Feb 13, 2023
Ex-Private Equity Chief for Joe Tsai’s Family Office Starts Fund
(Bloomberg) -- Danny Lee, who previously ran private equity investments for the family office of Alibaba Group Holding Ltd. co-founder Joe Tsai, is seeking to raise about $200 million for his own fund targeting wealthy individuals looking to diversify their investments.
Lee, a private equity investor with over two decades of experience including stints at Blue Pool Capital and Bain Capital, started the Cayman-domiciled fund VCA Capital last year. The investment management team, which currently has a total of three staff including himself, is based in Hong Kong.
“We’re targeting to raise about $200 million in the next 12 to 24 months,” said Lee, managing partner at VCA Capital. “I’m looking to build a team as we raise more capital.”
Lee says he works with a broad group of investors in industries spanning technology, real estate, media and finance to invest in capital overseas.
Amid rising geopolitical tension, wealthy investors across the globe are looking to diversify, including rich Chinese, and Tsai’s family office has been investing in property in Portugal and New York. Chinese tycoons, including the founders of Soho China, have shifted much of their fortunes out of the country, while wealthy Chinese are driving up prices of everything from property to golf club memberships in Singapore.
‘Learning to Diversify’
“Chinese families are starting to learn; they’re learning to diversify,” said Lee. “That’s one of their biggest considerations,” he said, adding that many are looking at the US, Europe and even Southeast Asia.
Family offices, which manage money of the super rich, have been on the rise in Singapore, a bastion of safety in the region. The imposition of the national security law in Hong Kong in 2020 and the city’s closer ties with with the mainland have made wealthy Chinese jittery.
However, from an investment perspective, the laws in Hong Kong are “very good,” said Lee. He’s “very comfortable” being in Hong Kong, he said.
Despite crackdowns on sectors from technology to education in China in recent years, Lee still sees potential in the world’s second-largest economy. “I don’t think China is uninvestible at all,” he said. “China is by far the biggest private equity market in Asia.”
However, growth is slowing from the pace that was seen decades ago.
“In 1998, when I started investing, you could invest in any manufacturing export business with your eyes closed and they’d be growing at 30%,” he said. “Those days are over.”
In terms of investments, Lee says he likes “boring” businesses that have good cash flow and margins and is looking at companies that have pretax earnings of at least $10 million.
Lee left Blue Pool Capital in 2021 and is currently senior adviser at the family office. He’s no longer involved in the day to operations, but still exchanges ideas with the team.
“If I see interesting opportunities I’ll pull them in to talk about a deal,” he said.
Lee worked with Tsai at Investor AB, the main investment vehicle of Sweden’s Wallenberg family in the late 1990s. A Canadian citizen born in Taiwan, Tsai quit a $700,000-a-year job at the investment firm to join Alibaba in 1999 for a monthly salary of $50.
When his former boss left to join Jack Ma at Alibaba, he asked Lee to join too, but Lee declined.
“If I had joined a startup it would be a huge pay cut,” said Lee. “At that time I wasn’t very wealthy, I was basically paying off my student loans.”
After working for larger organizations, Lee says starting his own fund offers fresh challenges. “One of things I haven’t done is be my own boss,” he said. “To me right now at 50, it’s the kind of thing I want to do.”
(Adds Lee’s comments on Hong Kong laws in eighth paragraph)
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