Creating value via light-footedness

Gui Zhaoyu drives JG Investment's efforts to redefine private equity in China 

Managing a private equity fund requires a relentless pursuit of high standards and precision－much like performing a ballet, said Gui Zhaoyu, founding partner of JG Investment, one of China's fast-growing private equity firms.

"Both ballet and PE investment require top professionals to do the finest things," Gui said, comparing his favorite art form to the career he devoted himself to for the past decade.

Gui began his career in private equity investing in 2009 at China Investment Corporation, the nation's sovereign wealth fund.

In 2011, he joined Carlyle Group, one of the world's largest PE firms, and served as managing director and a member of its investment committee in Asia, in charge of three funds totaling $7.2 billion.

In 2017, Gui left Carlyle and established his own PE firm, JG Investment.

Gui set up JG－the acronym for Jian (flexible and diversified) and Gu (steady and safe)－with an aim to better serve Chinese enterprises by leveraging higher decision-making flexibility and funds of a smaller size.

His decision was backed by 20-plus years of experience related to investment in China. Before becoming a PE fund manager, he spent eight years in investment banking and six years in non-financial sectors－a government body, a State-owned enterprise and a logistics company that he had set up.

On the preparation needed for mastery of investment, he alluded to ballet : "Ten years offstage for one minute onstage." His experience in various sectors has enabled him to understand his clients from different perspectives.

One example of how his experiences have guided JG's investments is the way Carlyle accelerated Haier Electronics Group's transition.

From 2011 to 2015, Gui led Carlyle's investment in Haier Electronics, and facilitated the white-goods manufacturer's transition into China's top online-to-offline integrated channel provider for home appliances and other bulky products.

"The key move was to bring outside directors, who are internet experts, to the board," Gui recalled.

This has changed the company's decision-making mechanism and prompted approval of the proper strategy: combining Haier Electronics' core advantage of an extensive offline distribution network with e-commerce platforms' advantage in acquiring customers, Gui said.

With Carlyle's help, Haier Electronics' parent company Haier Group formed a strategic partnership with Alibaba Group in 2013, whereby Haier Electronics provided users of Alibaba's e-commerce platform with last-mile delivery and installment services for bulky products.

Haier Electronics' compound annual growth rate of revenue was 16 percent from 2010 to 2014. Carlyle cashed out from the company in 2015.

"Now, when JG invests in mature businesses, improving the governance structure will be the starting point and the top priority," Gui said, adding that one of JG's criteria for eligible investment targets is its intention to reshuffle family-business governance structures.

With a clear check-list of eligible targets and industry insights, Gui is able to make investment decisions efficiently, said Liu Zhanjie, CEO of Qingdao Haier Biomedical Co Ltd, in which Gui has invested.

"Also, Gui's management expertise helped a lot with our company's development, ranging from corporate strategy to internationalization," Liu said.

On top of techniques and knowledge, Gui said creativity and passion are also indispensable for investing. "Just as dancers exert creativity to convey classic stories, so should our firm think outside the box to find unique solutions for each deal."

To spur innovation, Gui has developed a diversified team for JG. "Different from many PE firms whose partners are all PE professionals, JG has partners who are top professionals of PE, secondary market investments and legal services."

Now is a good time to invest, he said, as "current downside risks are not as considerable as many people reckon".

Areas currently worth investing in, Gui said, include cyclical industries with low valuations such as banks; manufacturers transitioning from subcontracting to being brand owners; and business models boosted by technology and consumption upgrades, such as event management and medical care.

Like a ballet performer with the grasp of skills and arts, Gui is using his experience, sharp mind and passionate commitment to explore his investment career.

"For me, PE investing is meaningful and joyful. It is about sticking by my partners－from both the target company and JG－through thick and thin to reach the joint goal of creating value."