Fund management: The sleuth of Shenzhen
Turning a profit by investing in China’s dysfunctional domestic securities markets has proved a perilous occupation for most fund managers. Recent share reforms have helped to improve an appalling investment climate but there is some way to go before China’s domestic asset management industry begins to resemble anything like those of more developed markets.
This is what makes Pure Heart Asset Management stand out among many local fund management companies. Founded in 2003 and now with just $150 million under management in four funds, Pure Heart, a hedge fund of sorts based in Shenzhen in southern China, is one of the country’s first pure privately owned asset managers.
Founder and chief investment officer Zhao Danyang cuts a refreshingly frank and down-to-earth figure in an industry still dominated by overseas-educated princelings and the politically connected elite. A former factory owner, Zhao says he decided to turn his hand to fund management after realizing that making consumer electronics in China’s cut-throat manufacturing sector was fast becoming a game of diminishing returns.
Studying investment theory at night after work, Zhao soon turned his back on his old career, but took some valuable lessons with him.
“Owning a factory, I know how hard it is to make money,” he says. “I believe in caveat emptor, I never trust anyone. The market’s always full of stories.”
Zhao says that he learnt this lesson the hard way when he began investing personally in the stock market based on tips and rumours – with disastrous results in 1998.