Exclusive interview with Zhou Ping of Binyuan Capital by Lujiazui Magazine: Insisting on Value Investment in A "Trading Market"

At the age of 30, he went abroad to study for an undergraduate degree. He could be the first person in China to get the CFA certificate. He is a global senior executive of General Electric Asset Management (GEAM) in the United States. The experience of Zhou Ping, the founder of Binyuan Capital, is full of legend. Recently, a reporter from Lujiazui Magazine interviewed Zhou Ping in Binyuan Capital's Pudong office.
In 2012, Zhou Ping left GEAM, where he had been working for 17 years, and founded Binyuan Capital. "I left GE for two main reasons. First of all, excellent asset management companies in the United States mostly led by on one or two core figures. I also hope to make investment into my own business. It would be too late to start if we did not start. And with so many years of investment experience, I think I have developed a solid investment style and feasible investment philosophy to bring strong investment results for our clients. "
Another reason for leaving GE was his judgment on the business potential: the allocation of overseas capital in the A-share market is still very low. The total market value of A-share is about US $3.5 trillion, of which the share of qualified foreign institutional investors (QFII) is only 1% of that. With the opening of the capital market, more overseas capital will be injected into the Chinese market in the future, so the Chinese market has a huge room for growth.
When Zhou Ping left GE, the core team members who had achieved excellent investment returns with him also joined, including an assistant manager and three research analysts. Such a stable and excellent team made Binyuan a strong boutique firm.

Older undergraduates

Zhou Ping was tall and burly, with unique fortitude and steadiness as a soldier.  Zhou Ping said with great emotion that he was one of the "eliminated generation" who lost formal education opportunities in the tide of "going to the mountains and the countryside".
But even in such an era, Zhou Ping didn't give up on himself. He firmly believed that he had to study. "I thought I had to learn something at that time, and I would use it one day". In those hard days, Zhou Ping, who likes mathematics and English, insisted on self-study. After joined the Airforce, it became very difficult for him to study mathematics by himself, but he persistently taught himself English and gave up spear time on entertainment for more than ten years.
At the beginning of 1987, Zhou Ping transferred out from the Airforce and worked as a manager in a shopping center in Shanghai. In the tide of go abroad to study and work at that time, he had two choices: Australia and the United States. Because he wanted to get his college degree, Zhou Ping chose to go to the United States. "At that time, I was surrounded by younger people who were studying for doctorate. Few of them studied for bachelor's degree like me." Zhou Ping recalled. The first application for a visa to the US for school was refused; six months later, the second try was again failed. Many people might have given up in this situation, but Zhou Ping, trained as a soldier, was persist. Finally, he got the visa at the third try. In 1991, at the age of above 30, he arrived in the United States. At the first few days in the United States, a friend who was studying for a doctorate in economics in the United States advised him not to waste his time. At such an old age, even if he were studying for a doctorate degree, he might still not be able to find a job, let alone an undergraduate. Zhou Ping naturally would not listen to such advice: "Get educated with a degree was my objective, I must insist on it!" As a result, Zhou Ping began a six-month study and six-month work study life in the Northwest University in Boston.
It is needless to say that it was very hard to study and live in the United States for the first time. As a fulltime student, he worked 40 hours a week to make money to pay tuition. At least 3 days a week, he slept 3 to 4 hours a day for about 2 years. “A typical day was after working a night shift as a dormitory proctor in the early morning, I went to a nearby friend’s the dormitory to sleep for one or two hours. I got up to start a day of intense study, taking class and doing homework. Then I either did an afternoon on campus job or do other night shift.” Throughout the school years, Zhou Ping has maintained excellent results and at the year of graduation, he was the top two students in the finance major.
In 1992, Zhou Ping worked as a fund accountant at State Street Corp as the work-study program. It was at that time that he first exposed to the investment business. "At that time, I found that investment was very interesting, and I decided to do investment as my future proctor." Zhou Ping had a new objective to work in investment industry.
 
After six months' work at State Street, Zhou Ping, who studied International Business and Accounting, began to focus on finance and investment. Later, he accumulated investment experiences by working at different mutual fund and other investment companies.
In 1995, he joined GE as a financial analyst in the United States and began his professional investment career.
In 2002, GEAM had launched China fund, managed by Zhou Ping; in 2005, Zhou Ping returned to China for GE. Prior to the establishment of Binyuan Capital, Zhou Ping had become GEAM senior vice president and Greater China managing director. He was responsible for managing GE Global Emerging Market Fund, GE China H and A-share QFII fund, with total assets of US $5 billion.

Value investment, contrarian thinking

At present, Binyuan's firm AUM is more than 400 million US dollars, and most of it is from overseas. This is related to the rich overseas background of Zhou Ping and his team. It will take some time for domestic clients to accept Binyuan's long term and bottom-up investment style.
Zhou Ping believes that since the economic reform and opening up, China's capital accumulation has been too fast, leading to high short term capital return expectations by domestic clients. Therefore, the domestic market is mainly a "trading market", not a real "investment market". "Many managers are considering whether to reduce or increase their positions every day. Some clients want to double their money in the next month and must get a positive return every day. Majority of the local investors hold this attitude, so our investment style is more suitable for overseas clients."
In addition, Zhou Ping pointed out that many domestic companies do not rely on organic growth, such as technology upgrading and brand building, to create performance, but excessively rely on financing from the capital market; moreover, there is almost no concept of protecting minority shareholders in the management of China's A-share market.
"So many people say that it is very brave for us to implement value investment in such a market environment. But in fact, the return on value investment is not low. " Zhou Ping said, "if you start to hold Midea, Maotai, Gree and other good stocks from a very early day, the capital return from holding them up to now is not lower than that from frequent trading. If the return on investment can exceed the cost of capital for a long time, the performance of the company's stock will certainly be able to beat the market. The above-mentioned companies such as Gree are all like this, but the key is whether a fund manager can have the ability and vision to find such a good company. "
So how to find these good companies? Zhou Ping attaches great importance to contrarian thinking: "to find companies that can create value for investors, investment must be different from what the market thinks. If everyone likes a company, there must be no chance. We should learn to "get on the bus when there are few people and get off the bus when it is crowded."
At present, Binyuan asset has not manage domestic fund to invest in the overseas market, but Zhou Ping said that this is the direction of future development, because the market has no national boundaries. "For us, the flow of capital has no borders, and the source of clients has no borders." Under the guidance of such an international vision, Binyuan capital has cooperated with a South Korea firm to launch a mutual fund investing money in China for Korean clients.

Investment master needs long time to prove

Before the interview, Zhou Ping had been humbly emphasizing that it was not time for him to "come out and talk". In his opinion, it is not a matter of one year, two years, five years or ten years for an investor to form his own sustainable investment style, but a matter of many years and go through many economic cycles." It is only after decades of tempering and market cycle that investors, like Warren Buffett, are qualified to tell their own experiences. Many fund managers who once had brilliant achievements for more than ten years may also make major mistakes, and their career will suddenly go to the bottom." Zhou Ping said.
Zhou Ping likes collecting. However, unlike many tycoons, most of his collections are not valuable works of art, but "time precipitation" or very unique things, much like his attitude towards investment.
Walking into Zhou Ping's office, there is an aircraft carrier model in the front; on his left side is a huge dowry box full of sense of the times in rural Shanxi, which he picked up from a friend; on the inside, there are antique carved wooden doors and windows hanging on the wall; there are fighter jet models, military themed oil paintings, Chinese calligraphy and paintings, and even butterfly specimens.
The most special is his hotel room card, which is neatly sandwiched between two glass plates. Most of these hotel room cards were collected by him on business trips around the world when he was working at GEAM. "These room cards can remind people of a lot of things in the past, and there is a precipitation of time in them." Zhou Ping said. Also time precipitation is his collection of all ages of old telephone, "put together is the history of telephone innovation changes, very interesting."
Zhou Ping highly praised the management model of Starbucks: "it's very rare for such a huge enterprise to let customers have similar experience in every store, and Starbucks has really made coffee into a culture." Therefore, Starbucks cups from all over the world are also one of his collections. At present, he has collected more than 30 Starbucks cups from all over the world. Friends around him know his hobby, and when they come back from abroad, they will also help him bring the cup back.
Although there are numerous private equity and asset management companies in China, Zhou Ping is very confident in Binyuan. "Not many have overseas background as we do and a deep understanding of the Chinese market. Investment is a long-term business. We hope to lay a solid foundation in the next 10 years. "