8 years, 1 billion: the person who caught the bullet chooses to win slowly

Author | South China Soros

Source | Watch Financial Commentary

On March 3rd, as the Shanghai Composite Index closed lower, a small- and mid-cap company called Xinhecheng rose over 4%, with its market value surpassing 100 billion yuan for the first time.

This company itself isn’t considered a star enterprise, but among its top ten shareholders is a low-key capital giant who has been布局ing for eight years, attracting market attention.

In 2017, this institution entered the market, and to this day, the stock it holds has increased by 240%. If it had never reduced its holdings, its unrealized gains would amount to over ten billion yuan.

It looks like another victory of patient capital, but what if the protagonist this time is a private equity fund?

What if the leader of this private fund is someone who has been评价d by peers as “able to pull back the bullets fired in the market”?

Being able to shoot bullets means being ruthless in seizing fleeting opportunities; being able to catch them with bare hands means precise hedging of the effects of previous decisions. In a split second, it’s a contest of masters, where every millimeter counts.

But if this person has not gained fame for speed since entering the private equity world, but rather for patience and calmness, rarely showing up in the limelight, it adds a layer of mystery and elevates their境界.

In the Chinese private equity圈, if we talk about being低调, Qiu Guogen and his Chongyang Investment are probably second only to no one in being the most低调.

Chongyang Investment’s main research team is led by Qiu Guogen

In China’s 30 years of A-shares, we’ve seen victories of long-termism as well as times when speculation dominated. The players at the table come and go—changing identities or strategies.

Every decade, every sector rotation, someone will shout “Value investing is dead.” Perhaps Chongyang Investment, with assets under 20 billion yuan, isn’t dazzling among the many高手 in private equity, but it remains one of the most稳健 and纯粹的 value investors.

Those who shoot bullets choose to win slowly

Qiu Guogen doesn’t always emphasize speed. In fact, within Chongyang, he’s often called “Mr. Qiu.”

This称呼可能源自 his scholarly气质: he loves reading, especially history, and is keen on extracting investment哲学 from historical lessons.

More likely, it comes from his calm demeanor: he writes important strategic reports for clients himself, painstakingly refining them without ever feeling satisfied. When the 2013 Securities Law was enacted, ushering in the first policy红利 period for private funds, everyone expected Chongyang to lead the way in launching public offerings. Qiu Guogen’s response was “No rush.”

The name Chongyang emphasizes sustainable compound growth, just like someone who can catch bullets, choosing to win slowly in the capital市场.

Time deserves respect. If Buffett and Soros had left the market 30 years ago, they might have been早早 forgotten by history. In Qiu Guogen’s view: “For an investor, if you dare to claim success, at least one of these must be true: either you are already dead and successful before death, or you have退出 this industry and were successful before退出.”

Time is also the best friend of investors. Although long-termism may seem老派, at least in Chongyang’s case, the power of time is evident.

In the private equity industry, which often creates wealth myths, Chongyang Investment appears somewhat平淡无奇. It lacks激动人心的传奇 stories, and its steadily rising net value curve leaves little room for期待. Compared to那些黑马 that often emerge, its annual performance ranking is only中等偏上, not very吸引人.

The market has summarized: occasional精彩表现, mostly平凡, but fortunately, not many大亏.

But what would be the result of such平淡风格 over a 20-year horizon? Take Chongyang’s first hedge fund as an example. This style has forged a nearly连续上涨的业绩 curve, with a total return of over 750% since inception and relatively small drawdowns among billion-yuan private funds.

Such performance is actually more稀缺, like the industry consensus: “Five times in a year is common, but doubling in five years is rare.”

How to craft such a curve? A科学的 stock selection mechanism is fundamental. Chongyang’s投研体系 can be summarized as “Three, Four, Seven, Eight.”

“Three” refers to investment decisions based on rigorous, clear logic and comprehensive empirical analysis, with dynamic tracking of fundamentals; “Four” is the focus on macro analysis; “Seven” involves key factors in specific investments; “Eight” refers to Chongyang’s macro策略研究的八个跟踪点. This体系 forms the basis of “comprehensive投研.”

Additionally, you need a sufficiently低的 and合理的 entry price. Low prices not only offer more growth potential but also serve as a strong hedge against风险.

In short, a good investment often has three conditions: good company, good industry, and good price.

Most agree with this, but few realize that even if all three are met, there’s still a significant gap to a truly稳妥的 investment.

Suppose you have 80% confidence (a quite high level) that your target meets these three conditions. The probability of success is then just over 51% (80%×80%×80%).

Even if you add higher confidence expectations, such as 90% confidence that the company will have major positive fundamentals, mathematically, it doesn’t help much. Adding variables increases uncertainty, leading to diminishing marginal returns on信心预期.

Therefore, the highest principle beyond all investment actions is to make fewer mistakes. And being a friend of time can reduce the probability of errors.

Back in 2015, Chongyang didn’t do any private placements, nor any small and medium enterprise (SME) or New Third Board (NEEQ) business, even though these were market热门.

The result was that short-term long products’ returns甚至 lagged behind the index, and hedging products performed poorly, leading outsiders to criticize “performance worse than grandma.”

But the泡沫 of “shell trading” proved Chongyang’s correctness. During that brutal股灾, Chongyang’s长仓产品 in 2015 had a最大回撤不到9%, while the同期沪深300’s回撤高达45%.

Ultimately, Chongyang drew the conclusion before the潮流 arrived: from 2012 to 2015, the market was driven not by macro or micro fundamentals, but by无技术含量的, unsustainable arbitrage.

There are countless similar examples. In 2012, Chongyang invested in China Yangtze Power, holding it for nearly 8 years before退出ing from the major shareholder list in 2019. During their holding period, the stock price increased 2.33 times.

Looking back, Chongyang’s退出 timing may have been somewhat早, missing out on the subsequent大幅上涨. But in a way, this reflects Chongyang’s investment philosophy: earn in the first half, avoid earning in the second half, especially avoid the最后一部分.

Even if the returns of the first and second halves are the same, the risks are certainly different. Persisting in this approach over the long term means that, with equal returns, the波动率 can be lower.

This approach might miss some opportunities, but it emphasizes稳健.

Using comprehensive投研 to form your own conclusions, sticking to your judgments, and reducing mistakes—then leaving the rest to time—is Chongyang’s investment advice. As Qiu Guogen says: “Time is the private equity industry’s best friend.”

And the most crucial method to reduce mistakes is to understand yourself.

Anti-human nature, close to human nature

Humans are inherently unsuitable for investing.

Because herd mentality is the strongest force in capital markets, as David Dreier describes:

“When everyone rushes in the same direction, maintaining independent thinking and going against the crowd requires enormous courage and discipline, because it goes against our innate desire for social认同.”

If you don’t follow the herd, you are very likely to陷入自我怀疑的陷阱. Self-doubt is a major cause of investment failure. Mark Sellers, in “Why You Can’t Be Buffett,” mentions that one of the most important and rare traits of a good investor is the ability to保持思路的一致 during大起大落.

In fact, many things haven’t fundamentally changed; what has changed is investor情绪.

Going against human nature is difficult, but successful investing often relies on反人性.

Is there a way to make it easier?

One strategy is to build a护城河 with a组合. For example, Chongyang senior strategist Tan Wei divides the market assets into growth stocks, growth value stocks, and deep value stocks, using price as the核心参考，逆势买入。

This strategy requires sufficient research depth to identify suitable潜在投资标的. Once the number of targets is sufficient, constructing a组合 becomes relatively simple—just compare them阶段性地，选择性价比高的纳入。

The final result is an investment组合 that balances growth and value stocks, striving for “东方不亮西方亮。”

Another approach is to step outside traditional analysis frameworks.

In the 1990s, classic金融理论 based on Efficient Market Hypothesis faced major challenges in practice, revealing its limitations. Meanwhile, behavioral finance, originating in the 70s and 80s, accelerated into mainstream finance, providing important补充和修正 to traditional theories.

People then发现，资本市场唯一的确定性，其实只有人类自己——全球股市经历了300多年的起伏，基本面一直在变化，唯有人性永恒。正如Howard Marks所说：“周期永远存在，因为人性永不变。”

Anchoring on constants and leveraging them is a wiser核心策略. Similar schools of thought include George Soros’s“反身性”哲学, which focuses on预判人性谬误 and规避它——“流行的偏见会影响基本面，而基本面变化又会改变偏见。成功的投资在于提前发现这种谬误。”

And Richard Thaler, father of behavioral finance, states: “Real people are ‘social’ and ‘psychological’ beings, prone to systematic errors that are predictable.”

From this perspective, the highest境界 of investing for ordinary people should be to接近人性,利用人性。

What are the characteristics of human nature? It’s impatience. Recall that even when you decide to do value investing, you often feel itchy and find it hard to resist the urge to “操作” from time to time. But the results of操作 are often not ideal.

However, the act of操作 itself isn’t the problem; the method needs upgrading.

Instead of反人性, it’s better to顺应人性. Chongyang’s value investing provides a具体方法论.

Qiu Guogen’s approach is: “Chongyang doesn’t simply dream of earning eight times on a single stock, but by ‘relay’ investing in three stocks to earn one time each, you can achieve the same eightfold return. The latter is easier, more realistic, and more liquid.” He calls this “价值接力” (value relay).

This ease is not only at the市场 level—finding four excellent 100-meter sprinters is easier than finding one outstanding 400-meter runner, especially in the A-share market where volatility is high and companies often face temporary lows due to利空.

It’s also at the人性 level—waiting ten years versus acting opportunistically, which is easier? The answer is obvious.

When combined with the earlier discussed投资组合构筑理论, even if an investor suffers浮亏 or misses opportunities due to various reasons, the overall波动性 of the组合 can be effectively平抑.

In other words, it provides some容错空间 for普通投资者.

In fact, Chongyang’s embrace of human nature isn’t limited to investing.

It’s hard to believe that in an industry emphasizing quick反应, Chongyang’s下班时间 is 5 pm, and the office is often empty by 6 pm.

Chairman Wang Qing explained: “Everyone continues working at home because research never stops. These are lifelong skills.”

The private equity industry often shows two extremes: one working late into the night, the other leisurely like闲云野鹤. Neither is right or wrong, but the choice of下班时间 reflects the company’s气质.

Another aspect is the fund management模式. Chongyang was among the first in China to推行多基金经理共管模式.

This means dividing a single fund into segments managed by multiple managers, each operating relatively independently within their scope, with the overall performance being the sum of their contributions. Top international private funds like Bridgewater, Millennium, and Castle have adopted this for years.

The benefits are clear: it reduces reliance on individual能力, broadens the overall capacity of the firm, and decreases errors from single decision-making.

However, despite its popularity among leading private funds, this模式 hasn’t yet become mainstream in China’s private equity industry.

Much of the reason is internal coordination challenges among managers; even forcing cooperation, achieving 1+1>2 is difficult.

But Chongyang has no such concerns. Most投委会 members are graduates of Renmin University, sharing similar backgrounds, ensuring smooth沟通.

Moreover, Chongyang rarely hires externally, preferring to培养内部应届生. Qiu Guogen and Chen Xin, as veterans, control the overall风格 and provide opportunities for新人 to expand their expertise in selecting targets.

You have to admit, people tend to合作 with those they get along with—that’s human nature. While this may lead to a relatively closed environment and slower growth, it ensures the consistency of Chongyang’s investment理念.

Epilogue

In 1992, just two years after the establishment of the Shanghai and Shenzhen markets, Wu Xiaoqiu, then not yet a professor, was preparing to write a book.

His motivation was simple: leverage his expertise and increase income. Thus, China’s first证券辞典《股票债券全书》 was born, totaling 5 million words, with Wu Xiaoqiu as the planner.

At that time, the contributors were all prominent figures. For example, chief editor Jin Jiandong was then the head of the Financial Management Department at the People’s Bank of China, and seven years later became the first chairman of Guotai Junan Securities.

Except for a 23-year-old seemingly unremarkable young man.

Back then, Qiu Guogen was just a graduate student in the Investment Economics Department at Renmin University. Perhaps his most notable contribution was initiating the university’s证券协会 and engaging in模拟炒股, reportedly the first such case in China.

Ten years later, in 2001, Wu Xiaoqiu emphasized in a speech: “China’s金融 must become strong, and the capital market should become an international金融中心.”

In the same year, Chongyang Investment was established in Shanghai, initially managing only Qiu Guogen’s personal assets, akin to a低配版“家族办公室.”

The next decade, the new CSRC chairman posed a startling question: “What if we don’t review IPOs?” This planted a seed in Wu Xiaoqiu’s mind: “Make China’s capital market the world’s most重要的资产配置中心.”

That year, Chongyang’s规模 just surpassed 10 billion yuan. As a value投资信徒, it entered the top tier of China’s private equity scene for the first time.

Another decade later, the registration system was finally implemented in A-shares. Qiu Guogen stepped down as法人, retaining only the title of Chief Investment Officer, handing over to Wang Qing.

If we see these two as师徒, then over the past thirty years, one has推动资本市场的完善, the other推动私募行业的阳光化, both carrying the旗帜 of value investing, giving the market more options amid fierce competition.

This choice is vital for the industry and the market: no longer judging private equity firms by排名; no longer valuing them solely by规模; allowing space for短期观点、注意力、空间, and focusing on long-term.

As more Chinese companies go global, this may be the true命题 facing the private equity industry.

References:

“Top Chinese Private Equity Interviews” compiled by HaoMai Fund Research Center

Data support: Wind