Blue Pool Capital, the Hong Kong-based family office of Alibaba co-founder Joseph Tsai, has not allocated a specific amount for ESG investing because it believes the market is still at a “super early” stage. and is prone to hype and greenwashing, a senior official said on Tuesday.
Concerns about liquidity and market depth also mean that Blue Pool does not, at least for the time being, participate in the listings of special purpose acquisition companies (Spac) in Hong Kong. A new regime for such listings on the Hong Kong Stock Exchange came into effect on January 1.
“If you look at the Spac game today, the honest truth is that Hong Kong is a bit behind the game,” Blue Pool senior adviser Danny Lee said during a panel discussion at the Asian Financial Forum ( DIS).
“I think the United States already has thousands of Spacs of all sizes. So I think it’s an interesting thing that Hong Kong is trying to do, but there’s a lot more liquidity and depth elsewhere in the market. It’s a bit of an oversupply of these Spacs compared to the opportunities. So we probably won’t participate in some of them in the short term,” Lee said.
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Blue Pool Capital
Tsai, co-founder and vice chairman of Alibaba, founded Blue Pool Capital as a family office in 2015 after Alibaba’s IPO in the United States in 2014. He manages much of his fortune from $8 billion, although Bloomberg and Financial Times reported that the company also handles some of Jack Ma’s $40 billion in assets. Lee did not mention Ma’s assets when presenting the company to the AFF.
None of Tsai’s family is involved in the day-to-day operations of Blue Pool. Each manager has professional experience in private equity, private equity and real estate, Lee said.
It primarily focuses on investments in technology, media and telecommunications (TMT), services and the consumer sector, with a small portion of assets in real estate. With the exception of the $3.3 billion purchase of the Brooklyn Nets basketball team and its arena, Barclays Center in New York, most of Blue Pool’s investments are financial investments in funds and companies.
Lee acknowledged that ESG investing is a hot topic in the market, but due to concerns about hype and greenwashing, the firm is still evaluating its approach rather than setting aside a particular allocation.
“We like to focus on thematic areas or technologies that we believe can change the world. So we look at a particular technology and see if it’s worth investing in,” he said. “We try to make sure that when we look at investments, we try to invest in things that actually help people, and not just to invest money in ESG.”
Joe Tsai, Alibaba
Current investments include biomaterials, vertical farming and water technologies.
“We tend to deploy larger trucks in more stable businesses that have good cash flow, but at the same time we also look for what we call ‘moonshots’ – early stage investments in companies that we believe could change the world in the next 10, 20 years. So we also selectively invest in start-ups,” Lee said at the event.
Lee worked for Tsai in private equity at Investor AB, an investment arm of the Swedish Wallenberg family, in 1998 before Tsai launched Alibaba with Ma. Noting that private equity is in his DNA, Lee said that Blue Pool invests across the full spectrum of private equity, from venture capital, growth capital to buyouts, participating in transactions in the United States, Europe and China.
The company is willing to take longer-term risks for higher returns. For example, he participates in buyouts in the United States and prefers writing bigger checks because it’s easier to operate given the small size of the team, Lee said, without disclosing the actual size.
Unlike other family offices, Blue Pool prefers to find its own deals and do extensive due diligence. Site visits and reference calls are also important to its investment process and it commissions professional firms to check management’s background to ensure a company is worth investing in.
He also works with an experienced and upgradable GP in the US to seek investment in tech companies and get help evaluating technologies.
Lee believes Blue Pool’s small size relative to private equity firms gives it a competitive advantage in making decisions and executing deals, especially for late-stage funds. But he doesn’t like to participate in auctions, because they are not to the advantage of the company compared to the big companies, and the prices tend to be high.
According to Lee, prices are generally higher in the private sector than in the public sector right now, especially for Chinese companies.
“I think it was also difficult for us. We have to remain very disciplined to deploy capital and invest it in the right companies at the right price,” he said.
A fully professional family office means that Blue Pool feels the pain of having to compete with large corporations to attract and retain talent. The pandemic has also not helped bring in good people from the Chinese mainland or overseas.
“It puts a lot of pressure on hiring, and we are also – I think like other family offices – growing, so we need more people to join the team. That has been the biggest challenge” , said Lee.