2007
Dear Investor:
Hello!
2007 ticks and slips by, time flies.
This has been a tough year for the bare-bones investor. Compared to any relevant index, we are far behind. We would like to apologize for that.
Children's Heart Hong Kong's weighted return for the year was about 13 %, compared with the Hang Seng Index, which was up 38.06 %, and the State-owned Enterprises Index, which was up 54.32 %; the cumulative gain for the past five years for Children's Heart Hong Kong was about 541 %;
SZITIC-Children's Heart (China) Pooled Capital Trust's weighted return for the year was about 48 %, compared with the Shanghai Stock Exchange, which was up 96.7 %; the cumulative gain for the past four years was about 371 %; and the cumulative gain for the past five years was about 4.7 %. four-year cumulative increase of approximately 371%;
SZITIC-Cheeky Heart Investment Philosophy Pooled Fund Trust annual weighted return of 47.37%;
SZITIC-Cheeky Heart (China) Phase 2 Pooled Fund Trust cumulative weighted return of approximately 22.12%;
Ping An-Ping - PUREHEART China Growth Phase 1 Pooled Fund Trust cumulative weighted The cumulative weighted rate of return of Ping An-PUREHEART China Growth Phase 2 Pooled Fund Trust was 24.54%.
Peace of Mind-PUREHEART China Growth Phase 1 Pooled Fund Trust cumulative weighted rate of return was approximately 49.25%.
2008
Zhao Danyang, the Godfather of Private Equity, released his 2010 "Letter to Investors" on the website of Heart of Red Son. At the beginning of every year, Zhao Danyang publishes a letter to investors on the website of Heart of Red Son, which contains his summary of the past year and his views on the market in the new year. However, this year, this email is no longer published to the public, and only clients who have purchased the ChiZiZhi ZhiXin series of private trust products can see it. Below is the full text of Zhao Danyang's "Letter to Investors". Dear investors:
Hello!
2009 year in full of hope and more than imagined the development of the past, in this trust company issued in preparation for the trust program's management team to all investors to wish: Happy New Year! Good health! All the best!
08 our investment return of 4%, 09 our trust fund principal of 1.51, the company's management account increased by more than 100% over the same period of the SSE index rose 50%, the deep index rose 50%. Winning the general trend, so that we have been adhering to the investment philosophy added a lot of confidence, of course, and the market fund managers from the outstanding private equity fund managers compared to our investment research team still need to continue to learn and work hard. Back to the stock market, the Shanghai Composite Index fell from its peak of 6124 points in 2007 to a low of 1664 points, down 72%, 09 at the beginning of the year we asserted that there will be a substantial recovery in the year of rise, this view has been confirmed by the market. Historically, the mainstream market in the two-year period to produce such a huge amplitude is still rare. In terms of today's market, the stock market has returned to rationality, the stock market's future trend will depend on the future economic expectations and the value of listed companies to return to rationality, we will see a return to the mainstream value investment system and the reconstruction of the spirit of in-depth research in the market. The year 2010 will be a period in which countries will slowly raise interest rates and focus on controlling global hyperinflation, and the global economy will enter a period of high growth brought about by higher inflation; in particular, after entering the twenty-first century, the demand for clean energy and environmental protection will change the economic growth model of the past few decades, and we are looking forward to the evolution of the dominant trend of the securities investment field brought about by this inevitable change.
The U.S. economy peaked in 2000, and the bursting of the Internet bubble sent the U.S. into recession. Greenspan in order to save the U.S. economy, 01 years after 9.11 and again cut interest rates sharply, so that 03 U.S. interest rates fell to a 45-year low, stayed at 1% for a year and a half, resulting in the United States of America's real estate bubble, sowed the seeds of the subprime debt turmoil. The essence of the problem of the United States today is that the past 20 years a large number of manufacturing and service industries transferred to China, India, the Internet and communications bubble after the U.S. innovation and has not kept up, temporarily did not form a large emerging industries, and real estate and finance can only be temporarily prosperous at low interest rates, can not be the dominant industry for a long time to support the entire country. Today, the U.S. government and household balance sheets are mostly over-indebted, and need to "deleveraging" to cut debt ratios; more importantly, the hollowing out of industries has caused damage to the recurring profit and loss of enterprises and households. If the financial turmoil is a balance sheet correction, the consumer recession is a correction of the profit and loss statements of firms and households. Unless the United States forms a new industry with a large total in the short term, this correction will be a long process. In retrospect, Greenspan was just unlucky, and the world would have been a different evolutionary process if the US had not failed to keep up with innovation in recent years.
China's accession to the WTO in 2001 has freed up productivity, and the popularization of Internet communication technology has benefited China in the process of undertaking the transfer of global manufacturing. Due to the substantial pegging of the RMB to the US dollar [1], it has become increasingly difficult for China's central bank to operate according to the theory of "Mundell's Triangle" [2] when the export industry accounts for an increasing proportion of the GDP.
After 2005, the expectation of RMB appreciation gradually became a global **** knowledge, with the history of Japan as a lesson, coupled with the low interest rates and depreciation pressure of the dollar, driving the global capital are trying to enter China, to share the growth of China. Accompanied by the rapid growth of exports, more performance is the surge of foreign exchange reserves. After so much currency entered China, the main vent is real estate and stock market, a perfect bubble form in China. If the above reasons to bring the increase in the number of currency, that the Olympic Games spawned national self-confidence and pride is the formation of the currency multiplier, the result of the multiplication of the two is the madness of mankind. History is always strikingly similar, China's pain today is a necessary lesson in the process of moving towards a market-oriented economy, just as most Hong Kong people will no longer overdraw to buy properties and stocks after 97. As the former Governor of the Bank of Japan said, looking back at the Japanese economic bubble of 1985-1989, even if it is re-enacted, it is difficult to avoid it completely. Compared to the US, China's fundamentals are much better, starting with the fact that the government and households are not highly indebted, especially in the household segment, where the high savings rate has resulted in a large amount of cash on the balance sheet, and cash to tide over the winter when it comes. What's more, China is still the most competitive manufacturing region in the world, meaning its income statement will remain the strongest going forward.
Back to A- and H-shares, last year we believed that China's stock market would form a major bottom in 2009. This year 2010, our task today is to find China in the economic restructuring, in the next ten to twenty years can represent China to participate in global competition, the essence of investment is to allocate capital, we allocate capital to the most core competitiveness, the most efficient enterprises, so as to promote the development of society. Nature's spring, summer, fall and winter are intertwined, each round of harsh winter will eliminate those who are inherently unhealthy and unsuitable for the survival of the species, and each fallen tree will be surrounded by more strong seedlings - Natural Selection is the eternal driving force to promote the progress of the natural world and society. Who is China's future Wal-Mart, Toyota, Microsoft, Procter & Gamble ...... Peter Lynch has searched for a lot of Tenbaggers in his life[3], and who will be the company that we can make ten times as much money in the future? In everyone's life, there will always be a number of major opportunities and challenges, in these important turning points, how to deal with and face will have a decisive impact on their lives, we come together to share Sir John Templeton's investment insights. Bulls are born out of pessimism, grow out of skepticism, mature out of optimism, and die out of exuberant ecstasy. The best time to buy is when extreme pessimism pervades, and the best time to sell is when extreme optimism abounds. Don't waste time worrying about your position shrinking or your losses increasing when the market is extremely low. Instead of being on the defensive like everyone else in the market, you should be on the attack, looking for value stocks that are getting shot down. Reason tells us that today's market has been different from 2006 and 2007, there will not be 2008 and 2009, it will never again to a generally sharp rise and generally sharp decline in the form of the completion of the market's development will be ahead of the macroeconomic data, the development of the industry will be ahead of the Shenzhen and Shanghai indices, the company's share price will be reflected in advance of the above two, in the space of 2,400 to 4,000 points. There will be stocks continue to rise, there will be stocks continue to fall, in everyone is sure of the clean energy, environmental protection, pharmaceuticals, infrastructure, railroads and electromechanical equipment and consumer upgrades the concept of the development of certainty, coupled with the financial sector in the era of high interest rate of the financial sector of the madness of the company's research as long as we keep up with such a beat. Finding the best companies in the industry as investment objects, catching the inflection point of company changes from quantitative to qualitative, and utilizing the superiority of company research in a stable market is the investment method we should be good at.
2009
After bidding farewell to the A-share market for a year, Zhao Danyang released another letter to investors on January 16, 2009, on the website of Chizi Heart.
Unlike a year ago, in this letter, Zhao Danyang showed unprecedented confidence in China's stock market. He believes that in this one-year period, it is rare for the A-share market to experience a huge drop, but the stock market bubble has been basically washed away.
Dear Investor:
Hello!
Too much has happened in China in 2008, and it is finally over, and 2009 will be a year full of hope. Hereby, Redsun wishes to all investors: Happy New Year! Good health! All the best!
In 2008, the investment return of Equity Hong Kong Fund was -18.84%, during the same period, the Hang Seng Index was down 48.3%, and the State-owned Enterprises Index was down 51%. In terms of absolute returns, we apologize.
Back to the stock market, the Shanghai Composite Index fell 72.83% from its high of 6124 in '07 to a low of 1664, and the Hang Seng Index fell 76.75% from its high of 20609 in '07 to a low of 4792. Historically, it is rare for the mainstream market to produce such a huge drop in a year or so. As far as today's market is concerned, the stock market bubble has basically been washed away, and the future trend of the stock market will depend on the expectations of the future economy.
When Volcker, the former chairman of the Federal Reserve, raised interest rates to 20 percent in 1980, global hyperinflation was finally stuffed back into the magic bottle, and the global economy entered a period of low inflation and high growth for more than two decades, especially into the nineties, when the Internet greatly enhanced the productivity of the global human community's labor and allowed more people around the world to share in the growth of the global economy. The U.S., Europe, Japan, China, Russia, and India are no longer fragmented economies; they influence each other, and the global economy has entered an era of integration.
2012
Dear Investor:
Hello!
2011 is over, and it's the beginning of a new year. I wish you all a healthy and prosperous New Year.
Cherent Heart had a bad year in 2011, with the largest book loss since the fund's inception. The Equinox Value Investment Fund was down 28.67% and the Equinox Natural Selection Fund was down 24.79%. We apologize for this performance.
In the next two decades, looking around the world, who will be at the center of the stage of human society? Throughout the history of human society, it is the history of the rise and fall of different countries and peoples in different periods of time, the fifteenth century Portugal, the sixteenth century Spain, the seventeenth century Holland, the eighteenth and nineteenth centuries England, the twentieth century United States, the twenty-first century is the world of who? We believe that the decline of Europe and Japan is inevitable. China and India are the most exciting countries in the world in the coming decades. The United States will also do well, but only in innovative industries. Barebones will hold on to the two large emerging economies of China and India in the future, looking for the most monopolistic, yet high-growth offensive companies to share in the future high growth of China and India.
Men are afraid of getting into the wrong line of work, and women are afraid of marrying the wrong man, so says an old Chinese proverb. The other day, I was chatting with some friends in the IT industry in Taiwan, and he was working as an executive in a large IT company in Taiwan. He lamented that it would be better to work hard for the rest of his life than to sell instant noodles (Master Kong). He was the best graduate of National Taiwan University and entered the most sunrise IT industry. However, after decades, the industry has been updated too fast and changed too much, and the options issued have become a piece of waste paper. After choosing the right country, the choice of industry and industry is extremely important.
Children's Heart has done a lot of additions in the past five years. We have tried to do macro forecasting, research and investment in crude oil, gold, foreign exchange and other commodities. On the equity side, we have invested in China, US, Canada, India, Vietnam and other stock markets. However, with more experience and lessons learned, since 2011 we have started to cut back and we mainly focus on China and India. In terms of sectors, we will focus on four industries: consumer, healthcare, education, and financials, with less exposure to commodities - crude oil, gold, mining, etc. - and manufacturing. We will only make equity investments to share in the growth of the country and the industry by holding equity in companies. We will also do less research on futures, foreign exchange and other financial derivatives. The future of Equity will become simpler and simpler. With the accumulation of experience, we realize that we know something really limited, the world is wonderful, we can only stay in the industries and companies that we understand and comprehend.
In 2011, our losses came primarily from currency exchange rates, with the Indian rupee falling 16 percent last year. Some of the next losses came from corporate governance, where we invested in Indian companies that were quite good in their own right, with very strong monopolies and very good cash flows. However, as we gained a deeper understanding of India, we realized that corporate governance is a bigger issue when investing in India. For example, there is a liquor company that has a 54% share of the high-end liquor market in India, which is equivalent to China's Moutai + Wuliangye. However, the majority shareholder's ambition is too big, doing too many industries, Indian regulations on investor protection and not enough, the majority shareholder can legally misappropriation of listed companies' cash. That is, the company's main business is very profitable, but the other shareholders are unable to restrain the major shareholder from misappropriating cash. Recently, we have been gradually selling off companies with poor governance structures. A good main business coupled with a good governance structure is what makes a company worth investing in, and this is the biggest lesson we have learned in the two years we have been investing in India.
China's stock market reached a high in November 2007, and after a rebound in 2009, it has been on a path of growth. After a rally in 2009, it has slowly become a bear. 2007 was too much of a stock market bubble, and now it's actually a de-bubbling process.
China's economy will enter a period of transition in the next decade, and some industries have already passed the period of high-speed development, and the turning point of the demographic dividend has also quietly appeared, so the era of Easy money has passed. China's current GDP per capita is only $4,260, compared to the U.S., there is still much room for growth, and in the future China will rise new heroes in some of the country's emerging industries. As the stock market falls and the bubble is released, we are gradually returning our attention to China and have found some companies to invest in. We are gradually buying these Chinese companies after selling off companies with poor governance structures in India.
We are now nine years old, and we are grateful to our investors for being with us through thick and thin. We are self-limited, do not know enough about the world, always try to pursue the perfect world, and are full of idealists. Over the past few years, as we have lived and invested abroad, we have become more rational and objective when looking back at China. Every country has its advantages and disadvantages, and China, the United States and India all have their own advantages and disadvantages.
No perfect world.
Early 2012
Zhao Danyang
Children's Heart China Growth Fund
In 2002, Zhao Danyang started to organize the "Children's Heart China Growth Fund", which was formally placed on January 16th, 2003, and started its investment operation. Mr. Zhao is also the investment director of SZITIC-Children's Heart (China) Pooled Fund Trust.
Zhao Danyang is the founder of Pure Heart China Growth Investment Fund and is known as the "Godfather of Chinese Private Equity". In 2008, he won a lunch with Warren Buffett for $2.11 million and 100 dollars. According to the Associated Press, Warren Buffett's 2008 charity lunch auction, which was won by Zhao Danyang, was the highest ever. But the record was broken in 2010 for $2,626,311,000 by a mystery buyer who wished to remain anonymous at the time, who has now been confirmed to be Ted Weschler, managing partner of the investment management firm Peninsula Capital Advisors, and who is currently named as one of Buffett's successors to run Berkshire Hathaway Inc. part of Berkshire Hathaway Inc's huge investment portfolio.