Alvin Jiang was 24 years old and embarking on a career at Goldman Sachs when he was hired by one of China’s top dealmakers to help launch Boyu Capital, a Hong Kong-based private equity firm.
For Sean Tong, who founded Boyu in 2011 after running the Chinese investment portfolio of US private equity firm General Atlantic, Jiang was an attractive prospect. The bespectacled, young Harvard graduate is the grandson of Jiang Zemin, China’s president from 1993 to 2003.
That initially gave Boyu a reputation as a “princeling” firm, a term used to describe the children and grandchildren of senior Chinese Communist party leaders, though Tong and his founding partners, who included some of the country’s most senior executives, had extensive business experience.
A decade later, the low-profile firm has closed a US-dollar fund worth almost $7bn, just as China’s investment industry has become caught up in unprecedented regulatory turmoil.
The firm that surfed China’s tech boom over the past decade to become one of its most successful investors must now adapt its strategy to Beijing’s vision for the sector, which emphasises “common prosperity” over capital market success.
“Some sectors are seeing much less activity, especially consumer internet firms,” said one person familiar with Boyu’s evolving strategy. “But others are enjoying a lot of policy tailwinds, things like semiconductors, electric vehicles and other alternative energy technologies. Investors also have to be a lot more cautious than before about regulatory risks.”
Boyu is best known for making billions of dollars on big early tech bets including Alibaba, Jack Ma’s ecommerce platform that listed in 2014, while also focusing on emerging consumer, finance and healthcare companies.
The firm was poised to repeat its Alibaba trick in late 2020 as an early investor in Ma’s online finance unit, Ant Group, before regulators blocked what would have been the world’s largest-ever initial public offering.
Boyu was also hit by a government crackdown on private education companies in July — the firm was an early investor in online tutorial provider Yuanfudao.
It dodged a bullet, however, when it offloaded most of its stake in Didi Chuxing before the ride-hailing group’s June initial public offering in New York, according to people familiar with its investment. Didi’s share price collapsed after the Chinese government launched an investigation into its data security practices.
In addition to Didi, people close to Boyu said it had invested in seven or eight companies that successfully launched IPOs last year, including Cloud Village, the music streaming unit of NetEase, and biotech start-ups such as Brii Biosciences and KeyMed Biosciences.
“A few years back you would still have very large ecosystem companies in the marketplace — the likes of Alibaba, Ant, Meituan and ByteDance,” said a Boyu investor. “But this market is much more crowded than before and the likelihood of an ecosystem company that big coming out is getting smaller. Boyu has to focus more on winners in niche sectors.”
Boyu’s early success with Alibaba had its roots in an accidental encounter. In the early 1990s, Ma, then a university English teacher, was a judge at an English-language competition in his hometown of Hangzhou in eastern China. Tong was one of the high-school students competing at the event, according to people familiar with their relationship.
Ma, who went on to become the country’s most famous entrepreneur, was impressed by Tong’s performance and congratulated him. It was the start of a three-decade friendship.
Tong was in his mid-30s when he founded Boyu. He met Jiang when the latter was an intern at General Atlantic’s Hong Kong office.
The children and grandchildren of China’s leaders have traditionally enjoyed access to decision makers, and foreign businesses in the country have turned to them as facilitators.
Liu Tianran, son of vice-premier Liu He, a confidante of Xi Jinping, established Skycus Capital in late 2016. Skycus has invested in units of Chinese technology giants Tencent and JD.com, which are Ant and Alibaba’s biggest rivals. Wen Yunsong, the son of former premier Wen Jiabao, founded the New Horizon investment fund in 2005, when his father was in power.
But since Xi became Communist party leader in 2012, the princelings’ influence has diminished, investors and analysts said.
“Those princelings who are still active in finance are extremely low-key, staying in narrower sectors, with much smaller funds than Boyu,” said a veteran dealmaker who was involved in the restructuring of state-owned enterprises. “What makes Boyu different is the calibre of its general partners, fund size . . . and track record, which all mean that it does not need to trade on princeling connections.”
Kerry Brown, a China expert at King’s College London, said it was “now probably as much a liability as a help to have these figures [princelings] associated with you”.
“There are now so many people outside these [elite] networks with excellent skills,” he added. “Why rely on someone just because of who they are related to?”
Boyu, Tong and Jiang declined to comment for this article.
For Boyu’s part, launching with industry veterans was instrumental to its success, according to people who worked with the firm. Aside from Jiang, Tong also recruited Louis Cheung, a former president and chief financial officer at Ping An, China’s largest insurance group, and Mary Ma, who was finance chief at Lenovo when the Chinese company bought IBM’s PC business in a landmark 2005 transaction. She later joined TPG Capital, the US private equity firm.
“If there was no Sean, no Mary and no Louis we would have been concerned about [Boyu’s] set-up,” said an executive at one of the firm’s longtime partners.
From 2011 to 2019, Boyu raised four US dollar funds, and last year finalised a fifth worth $6.8bn, according to several people involved. It is the largest US dollar fund in China controlled by an independent manager, according to AVCJ, a data provider. Boyu has also completed three smaller renminbi-denominated funds and is now raising a fourth.
The firm has increased its office space in Beijing and Shanghai, where Jiang is based. It also opened a Singapore office in late 2019; Tong relocated there from Hong Kong in 2020.
But Boyu is now navigating a dramatically more politicised investment climate. Xi has made it clear that no industry is safe from regulatory risk if it does not contribute to “common prosperity” in the run-up to his bid this year for an unprecedented third term as party head.
“Boyu has picked well but the same relationship will not always give you the same outcome — look at Ant,” said one Boyu investor. “The thing with China is, you don’t know when regulatory risk might hit you.”