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North Oakridge Investment Fund
August 2016
• Team
• Opportunities in the New Chinese Economy
• About North Oakridge Investment Fund
Contents
5 years of consulting experience with A.T. Kearney and the Boston Consulting Group
• Strategy development, organization optimization and operation improvement
8 years of experience in VC/PE with SAIF Partners (over $3.5 billion AUM) and CAIIF ($700 million AUM) in China
• Invested over $400 millions in 20 VC/private equity deals. Evaluated thousands of investment opportunities in a broad range of industries in China
• Achieved superior investment returns: 40X for Perfect World (NASDAQ: PWRD); over 150X for 58.com (NSE: WUBA); 6X for TQM (SZ: 002510);18X for SaishengPharma (SZ:300485); Dozens of trade sales exits /IPO pipelines, including WSH, Jinyuan Organic, Maike Metal, Ganli Pharma, ZTEsoft, Jingcheng Machinery, and Xumei Potato
Venture Partner of SAIF Partners
Founder of North Oakridge Capital
Director of M. Y. Capital Management Corp
Registered Portfolio Manager in Canada;
CFA Charter holder since 2006
M.B.A., Harvard Business School; B.A. Economics, Peking University
Portfolio Manager - Eric Xu, CFA, MBA
3 years of management consulting experience with McKinsey&Co.
• Strategy development, organization optimization and operation improvement
4 years of experience with Apple Asia, senior manager in charge of regional retail development
• Developed and managed an extensive retail network across China
Founder & Chairperson of Beijing L.T.H.Y Technology Ltd.
• Owner of 20 premium Apple stores in China
• Hands-on experience on running start-up company
Chief Operating Officer of North Oakridge Capital
Partner of M.Y. Capital Corp
M.B.A., Harvard Business School
M.A. Economics, Peking University
B.A. Economics, Peking University
Operation - Alice Hong, MBA, M.A.
10 years of experience with Vancouver-based Genus Capital Management Inc. (over $1 billion AUM)
• Extensive investment management experience in equity trading, research, portfolio management and compliance
• Compliance officer of Genus Capital
• Actively managed over $1 billion assets under the Genus Canadian equity and global equity strategies.
Winner of AIMA Canada Investment Research Paper Award (2012)
Registered Portfolio Manager in Canada
Director and President of M.Y. Capital Management Corp
CFA Charter holder since 2006
M.Sc. Finance, University of British Columbia
M.A. Economics, University of Windsor
B.A. Economics, Peking University
Regular contributor with BNN, Reuter news and Bloomberg
Compliance (Canada) - Marcus Xu, CFA, M.Sc., M.A.
• Team
• Opportunities in the New Chinese Economy
• About North Oakridge Investment Fund
Contents
Chinese economy is facing many challenges
Rising debt Real estate bubble
Bad debt in banksCurrency Depreciation
Industrial pollution
Excess capacity
Is the Chinese economy heading for
a collapse?
The fear of a China crisis drags down equity valuations
Hang Seng China Enterprises Index – Trailing P/E
Source: Bloomberg
A holistic view is critical to understanding the Chinese economy
We believe that there is unlikely to be a systematic crisis in the near future
A strong national balance sheet• Net assets/total assets is well above
50%*, especially for government and consumer sectors
• Banking system’s capital adequacy ratio and provision coverage ratio is 13% and 181% respectively
China’s government has plenty of financial capacities to weather a crisis
Financial system is in good shape
Key Factors Implications
Huge potential for consumer sectors• A fast expanding and hardworking
middle class• About 50% gross saving rate• Spending level is still very low
Fast growing domestic consumption will become a major growth engine for Chinese economy in next decade
A strong and efficient government• An authoritarian government means
efficiency when implementing right policies
• A capable bureaucratic system• Good track record of self-adjustment
Continuous economic reforms will ensure gradual transition from investment/export driven growth to consumption driven growth
Note: *China National Balance Sheet 2015, Leverage and Risk Management
China’s rising middle class is still a small proportion of the population today
China’s middle class: at top of the pyramid and only 11% of the population
US middle class: in the middle and most important
Source: China NBS, US IRS, Goldman Sachs Global Investment Research
Average consumer expenditure is low, and the average consumer basket is different from those in more developed world
0%
20%
40%
60%
80%
100%
China Korea Japan US
Per Capita Consumption allocation in 2013
Others
Healthcare
Having Fun
Mobility/connectivity
Better Home
Eating better
Looking more beautiful
100%= $2,506 $12,439 $22,876 $35,576
Huge growth potential and significant changes ahead
Source: Euromonitors, CEIC, Goldman Sachs Global Investment Research
Consumer sectors have seen robust growth and will be China’s growth engines
Consumer sectors keep double digit growth in past several years, even though overall economic slowdown since 2011
• Contribution to GDP increase from lower 40% to over 50%, vs over 80% in US
China has the highest gross saving rate (~50%) in the world, and consumers confidence largely unchanged in recent years
• 55% of consumer were confident their incomes would increase significantly over the next 5 years, a mere 2% drop from 2012*
E-commerce, leisure travel/tourism,, entertainment, education, healthcare and finance sectors will continue to see robust growth
• Many new sector leaders are merging and strengthening their position to enjoy high revenue/profit growth
• Some world class players are expanding their global presence
Source: * McKinsey 2016 China Consumer Report
When most people fear, visionary investors invest
• Team
• Opportunities in the New Chinese Economy
• About North Oakridge Investment Fund
Contents
Investment target: Achieve capital appreciation over mid to long term (3-5years) investment horizon
Long
• Chinese companies with strong growth potential, promising business model, superior management and reasonable valuation
Short
• Companies with overstated earnings or flawed business plans or unstainable high valuation
• Companies in structurally weakening sectors or losing competitiveness
Take a private equity approach to making investigative research
• Identify opportunities based on through and proprietary due diligence
• Bet on mega trends/great management
Fund strategy
Universe: Stocks listed in public stock exchanges, mostly in U.S. and HK, 15~20 positions; companies with significant business exposure in China
Style diversification: Large-cap 40~60%, Mid-cap 20~30%, Small growth 10~20%
Sector focus: Technology/internet, consumer, healthcare, and industrial
Regions: Chinese technology/Internet/consumer companies (70~80%), others (10~20%)
Exposure: No target hedge ratio; Opportunistic on short side and limited leverage
Portfolio overview
Focus on fundamentals
• An intimate understanding of company essentials
• Strong sense of intrinsic value
• Investigative research
Take long-term perspective
• Big picture on mega trends
• Superior management/entrepreneur
Control risk
• Margin of safety, avoidance of overpaying
• Exposure limit on single stock
• Asymmetric bet: upside potential vs downside risk
Think independently
• Market consensus vs. “second level” thinking
• Contrarian investment – greed and fear
Investment philosophy
Investment process
Idea Generation Investigative ResearchPortfolio Construction
and Optimization
• Talking with industry experts, entrepreneurs and local investors
• Extensive reading of Industry reports, news, articles and blogs
• Forum, seminar and industry events
• Stock screening based on quantitative criteria on Bloomberg
• Analyst research reports
• Interviews with industry expert, suppliers, customers, and competitors
• Leveraging Big Data to track target company’s operational parameters
• Company and its competitor's prospectus, 20F, earning release, earnings calls, conference transcript
• Sell side analyst reports to understand market consensus
• Financial modeling based on own assumptions
• Waiting for good timing to add/reduce positions
• Balancing weight on sector, region and single stock
• Monitoring and reviewing – detect changes early
• Comprehensive track of company’s operating performance by leveraging big data technology
Get insights through in-depth primary research and rigorous analysis
Portfolio risk
• Continuous and rigorous due-diligence, frequent onsite visits and check with management
• First hand interactions with industry expert, customer, supplier and competitors
• Leveraging big data technology to monitor key operating parameters
• 15% single position limit
• Avoidance of high leverage and pay attention to liquidity
Operation risk
• Best practice on back-office operations including trading, settling, compliance, administration and internal control
• Working with the best service providers
• High transparency to investors
Risk management
Savvy team with proven investment track records
• Hundred millions of investment in private equity/VC deals that achieved superior returns; enormous lessons learned and acute business sense developed from past successes and failures
• Great academic and professional credentials; a high-caliber team with integrity, diligence, and the highest ethical standards
Real China insights
• Insightful view on China business dynamics based on deep understanding of Chinese history, culture, politics and economy
• Extensive connection with entrepreneurs, investors, industry experts and regulators in China
Extensive capital market knowledge / fund management capability
• Deep understanding of hedge fund investment /operation
• Good knowledge on global capital market
Our competitive edge
Professional fund setup
Investors
Lawyer
Fund Manager
North Oakridge
Capital
Trading Instruction
NAV calculation and report
North Oakridge Investment Fund
Fund Administrator
Prime Broker
Performance tracking
M.Y. Capital Management*
Portfolio Manager
The Fund
Fund Audit
Auditor
Legal Services
Note: * A licensed asset management firm in Canada
Order execution
Invest
The Fund’s track record since inception
Note: Return for Series A Class shares; Audited results prior to 2016.
Cumulative Return
2.8%4.8% 5.0%
1.9%4.9%
7.4%
-8.9%
15.0%10.4%
13.9%
39.1%
-10%
0%
10%
20%
30%
40%
50%
May-14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Aug-16
Key investment terms
Legal structure Limited Company
Management fee 2% per annum*
Performance fee 20% (high water mark)*
Redemption Quarterly
Lock-up period 1 year
Minimum investment US $1,000,000
Note: * 1% management fee, and 15% performance fee for investment over USD5,000,000 OR 3 years lock up period
1-778-988-2013 (Canada)
86-136-0122-4670 (China)
Bloomberg ID: NOIFUND KY
www.northoakridge.com
North Oakridge Capital Ltd.
Contact
M.Y. Capital Management Corp.
Suite 701, 1055 West Broadway
Vancouver, BC V6H 1E2
1-604-559-6780
www.mycmcorp.com
Disclaimer
All the contents in this presentation is for display and information purposeonly, the presenters and the presenters firms hereby acknowledge that none ofthe data or contents provided in this presentation constitute all or part of anyfund unit sales or distribution documents such as offering memorandum,subscription agreement or prospectus. Past performance does not guaranteesame or similar future results. The presenters and the presenters firm reserveall legal rights to retrieve or modify any information hereby provided and willnot assume any legal responsibility shall anyone acts or trades based onhis/her own interpretation of the information provided. This is not asolicitation of trades or purchase or sales. Any individual or entity interestedin the material or information provided shall contact the presenter’s or theirown professional advisors for further details. Any individual or entityinterested shall also seek their own legal, tax, accounting and all necessaryadvices pertaining the information provided in this presentation.
