The entrance to 1980 Yushan Lu, No 14-504 in Shanghai’s Pudong district is cluttered with scooters, bicycles and an umbrella left out to dry. Thick black cables criss-cross overhead connecting the grimy residential block with electricity poles on the street.
When asked whether the office of China’s largest private equity firm is located inside, the building entrance guard looks confused. “It’s all residential here,” he says.
1980 Yushan Lu is the only known office address of Inventis Investment Holdings. The firm says it is China’s largest growth equity fund manager with as much as $10 billion in assets under management, according to its website. It has raised – according to information it submitted to Private Equity International in March – $14.2 billion over the last five years, which would make it the largest private equity firm with headquarters in Asia, ahead of well-known players such as MBK Partners, Affinity Equity Partners and RRJ Capital. Even ahead of Hillhouse Capital Group, which recently closed Asia’s largest fund on $10.6 billion.
Naturally we wanted to find out more about this firm, so we started digging. And then something strange happened.
Publicly available information on Inventis is limited. This is not unusual in the world of private capital, still less so in the world of Chinese private capital. The firm’s website flashes with cityscapes of Shanghai, Beijing, Sydney, London and Moscow, giving visitors a sense of where the firm sees its markets. It notes it invests in China across six funds and has a sector-agnostic, growth capital strategy. It goes on to say the firm has made more than 50 investments in China since 2000 across industries such as education, retail, agriculture, energy and natural resources, logistics and contract manufacturing.
None of those investments were announced or appear to have garnered the attention of local media as far as we could see. The only public statement we could find regarding specific investments was an announcement in November 2017 about a $50 million commitment made to China-Russia private equity fund Youxian Capital. While there is certainly no obligation to publicly announce deals, most large private equity firms – including those in China – regularly do so. The lack of such announcements makes Inventis an outlier.
Chinese private equity firms typically use a mix of internal and external spokespeople to announce their transactions. Some send out press releases to newswires, while others such as CDH, Hony Capital and FountainVest Partners use more innovative methods like Chinese messaging app WeChat.
Inventis states on its website that it typically invests at least $50 million for minority stakes in companies, an amount large enough to generate ‘buzz’ in the private equity community, whether announced or not.
On the face of it, it should be possible to find an executive in the market that has done business with a firm that has been around for 18 years and made 50 investments.
PEI spoke to 23 well-regarded Asia-based private equity participants from the buyside, advisory side and legal side about Inventis. Seventeen said they have never heard of the firm or interacted with anyone from it.
“I don’t know them,” says Niklas Amundsson, a Hong Kong-based managing director of global placement firm Monument Group. “I saw them on a list last year and went through the same fact-checking mission but didn’t come up with anything aside from what’s on their website. I think they are a local player with no international institutional backing.”
Three industry insiders said they had heard of the firm but have little knowledge of it and another three – a fund formation lawyer in Singapore, an Asia-based fund placement agent and Kyle Shaw, founding partner and managing director of mid-market firm ShawKwei & Partners, said they had met the founder of the firm, Yong Kwek Ping, at conferences around Asia but had not been involved in any of the firm’s funds or transactions.
Yong is the only executive identified on the firm’s website. It carries a biography of a man whose “track record is well-recognised, […] and is frequently invited to speak at many international conferences and summits”.
In contrast to his firm’s low profile, Yong has a visible presence in the business and academic communities. He has appeared on CNBC and Bloomberg Television. He is a Milken Institute, Oxford Business Alumni Network and TED Talks speaker and has authored two books on private equity in China, both published by Wiley. He is a fellow of Wharton Business School and, according to the Inventis website, teaches private equity courses at the Singapore Management University, Imperial College Business School and Skolkovo Moscow School of Management. In August, he taught a two-day course titled “How to Set Up Your Private Equity Fund” at SMU, which was confirmed by a course co-ordinator at the university.
Yong also sits on the board of advisors of the Asia-Pacific Academy of Economics and Management at the University of Macau, China, and is the centre director of the Greater China Centre for Private Equity at UMAC. Both positions were confirmed by a GCCPE member of staff over the phone.
PEI approached the media outlets and institutions named to ask about how they recruit and vet their speakers and experts. Bloomberg Television and CNBC did not respond to requests for comment by press time. Neither did Wiley and most of the universities where Yong has taught private equity.
The spokesman for the Milken Institute – which stages a giant annual gathering for the great and good of finance in Los Angeles – said most of its speakers are recruited from its established network or by invitation, although some do approach them. Unknown candidates are asked for a biography and written content for review. TED, meanwhile, works with a group of select companies and foundations to identify speakers for their events, a spokeswoman told PEI via email.
A representative from Imperial College Business School said that Yong’s name does not appear in the faculty list, although guest speakers were sometimes invited by faculty members to conduct a masterclass.
Who works for Inventis?
Inventis claims it is managed by a group of “seasoned investment professionals with diversified backgrounds who have been in China for more than 10 years”, but the make-up of its staff remains a mystery. The information submitted to our PEI 300 research team came directly from Yong himself. Between May and June PEI attempted to contact three of the firm’s supposed current and former staff – which we found via online searches and shared by one Asia-based source – by email and LinkedIn and received no replies. Efforts to reach Kenny Ng, who was listed as the firm’s investment director in a presentation at the Moscow Economy Conference Shanghai on 30 October 2017, were unsuccessful.
In June this year we managed to track down Yong himself for a telephone interview. He recounted the establishment of the firm in 2000. He received a $200 million investment from a Chinese financial group – which he declined to name – and used this to set up its debut fund, China Growth Fund I, he told us.
“I suggested to the financial group that they should invest via a fund structure and not direct investment, so they put in the money for us to manage the fund,” Yong explained. “When I started my first fund I [didn’t] exactly know [it was] a private equity fund, just an investment fund.”
Yong added that when the firm first started investing in 2000, the Chinese government prodded it to back manufacturing companies because it was trying to create more jobs. “That’s why we put most of our $200 million in manufacturing in Guangdong province, in the southern part of China.”
At that time, he said, valuations were low and with Inventis’s investment, the manufacturers expanded production capacity and customer bases. He declined to discuss what type of manufacturers the firm had invested in.
After about five years, Inventis saw “very good exit multiples”, he said, which gave the firm “a good track record for future fundraising”. When asked who he sold the assets to, Yong declined to comment again.
A second fund was launched with the same $200 million target and the same strategy shortly after, Yong said. The firm attempted to raise its third fund in yuan in 2008 because “a lot of its peers were raising capital in the local currency” at that time. 2009 was the first year in which more China-focused capital was raised by yuan funds than US dollar-denominated funds, according to a report from law firm O’Melveny & Myers. The financial crisis hampered this fundraise, said Yong, and it took the firm four years to raise approximately $600 million, against an $800 million original target.
The firm’s earlier funds produced top-notch returns – hitting multiples of 5-6x and internal rate of return of above 30 percent, said Yong – although he expected returns to slide going forward. “We have to move to second, third and fourth-tier cities in China now in order to secure lower valuations. The thing about the country is that it is so big, there are many provinces and good companies,” he said.
Inventis is currently in market with its seventh flagship fund targeting $3 billion, Yong said.
In 2016 the firm announced a partnership with Russia Direct Investment Fund for a $500 million investment platform targeting food, agriculture, mining and retail businesses. It is unclear whether the capital raise was split between the two investors, or whether it received third-party capital. Yong declined to provide information on the status of the partnership. RDIF did not return three requests for comment between May and June.
Inventis is also deploying a Sino-Korean fund and has plans to launch a $100 million China-Central and Eastern Europe Fund, Yong told PEI, declining to give any further information.
So why is there no record of Inventis’s deal activity? The firm’s portfolio companies are private companies “that wouldn’t be too happy about media exposure”, said Yong. He declined to give any case studies of past investments, referring only to an education technology company in Russia he was looking at that he, again, declined to name.
Follow the money
The other significant piece of the puzzle is the investor base. Much of the information gleaned about private equity firms is sourced – either from public notices or through private conversations – from their investors. Some, like many public pension funds, are mandated to disclose this information, while others, such as family offices, retain full confidentiality.
Asked about its investor base, Yong replied its earlier funds garnered commitments from investors in the US, Japan and China. He could not share names, but added that their LPs were “family offices, financial institutions and pension funds”.
In a Reuters article published on 28 November 2012, Yong reportedly said that Inventis’s outbound funds of 4 billion yuan each were largely backed by city governments, pension funds and insurance funds. It is unclear which funds he was referring to.
If the firm raised capital from US LPs, as Yong said, federal securities laws require Inventis to register with the Securities and Exchange Commission. PEI was unable to locate any SEC filings related to Inventis.
PEI checked whether Inventis was registered as an authorised company with Singapore’s Accounting and Corporate Regulatory Authority, the Monetary Authority of Singapore and the Asset Management Association of China but failed to see its name in these registers.
What of the head office seemingly located in a suburban apartment block? “We have actually moved office,” said Yong on our call, before declining to disclose the firm’s new location. “We normally don’t put all this online, and one thing we are very careful [about] nowadays is to watch our digital footprint.” When we suggested an in-person meeting to learn more, Yong said we should contact him when we were in Shanghai and he would then give us the address.
It is a challenge to verify whether Inventis is what it says it is; a vastly successful, totally secretive, fundraising and investing machine with an international LP base, or – perhaps as nodded to by its name – an invention of its charismatic founder.
What we do know is that Yong has had some success in generating the digital footprint that he says he is trying “to watch”. The Inventis website cites the firm’s listing in the PEI 300 alongside listings in reports from Preqin and Yong’s various media appearances.
We would welcome more information from Yong about his firm; he has not responded to our requests for more information since our initial interview in June.
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The views and opinions expressed by interviewees or any other person quoted in this article are the opinions of those parties and should not be construed as the official opinion of PEI. PEI is not responsible for the validity of these views and opinions, although all reasonable attempts were made to avoid inaccuracy.