The Secret Gardens of China's Ultra-Wealthy

By Zhiyan Chen

Edited by Jing Liu

A Convex Lens for Human Nature

In late August 2016, a deal finally closed at the DoubleTree by Hilton in London: a mysterious figure named Cai Kui purchased the property for £80 million.

The building, whose exterior resembles a 17th-century dock, sits on the south bank of the Thames with over 13,000 square meters of space and 378 rooms. Across the river lies the famous Canary Wharf — one of Britain's three major financial centers.

The mysterious buyer's real name was Cai Kui. He was better known as the ex-husband of Wu Yajun, the head of Longfor Properties. After their highly publicized divorce, Cai had walked away with company shares worth HK$20 billion. He then embarked on a tour abroad: in the United States, he visited Texas oil tycoon H.L. Hunt, the Dell family office MSD Capital, and the Walton family's Madrone Capital Partners; in Brazil, he saw the global investment empire of Safra Bank's founder, spanning over 200 top-tier commercial, residential, retail, and farmland properties across the world.

This overseas journey profoundly shook Cai. Upon returning to China, he quickly established the Cai Family Office in Hong Kong. The institution later took on a more formal name: Junson Capital. According to our understanding, Junson now manages over $10 billion in assets, employs a dedicated IT team of fifty people, and even maintains a CRO (Chief Risk Officer) position alongside the CEO, CFO, and CIO.

An investor who has worked with Junson told An Yong Waves that thanks to advance calculations by Junson's risk control team, the firm "perfectly avoided the collective disaster" of the early 2020 market crash.

Junson's story may be extreme. In the telling of many family office industry insiders, Cai's ambition has even been described as "seeking to build a world-class, institutionalized family office." Before this, the best-known family offices were still those originating from European and American families of previous centuries.

For a considerable portion of China's wealthy, the family office has indeed become a secret garden in their financial world.

In fact, in the same year that Cai founded Junson, Wu Yajun also established Wu Capital. This family office under her control is now run by her daughter Cai Xinyi, and serves as a backer for Hongshan, Hillhouse Capital, Source Code Capital, and other leading domestic funds. 5Y Capital, which hit home runs with Xiaomi and Kuaishou, began as the mainland investment arm of the Chen family behind Hang Lung Group. In recent years, Adrian Cheng of Hong Kong's New World Development's fourth generation has become a direct investor in a series of buzzy companies including SenseTime, Helen's, Lalamove, and FITURE through his private investment vehicle C Capital. The investment footprint of Blue Pool Capital, founded by Joe Tsai and Jack Ma, spans hedge funds, healthcare, sports, metaverse, and blockchain.

In the layered world of commerce, the family office has long been an omnipresent shadow.

For a long time, however, this was a niche and secretive industry. Junson Capital has fewer than five publicly available entries on the Chinese internet; you'd almost never run into their employees at industry conferences. Blue Pool Capital's one-page website contains only a headquarters address, landline number, and corporate logo. When we finally reached them after considerable effort, they repeatedly stressed: "The meeting contents are absolutely confidential." Consider that in family office circles, Junson and Blue Pool — founded in 2013 and 2014 respectively — are already far ahead of the pack.

Forty years of Chinese commercial waves have produced at least three generations of "those who got rich first." For most of them, maintaining and even amplifying wealth in the face of individual fortune's ups and downs and the shifting tides of era has not been easy — harder, perhaps, than earning their first pot of gold.

As with all commercial waves, social turbulence tends to follow. The explosion of China's family office industry came in 2020. In that remarkable year, the exposure of risk and sudden surge of uncertainty plunged the wealthy into profound anxiety.

"All of a sudden, people who did bank VIP accounts, who did investing, who were lawyers, even insurance salespeople, immigration consultants — they all stamped gilt 'Family Office' titles on their business cards," said an institutional partner who has been raising funds for over a decade, his face a picture of disbelief. Jiang Wei, founder of "Family Office Home," put it this way: "Three years ago, at most one new family office emerged per week. Now there's practically a new one every day."

The wealthy's expectations of family offices go well beyond "making money make more money."

In the first half of 2018, after 33-year-old Ele.me founder Zhang Xuhao sold his company to Alibaba, "every name-brand primary and secondary market fund boss came knocking," hoping to make him their investor. But almost none succeeded. A year later, Zhang and several co-founders turned around and established their own family office: GurryShark Capital. Word has it that GurryShark now manages over $2 billion.

"They're more eager to become discerning investors themselves, even ones that could rival the heads of professional funds," a private family office principal told An Yong Waves.

Perhaps precisely because the wealthy's motivations are too varied to summarize, the family office seems to be something of a Doraemon-style existence. Dreams of wealth, career trajectories, life's troubles, even all manner of thorny problems — everything is expected to be solved here. In this sense, isn't this industry closest to wealth exactly our era's convex lens: a person's ideals and anxieties, desires and timidities, all played out in exaggerated form.

The Pyramid of Wealth

Whether you agree or not, the world we live in has been invisibly folded into many isolated units. The world of the wealthy is no different.

Before the true family office was born in China, banks and third-party wealth management companies handled nearly all the wealthy's financial needs. Looking back, the barrier to entering the wealth pyramid wasn't particularly high: open Noah Holdings' website, and the first pop-up tells visitors that becoming a "qualified investor" requires only an average annual personal income of no less than 500,000 yuan over the past three years.

Yet top-tier wealth demands scarce, even unique services.

What many family office insiders speak of with relish, for instance, is that Junson has an internal process called "stress testing." Their risk control team has even simulated scenarios from the 2008 financial crisis and the 1997 Asian financial crisis. Such stress tests were previously used only by large investment groups like Goldman Sachs and Temasek.

A more fundamental difference from wealth management: the former's core is generating more transactions — even regardless of whether the entrepreneur ultimately benefits — while the latter must answer for investment performance. In its early days, Blue Pool Capital invested $100 million in a hedge fund, but proactively withdrew within two years due to poor performance. Jack Ma's wife Cathy Zhang even made a personal appearance at Blue Pool's offices to express her concern: "Could we hire one more fund manager? Two teams could 'race horses' — the current setup seems inefficient."

Gao Hao, director of the Global Family Business Research Center at Tsinghua University's PBC School of Finance, once interviewed 20 single-family offices in China with an average scale of $1.5 billion (about 10 billion yuan), and discovered an interesting phenomenon: 90% were established after 2013. Wu Capital and Junson Capital were both born this year; Blue Pool Capital was founded the following year; fashion enterprises like Septwolves, Anta, and Xtep came slightly later.

By this point, despite 7-8 years of development, the wealth management industry still couldn't fully satisfy top-tier wealthy needs. Additionally, China's stock market entered a major bull run from 2014 to 2015, with sustained capital market activity in those years creating a new batch of wealth myths.

However, a single-family office doesn't mean they must cut themselves off from the outside world. Just as business relationships have degrees of closeness, family offices too engage in alliance-building.

In 2021, Bama Tea's A-share IPO prospectus revealed a scene straight out of a business war drama: a marriage alliance connecting over 50 billion yuan in wealth. Major shareholder Wang Wenbin and his wife had one son and two daughters; the son married the daughter of Anta boss Ding Shizhong, while the two daughters married the son of Septwolves controller Zhou Yongwei and the chairman of Gaoli Holdings Group respectively. An RMB fund's investor relations professional told us that although these fashion giants each have their own family offices, they frequently conduct due diligence and invest in funds together, with deep ties between them.

The life of having an independent family office is enviable, but its cost deters many. The head of one top internet entrepreneur's family office estimated for us that "to sustain a professional single-family office, you need at least $2 billion in assets."

In our reporting, An Yong Waves encountered a private entrepreneur who established a single-family office out of a desire to "clarify inheritance rights." But after two years of operation, he found "costs were high, and functions overlapped with the corporate president's office," and eventually gave up.

"The family offices that can afford professional investment teams and have relatively complete investment strategies, you can count on ten fingers," a single-family office CIO told us.

When we discuss family offices today, the much larger group is neither Cai Kui nor third-party wealth management users, but rather those from the middle layers of the wealth pyramid.

Starting in 2016, multi-family offices — institutions managing assets for multiple families — began appearing in China. The typical profile: assets between 50 million yuan and $1 billion. Especially after 2020, with a wave of Chinese concept stock IPOs, a large number of young internet nouveau riche holding early-stage options emerged. Their "more than enough to get by, but not quite there" capital scale made them core targets for multi-family offices. This is also currently the most bustling part of the entire family office industry.

In just the first half of 2021, family offices registered in Hainan's free trade port alone exceeded three times the total of all previous years combined. By year-end, the Hainan Market Regulation Bureau had to issue a notice suspending 304 commercial entity names, of which 301 contained the term "family office." The vast majority were multi-family offices.

Headhunters also caught the scent. Starting in 2020, Ray, a headhunter at Element Resources, received increasingly more family office staffing requests. "Last year there were about 400 orders total, roughly 40 from family offices. Before 2019, there were practically none."

Though there were reasons for this, the frenzy was still astonishing. In 2019, Wang Yu's Ruiyu Investment received investment from the Rothschild family — long regarded as the progenitor of family offices worldwide. "Today's family office industry resembles the VC industry around 2015, going through a phase of piling in," said Wang Yu, formerly CPE's fundraising head, who has been in this industry for over a decade. She believes investing "remains difficult, specialized work" — in five or ten years, the vast majority of "family offices" will scatter, leaving only a few.

And interestingly, according to one family office industry observer, "Nowadays, pretty much anyone calling themselves a family office is actually a fake family office."

Over months of interviews, An Yong Waves asked many founders claiming to be multi-family offices about their fee structures. They were typically evasive. Even whether they actually managed any wealthy person's money, and how much, was "a secret that cannot be told."

For people with ulterior motives, "family office" seems to be a universal sheepskin for disguising their true motivations. According to An Yong Waves' understanding, many multi-family offices don't directly manage any wealthy person's assets; essentially they're intermediary organizations — "selling allocations, projects, and wealth management products to rich people, collecting transaction fees."

"In Eastern culture, the service provider is often seen as inferior, so being a family office on the client side is a better cloak: it makes gaining trust easier," one family office practitioner analyzed for An Yong Waves. After all, the closer you are to wealth, the harder trust is to obtain.

In 2019, Xu Jin, founder of a multi-family office, met "President Wang" at a dinner. From exchanging business cards to toasting to the meal's end, the post-90s Xu Jin, who had graduated less than five years prior, didn't even get a direct look from "President Wang." In a later chance conversation, Xu discovered "President Wang" was caught in "an extremely complex situation." After being given one opportunity to try, Xu used various risk management tools to untangle knot after knot.

After 635 days — one year and nine months — Xu finally landed this client worth a billion yuan. Recalling this to us, Xu specifically noted: on the day it was settled, "President Wang" said "please" to her for the first time.

Another reason trust is hard to obtain is that many wealthy people have indeed been harvested like leeks. This was the easiest material to gather in our interviews: a foreign investment bank promised an entrepreneur a "extremely stable" strategy, but actually employed a high-volatility secondary market strategy, costing the client $200 million; a deputy section chief at a local bank's finance department, in less than five years, swindled a female entrepreneur of over 40 million yuan using "bank bridge financing" projects; there was even a boss who was sold by an education consultant on "getting identity points," ending up with passports from five countries and tax residency in four of them.

The most notorious scam was the Buchang Pharmaceutical scandal. In 2019, the Zhao family behind Shandong Buchang Pharmaceutical Group was swept up in the sensational Stanford admissions fraud case. According to media reports, the largest single bribe of $6.5 million came from the Zhao family. Eventually, Buchang Pharmaceutical chairman Zhao Tao's wife issued a statement through lawyers: the funds were for supporting overseas higher education charity projects, and being caught in the fraud case meant they had been "swindled" by an intermediary.

This is why most entrepreneurs prefer to have trusted confidants run their family offices. Junson Capital's CEO Kevin Liu has followed Cai Kui since the Longfor days; GurryShark Capital's actual manager Li Xiao was formerly a private equity investment director at Noah's multi-asset allocation center, who met the Ele.me founding team when they were still small and had long managed their wealth; former Wu Capital CEO Zhang Yan was an old Longfor hand who joined as early as 2004.

Yet even a trust relationship as close as Zhang Yan and Wu Yajun's cannot match blood ties. In the second half of 2020, Zhang Yan left Wu Capital, and Wu Yajun's daughter Cai Xinyi became Wu Capital's new CEO.

In fact, it's quite common for the principal or their children to personally manage the family office. According to headhunter Ray's observation, the most typical family office hiring logic is: the founder leaves their previous enterprise to manage the family office, or the second generation doesn't enter the enterprise but manages the family office, then they find a veteran investor from the market to serve as CIO.

In the world of family offices, "loyalty first, professionalism second."

The Reverie of Old Money

Making money make more money is certainly the essence of a family office. But for the wealthy, whose survival circumstances are more complex, there are far too many problems waiting to be solved.

After confirming cooperation with each wealthy family, Panhe Family Office partner Wang Xin has a long chat with every member. "It's basically a family physical exam," Wang Xin told us. "Centered on two things: desire, and pain. After the exam, we produce reports and solutions." All potential problem areas are prioritized, then addressed one by one through establishing a "family constitution."

As an "independent third-party family office," Panhe doesn't directly manage client assets, operating instead on a consulting model with annual fees. In Wang Xin's view, "a good family office practitioner is a general practitioner for entrepreneurial families."

Xu Jin, who runs a multi-family office in Hong Kong, has a more detailed breakdown. She dissects the risks facing wealthy people into four major categories: family-business risk, succession risk, marital risk, and external risk, further subdividing these into 13 subcategories including debt, corporate asset management, family infighting, second-generation profligacy, divorce division, inheritance planning, and tax changes.

So often, wealth manager is just one of many hats a family office practitioner wears.

For instance, beyond managing investments, Blue Pool Capital also operates Joe Tsai's personal passion projects related to basketball foundations and film productions, and even coordinates scheduling for the bosses' private jets. When Beijing Universal Studios tickets were nearly impossible to get, one multi-family office founder secured 17 admission tickets for core clients within a week. Another family office made long-term investments in healthcare specifically so the ailing entrepreneur behind it could gain early access to new drug trials.

A few months ago, Li Yu left an executive position at a wealth management institution, having directly participated in investing in numerous mainstream fund GPs and also managed S-funds. In preparing to launch a multi-family office, he spent two full weeks doing just one thing: persuading his "brother's brother" — a department head at a "top-tier hospital" in Shanghai — to treat a "friend's" father's complex illness. His purpose was direct: that "friend" was a traditional entrepreneur and one of his target clients, with potential investment of 100 million yuan.

Family office practitioners may also be those who hold more of the wealthy's secrets.

"Being all things to all people is an essential quality," one multi-family office founder quipped to An Yong Waves. He gave his own example: "When the entrepreneur is with his wife, we discuss how to divide the money, where to invest it. When the wife isn't there, I have to tell him: how do you separate your money from your wife's? How do you put money in the children's names?"

Once, an entrepreneur came to him, stammering that "there's a family member for whom property allocation is rather inconvenient." "I immediately knew it was an illegitimate child, so I said we have many legal models for non-marital children." Sure enough, as soon as he finished speaking, the other party broke into a satisfied smile.

A good family office steward can even rival a top lawyer. In our interviews we met a well-heeled Cantonese born in the 1970s who also runs a multi-family office. What he's proudest of to this day is an action he calls "helping my cousin seize power": leveraging the family office's management of family assets and equity, over two years he helped his cousin — who originally held no real power in his uncle's family — transfer all the family enterprise's equity into his cousin's name, making him the richest person in the family.

Rui Meng, co-director of the Family Heritage Research Center at CEIBS, told us in an interview that "the core problems family offices must solve are first wealth preservation, then intergenerational transfer." It is precisely for this reason that family offices have distinctly interdisciplinary characteristics, with extremely high demands on practitioners' ability to handle complex situations and manage multiple asset types.

Rui Meng's "Family Office Chief Architect" course illustrates this: (1) risk isolation between family and family enterprise; (2) legal and tax tools for managing family civil, criminal, and social risks; (3) exploring transmission of family intangible capital based on long-term strategy; (4) family financial wealth inheritance and investment management; (5) overseas family enterprise study tours.

Seven years ago, when Rui Meng first launched this course at CEIBS, almost no one showed interest. He eventually had to "use his face" to get two CEIBS alumni to help, with each donating 1 million and 500,000 yuan respectively as course scholarships, just to barely recruit the first cohort. But today, even though the course fee has doubled from then to 360,000 yuan, it's still nearly impossible to get a spot.

Jiang Wei, founder of "Family Office Home," told An Yong Waves that the industry's biggest pain point is the shortage of talent capable of handling complex asset allocation and building appropriate family office structures. "With 100 family offices, 100 can't find people."

Despite being at the center of the top名利场, Rui Meng still emphasized to An Yong Waves: "The original intention of family offices is people-oriented, love-first."

Zooming out to the societal dimension, wealth accumulation and intergenerational continuity are often just the beginning of a family's social class ascent. From "having money" to "having status," what the wealthy care more about is often identity recognition.

In the opening of the film Gone with the Bullets, the warlord's son Wu Qi — who doesn't understand "wok hei" and is mocked as "new money" — searches far and wide for cultured literati until he finds Ma Zouri, played by Jiang Wen, and asks that soul-searching question: "How do I turn my money from new to old?"

Compared to the aloof GPs above them, as agents of the wealthy group, family office leaders try to put more effort into "enhancing investment satisfaction" and "matching wealth with services."

During the 2019 Spring Festival, Candice Wu, co-founder of Tiger Family Office, took 17 Chinese billionaire families to a Chinese New Year dinner hosted by Prince Charles. Shaking hands with Prince Charles, meeting then-Prime Minister Theresa May, and chatting with the heir to a London real estate family that works with the Qatari royal family — the conversations covered not just how to invest, but even longer discussions on: cultivating second-generation successors, philanthropy, and the character of upper-class individuals.

One entrepreneur reflected afterward: "First time seeing real old money — absolutely震撼!"

The Difficult Second Curve

Not long ago, an entrepreneur over 50 completed due diligence on a top consumer fund in halting English. He told the fund's fundraising head: "I'm in traditional industry, why invest in a consumer fund? I just want to see the fu... future."

For entrepreneurs, beyond wealth, participation, or various ineffable anxieties, the "second curve" may be what they most hope to gain from investing.

From the 1980s to today, China's private entrepreneur population has had three generations: the first mainly in traditional manufacturing, energy, and consumer goods; the second largely originating from real estate; the third is the internet generation. And in recent years, these once-massive opportunities of the era have encountered bottlenecks to varying degrees: traditional industries face transformation and upgrading, real estate has entered a deep freeze, and even top internet companies have gradually slowed their pace. This is the deep anxiety hidden behind this wave of family offices.

This is also why most family offices aren't enthusiastic about conservative investment models, but rather crave investment — even direct investment into extremely high-risk early-stage companies. The motivation isn't hard to understand: since pouring more capital into their enterprises may not bring former glory, only finding tomorrow's opportunities could put wealth back on the fast track.

In Tong Jie's consumer-focused Shangcheng Investment, well-known consumer entrepreneurs and family funds from Jinhe, Xiangpiaopiao, Luolai, K11, China Gas, and Peidi — from south to north — constitute over 90% of the LP base. In working with them, Tong Jie senses these entrepreneurs' and second generation's enthusiasm for early-stage equity investment in their own industries.

Tan Min, RMB IR at an early-stage fund, witnessed a successful transformation of a second-tier real estate company: a few years after being acquired by a large developer, the chairman took his whole family to Hong Kong to establish a family office and transition to investing. They recruited VPs from name-brand funds, and as LPs made mandatory co-investments, "due diligence was so detailed we had to share our weekly meeting notes."

After several years of GP investing and direct investing, this family office has now begun marketized fundraising. The industry rumor is — they hope to become the Hongshan or Hillhouse Capital of family offices.

For younger internet nouveau riche, the pursuit of second curves is even more adventurous.

Sun Yuejun, born in the 1980s, has his Hong Kong office across the harbor from Blue Pool Capital. Two massive floor-to-ceiling windows look out on the same Victoria Harbour view. Five years ago, Sun left UBS to found Harbour Wealth. The starting point was simple: hoping to change how traditional private banks couldn't well serve tech nouveau riche needs, using digital methods to improve efficiency and client experience. Among these, one common need was solving a core problem for listed internet company early employees — that is, getting cash to improve their lives by pledging their company stock to private banks or brokerages without actually selling their shares.

But in communicating with clients, Sun discovered that whether they were early employees of listed internet companies, or co-founders and executives, most of their lives hadn't changed much due to sudden wealth. "Very few would buy private jets; at most they'd buy a bigger house."

"$100 million net worth, still wearing plaid shirts doing 996. It's as if wealth isn't a chip for exchanging for luxury living, but a self-award for self-actualization." Sun told An Yong Waves, "They're still looking for the next opportunity, always ready for a second创业."

Former Hongshan investor Li Guangmi has similar observations. At the end of 2019, Li founded Shi Xiang Technology, whose main business is providing alternative investment services for successful entrepreneurs and new economy leaders, and thus became an investment partner for many internet nouveau riche family offices.

Li's judgment is that China's new economy entrepreneurs don't yet need traditional European/American wealth-management-style family offices. "Yiming Zhang, Wang Xing, Colin Huang — their information acquisition and judgment capabilities are stronger than the vast majority of professional investors in China. To make an inappropriate analogy: if Yiming Zhang ran a family office and hired several fund managers, they'd probably still end up heavily invested in ByteDance."

Additionally, their expectations of family offices differ. China's new economy entrepreneurs enjoyed the massive dividends of mobile and e-commerce over the past 10 years; their internal expectations are much higher than European/American old money. Young entrepreneurs often hope to find their own second growth curve, so either they want to participate in re-entrepreneurship through incubation-style investment, or they want to allocate to high-growth alternative assets.

Especially former No. 2-4 executives who never fully ran an enterprise themselves — deep down they very much hope to find new growth points through investment and incubation. They have deep understanding of industries, technology, and products, but lack fund and project investment capabilities. For them, investment has dual meaning: "maintain 80% stable wealth, use the remaining 20% to re-entrepreneur, continue creating social value."

If finding a second curve is an "important but not urgent" matter, then in the past year, more and more entrepreneurs have personally felt the urgency.

With the ongoing pandemic, global tax system adjustments and reforms, and the collapse of the tutoring industry, entrepreneurs' era anxiety is being continuously amplified. The essence of anxiety is fear of an uncontrollable future.

"Our sense of crisis is unparalleled. Because the environment is changing, policies are changing, and风口 are changing." One entrepreneur told An Yong Waves.

On August 17, 2021, the Central Financial and Economic Affairs Commission held its tenth meeting. The theme: common prosperity. The meeting made clear that high incomes should be regulated and adjusted, lawful income protected, excessively high income reasonably adjusted, and high-income individuals and enterprises encouraged to give more back to society. This provides a new dimension for considering how China's wealthy preserve wealth and continue creating it.

No one is immune to困境. Those who gain more often have more困境. Even with a family office as successful as Cai Kui's, he couldn't help saying meaningfully in a small-scale interview: "You can't expect each generation to become stronger and stronger — it's better to let things develop naturally. This isn't the traditional Chinese expectation for descendants, but the descendants themselves should matter more than all of this."

(At interviewees' request, Xu Jin, Li Yu, and Tan Min are pseudonyms.)

Image source | Visual China

References:

CHRISTOPHER J. MALLOY, LAUREN H. COHEN, HAO GAO, DAWN H. LAU, Junson Capital: Building an Institutionalized Family Office