tag:blogger.com,1999:blog-4815867514277794362.post3304109816657471705..comments2024-03-08T06:18:28.125+11:00Comments on Bronte Capital: Guanxi vs Analyst: Carlyle and the coming collapse in Asian Private EquityJohn Hemptonhttp://www.blogger.com/profile/03766274392122783128noreply@blogger.comBlogger26125tag:blogger.com,1999:blog-4815867514277794362.post-37248310054343855832011-08-22T02:28:34.783+10:002011-08-22T02:28:34.783+10:00"In the United States the Guanxi guys will wo..."In the United States the Guanxi guys will work for single-digit millions annually and think they are well paid. That is all they are entitled to. Such limitations on entitlement do not exist in Asia - and the Guanxi guys are likely to see Western funded private equity shops like Carlyle as piggy banks to loot."<br /><br />I think this is one hell of an accurate and elegant way to put a good yet somewhy not very widespread insight.<br /><br />(Same here in Russia, and I've been trying to explain the effect - if to myself - in comparably elegant way for quite some time)Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-16017222083798499242011-02-25T22:12:23.134+11:002011-02-25T22:12:23.134+11:00guanxi means more than connection....it is, in man...guanxi means more than connection....it is, in many cases,about a deal without contract but sort of mutual trust.<br /><br />when without contract, the deal must be vague and contains both reward and risks...reward may bring you 10X return and risks may cause you a heart attack.<br /><br /><br />Remember, when someone shops you a Guanxi or himself as the Guanxi, you need to spend enough time to investigate that "Guanxi"...in many cases, an important guy's driver is more powerful than that guy's right hand man, simply because the driver knows too much.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-66251779613884658142011-02-22T22:47:17.593+11:002011-02-22T22:47:17.593+11:00Regarding your Note 3: China Water & Drinks is...Regarding your Note 3: China Water & Drinks is another case in point:<br /><br />http://www.thestreet.com/story/10953579/1/dealmakers-long-trip-through-china-rto.htmlAndreas Zollmannhttps://www.blogger.com/profile/08854337904343607594noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-43066766914862104682011-02-20T05:14:56.184+11:002011-02-20T05:14:56.184+11:00re forest funds
see empty cities (no 1 renting)
in...re forest funds<br />see empty cities (no 1 renting)<br />in P R CAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-32061743451133409692011-02-16T14:41:00.583+11:002011-02-16T14:41:00.583+11:00Carlysle couldn't see the forest for the fees....Carlysle couldn't see the forest for the fees. Bah dum dum.jackhttps://www.blogger.com/profile/01858304763034157589noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-35862794548391710052011-02-16T05:02:08.979+11:002011-02-16T05:02:08.979+11:00Regarding the FCPA: it is not necessary to bribe a...Regarding the FCPA: it is not necessary to bribe anyone directly to violate the Act. <br /><br />For instance, giving one's outside accountant money to pass to a government official would be a violation.<br /><br />However, the itneded recipient of the bribe must be a government official (although this term is defined broadly.)<br /><br />SidFinsterAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-26502359495720637432011-02-15T22:53:12.970+11:002011-02-15T22:53:12.970+11:00See this article from China Daily in 2008:
PE: Beh...See this article from China Daily in 2008:<br />PE: Behind so many failed projects that have 'fool-you'ed<br />http://www.chinadaily.com.cn/bizchina/2009-03/06/content_7548700.htm<br /><br />"In recent years, many mediocre companies and short-lived commercial myths have been the target of round after round of investment by foreign parties. Bad projects fetched skyrocketing prices as China's red-hot VC/PE market blew big bubbles.<br /><br />Looking deeper, it is not difficult to see that one of the main culprits is the "fool-you" culture of this industry. For example, some general partners (GP) of foreign PE funds abandon the primary goal of finding good projects to get high returns and don't wait until the end of their investment tenure to cash in their bonuses. Instead, they have tried their best to legally take money out of the pockets of foreign investors and then change jobs. The final victims are invariably the limited partners of these foreign funds, who have to write off the investment losses.<br /><br />A Chain of Grey Interests<br /><br />The manager at a famous foreign fund says 70 percent of its projects come from "middlemen", or individuals rather than institutions. Why do these GPs need so many such "middlemen"?<br /><br />One local fund manager explained: "If I follow up a project and it is nearly ready, I would tell my investment committee that this project was introduced to me by another manager who works for another fund. I would get a finder's fee, which I will share with the other manager. The other manager will do the same to me with his projects. We both have legitimate income."<br /><br />To prevent such practices, some foreign funds prohibited a "finder's fee" or "introduction fee". That proved little problem for the greedy GPs. "The fees can be paid by the target company to a related person designated by the GP. This is allowed and has no direct link with the fund," the manager said. "But the fund has to pay for it one way or another. Also, in some cases, an investment fund can buy out a company at four times P/E. But the GP talked the fund into paying five times P/E. The extra amount will be shared between the target company and the GP." In this chain of grey interests, there is inevitably the real "intermediary", the investment banks. With their expertise in packaging the projects, investment banks added a formidable force in pushing a quick investment decision by the funds.<br /><br />One's Own Fund Is a Better Place to Earn Money Than a Good Project<br /><br />If cheating funds with a "finder's fee" is a practice limited to a few managers, the most commonplace practice to rip off investment funds is to invest as much as possible within the provided time frame and skip the necessary project investigation and review work and the hard bargaining of purchase price..."Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-73655120117207555452011-02-15T22:47:31.461+11:002011-02-15T22:47:31.461+11:00TPG has had several problems in its China portfoli...TPG has had several problems in its China portfolio, including in Shanghai in which they were locked out of the offices by the local management. Blue Ridge Capital's China fund has had at least two major frauds--ITAT and Gushan. The list is not short, but they seem to have enough big winners to make up for the frauds and turkeys. Cost of doing business in China?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-4661912636039154042011-02-15T15:30:59.349+11:002011-02-15T15:30:59.349+11:00Point taken on Foreign Corrupt Practices...
JPoint taken on Foreign Corrupt Practices...<br /><br />JJohn Hemptonhttps://www.blogger.com/profile/03766274392122783128noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-196006621186874972011-02-15T15:24:47.398+11:002011-02-15T15:24:47.398+11:00It's not so simple as the Foreign Corrupt Prac...It's not so simple as the Foreign Corrupt Practices act, because Carlyle isn't bribing anyone directly. They might have been offered a pool of deals without a lot of words exchanged about the fact that two of those were Turkeys.<br /><br />Carlyle could have put up with the bad deals without understanding the details of the corruption within them. But the important point would be that Carlyle's presence in such a deal wouldn't necessarily indicate that they did due diligence, or that they even like the investment.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-9386290290326831182011-02-15T14:20:27.624+11:002011-02-15T14:20:27.624+11:00Anon suggested:
One thing to consider is that may...Anon suggested:<br /><br />One thing to consider is that maybe Carlyle was forced to take on a few small corrupt deals in order to get an opportunity to participate in some much larger (more) legitimate deal? <br /><br />It could be that on some of these smaller plays Carlyle did little due diligence and didn't even much care about the outcome?<br /><br />==<br /><br />Did you ever hear of the Foreign Corrupt Practices Act?John Hemptonhttps://www.blogger.com/profile/03766274392122783128noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-3510370637828642672011-02-15T12:40:08.559+11:002011-02-15T12:40:08.559+11:00One thing to consider is that maybe Carlyle was fo...One thing to consider is that maybe Carlyle was forced to take on a few small corrupt deals in order to get an opportunity to participate in some much larger (more) legitimate deal? <br /><br />It could be that on some of these smaller plays Carlyle did little due diligence and didn't even much care about the outcome?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-34991037876334657122011-02-15T07:28:16.871+11:002011-02-15T07:28:16.871+11:00This is one of the most important articles I have ...This is one of the most important articles I have seen on corruption in China, and it puts the whole issue into a different scale of understanding for me.<br /><br />John, do you think a retail investor can trust any Chinese issue given the mind boggling level of corruption in this country? If government officials feel entitled to hundreds of millions of dollars of corrupt payouts, and that corruption gets reflected in many of the businesses throughout the country, then clearly no one should believe any filing made by any Chinese company, because the corruption is systemic and at a level that Westerners cannot quickly comprehend. We are in effect trying to project the level of corruption in Western businesses, and our tolerances toward this, onto China, and China is just practicing all of this black art at a much different scale than Westerners understand.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-73244181991203998872011-02-15T02:43:43.799+11:002011-02-15T02:43:43.799+11:00Back to Guanxi again!
The Wiki article I fear is n...Back to Guanxi again!<br />The Wiki article I fear is not correct.<br />http://blog.chinesehour.com/?p=1057 and comments is a little better.<br />The article sort of views guanxi as a Mafia type obligation. Which is wrong.That is an obligation of one individual to another.<br /><br />But if I understand correctly, in the areas where Confucius resonates with the underlying social system, there is no such thing as an individual ego containing an individual soul.<br />Rather you ARE as a member of a group. <br />Recently scientists were surprised when they learned that certain bacteria in times of stress would stop swimming around separately. Instead they glommed together into a single stalk and some were sent out spores. Notice how projective this is. The natural state is seen as free swimming.Only in time of trouble do the parts get together.<br />Perhaps an NW Asian might see that the stalk is the primary state of bacteria being and in times of plenty, it desolves into individual cells who can better multiply.And strengthen the stalk when the environment goes south.aeoliushttps://www.blogger.com/profile/09528717028785728695noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-77249942173343487652011-02-15T02:24:10.215+11:002011-02-15T02:24:10.215+11:00If memory serves, I recall reading that Chelsea...If memory serves, I recall reading that Chelsea's mother did rather well during her first year trading commodities. Dollar gains didn't pass your threshold, but rate of return seemed rather astonishing. I've always wondered how the other clients of that trading firm fared that year.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-90673755185168107752011-02-15T02:21:13.769+11:002011-02-15T02:21:13.769+11:00There are two Chinese reverse merger stocks that a...There are two Chinese reverse merger stocks that are currently in the subject of buy-out offers. <br /><br />In one case, On Nov 3, 2010 FSIN (fka PLLK) announced that it's CEO, Mr. Li Fu along with <b>Abax</b>, a HK firm, were going to buy the company at $11.50 a share in cash. Over three months later there are still no filed deal documents.<br /><br />In another case, HRBN (fka TESV) announced a deal on October 11, 2010 where the CEO along with Baring Private Equity was to buy the company at $24.00 per share in cash. As of today there have still been no filings in regards to that deal. However, <b>Abax's</b> name shows up prominently in HRBN as well.<br /><br />Curious. I wonder if the Western cash is finally seeing the light?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-50107169420630757662011-02-15T01:50:39.766+11:002011-02-15T01:50:39.766+11:00This reads like sour grapes.
Sure they tout onl...This reads like sour grapes. <br /><br />Sure they tout only their wins. Who doesn't? But, Carlyle used their Guanxi and made US$ billions on China Pacific Insurance. <br /><br />http://www.chinadaily.com.cn/business/2011-01/21/content_11894445.htm<br /><br />And, what's a mere $100 million amongst friends, which could even be the head of the China coverage team's personal carry?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-16370075510033422382011-02-14T23:31:13.050+11:002011-02-14T23:31:13.050+11:00Your China Forestry story reminds me of that old s...Your China Forestry story reminds me of that old saying, "You can't cheat an honest man."<br /><br />Wonder how Carlyle will dump these losses onto the US taxpayer. . .But What do I Know?noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-24948398527321751212011-02-14T23:25:32.409+11:002011-02-14T23:25:32.409+11:00Also:
China’s vanishing forests?
Posted by Trac...Also: <br /><br />China’s vanishing forests?<br />Posted by Tracy Alloway on Feb 14 11:47.<br /><br />http://ftalphaville.ft.com/blog/2011/02/14/487451/chinas-vanishing-forests/polit2khttps://www.blogger.com/profile/08184279620350984044noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-14601695399764297292011-02-14T21:39:43.599+11:002011-02-14T21:39:43.599+11:00Fame at last :-)
Carlyle Group Lost $105 Millio...Fame at last :-) <br /><br />Carlyle Group Lost $105 Million On A Fictional Chinese Forestry Company, And It Will Make The Same Mistake Again<br /><br />http://www.businessinsider.com/carlyle-group-china-forestry-2011-2polit2khttps://www.blogger.com/profile/08184279620350984044noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-16600042507033880272011-02-14T15:49:39.863+11:002011-02-14T15:49:39.863+11:00Is it true that China, a year or 2 ago, has allowe...Is it true that China, a year or 2 ago, has allowed shorting of stocks?<br /><br />Given the amount of fraud, this seemed like a great environment for native Chinese short sellers to feast on. <br /><br />What is holding these people back? Is it the political environment? Is it the double digit growth rate? Why are short sellers affective in the west but not affective to the same degree in China?<br /><br />China hasn't had a big down turn for a while. Events like the great recession is hugely cleansing in the west. However, the impact in China is relatively short. Any thoughts on where things will first show signs of cracking?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-32528934347917666772011-02-14T12:13:54.885+11:002011-02-14T12:13:54.885+11:00I have heard people say that most companies listed...I have heard people say that most companies listed in HK whose name start with "China" but are not state owned are fraud. Now "China Forestry" can be added to the list of examples.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-63068270111710885642011-02-14T06:09:17.912+11:002011-02-14T06:09:17.912+11:00It seems to me that the collapse of Guanxi-based A...It seems to me that the collapse of Guanxi-based Asian PE, along with perhaps one or two or more listed firms, will come in part from a thorough investigative review of the Financials of these listed companies. Dr. Al Rosen has written extensively on "liberal" accounting to goose up results. You can find some of his work on web. He also has written a book entited "Swindlers".<br />It's easy to slap a sign on the door and call it a "facility" if pressed, make excuses as to why it not busy "at the moment". But inflated revenues, upon which the share price is based, coupled with inflated expenses and fixed assets purchases (otherwise the cash flows into the bank which is an easy check) can't have signs slapped on them.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-63039210205278639762011-02-14T04:08:43.340+11:002011-02-14T04:08:43.340+11:00Just to prove that someone is readng closely - I c...Just to prove that someone is readng closely - I can't agree that you are an Austrian economist. You're far too proud an Australian to let that stand.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-85269017775385422242011-02-14T02:39:56.551+11:002011-02-14T02:39:56.551+11:00If only the Biden family's work history were a...If only the Biden family's work history were as clean and quiet as Chelsea Clinton's.<br /><br />I learned about the Biden family's shenanigans with <a title="Paradigm" href="http://brontecapital.blogspot.com/2009/05/paradigm-global-bidens-and-allegedly.html" rel="nofollow">Paradigm</a> from your blog.<br /><br />Paradigm investors are a great example of the failure of guanxi in the West. <br /><br />Did you see the great piece in Bloomberg Markets magazine about the funds run by the ex-NFL players? Another cautioinary tale of guanxi-led investing?Anonymousnoreply@blogger.com