. Chief executive Lei Zhang, who founded the firm in 2005 with $20 million of seeding from Yale University’s endowment fund, gave some personal profile interviews peppered with Taoist aphorisms in 2014, and speaks at occasional Yale alumni dinners, but otherwise its executives have not granted on-the-record interviews for years.
But the market needs to understand Hillhouse. Its several hundred staff (“several hundred” is as precise as the firm is prepared to be) in Hong Kong and Beijing manage at least $50 billion (also as precise as the firm is prepared to be); and the way they are putting that money to work is not only interesting but influential.
It is also successful – from its very early stakes in Tencent and JD.com to a range of bold take-privates. Pinning down returns is difficult: Hillhouse does not disclose them and, although some of its limited partners occasionally do, these tend to reflect the performance of single underlying funds or investments rather than the whole shop.
But some of its gains are plain to see: the listing of Chinese on-demand food delivery firm Meituan Dianping in September, for example, which valued the company at $53.4 billion, made Hillhouse’s 3.1% stake in the company worth $1.655 billion. It is believed to have paid between $500 million and $600 million, depending on how you value a stock swap along the way, for the stake in 2015.
So what makes Hillhouse tick?