Asset Allocation in Economic Adjustment Cycle, Looking for Certainty in Uncertainty | Recording of DCL Investments 2019 Investors Annual General Meeting
In the cycle of economic adjustment, how to review the situation and tap new investment opportunities to grasp the definite opportunities under market fluctuations is the topic that investors today are most concerned about. The theme of this annual meeting is “Asset Allocation in the Period of Economic Adjustment—Finding Certainty in Uncertainty”, which will gather with top domestic professional investors and well-known guests from financial institutions and academic fields, to share their insights and talk about future perspectives.
President Selina Zheng’s special report
Construct long-term certainty in short-term uncertainty
Ms. Selina Zheng, founder and president of DCL Investments, shared series of efforts made by DCL Investments to build long-term certainty in the business line of fundraising、investments, assets management through this special report, and reported the latest numbers of operating results that DCL Investments achieved in detail.
Distressed asset investment has several particular characteristics such as counter-cyclical, anti-risk, diversified asset types and transparent transaction processes. DCL Investments seizes the trending opportunities of this round of distressed asset outbreaks, nurtures institutional advantages with strong know-how, and formulates a clear strategic layout of future development. DCL Investments consistently stick to the construction of systematic, intelligent, standardized and normalized platform, and will continue to strengthen its own operating system and strive to build a leading domestic asset management platform which focused on distressed asset investment, disposal and operation.
In terms of investment, DCL Investments introduced new mindset(Distressed Investment 2.0) and focused its attention on the upgrading of distressed assets, which is a combination of large volume, liquid bulk acquisition and disposal plus value added core asset holding and operation. The idea is to build a diversified deal source and sustainable high-quality deal pipelines. In terms of asset operation management, DCL Investments integrates industry and regional resources and builds a distressed asset operation management ecological chain combining internal and external resources. In the end, the systematic construction organically combines investment and post-investment, a 1:1 mixed team. At the same time, DCL Investments also pushes forward localized management and the consistency between pre-investment and post-investment. At present, the systematic construction has making lots of achievements. In the past two years, DCL Investments’ post-investment recovery rate has surpassed that of investment.
As the old Chinese saying tells us, the ironsmith must himself be strong for iron work. DCL Investments constantly optimizes its internal organizational structure to maintain a balanced ratio of funds available for investment and team size. Through self-built IT systems and data centers, it can realize the intelligent full-process management and optimize the operation process, and then even further promote the team ’s comprehensive capability.
At the end of the report, Ms. Selina Zheng described the status of DCL Investments. In this complex and moving investment word, DCL will stick to its original will, focus on distressed investment, work hard to solve complicated problems. Through those efforts, we may be the one who is able to go through short-term fluctuations and achieve final success.
Round Table Forum 1
Through the mist of the cycle
This round table focused on the allocation of insurance companies. Seven guests from insurance companies and insurance asset management companies participated in the discussion, reviewing the experience and gains in the past year, and discussing the future direction of insurance companies’ asset allocation.
In addition to fixed-income products, “how can insurance companies find products with liquidity in stable periods and meet current income requirements in alternative investment opportunities”, “how to deal with low interest rate environment”, “how to choose the right equity investment that can be complementary to bond investment, and “how to reduce credit risk and seek more long-term deterministic returns under the same risk attributes” become hot topics in this round table. The guests said that funds managed by DCL Investments have sufficient liquidity during the fund life and have achieved more than 8% of cash yield over the years, providing sustainable positive contributions to the income requirements of insurance companies.
When talking about the post-investment management of insurance investment portfolios, the guests believed that from the perspective of investing in PE funds, the fund manager should actively disclose information to investors. The fund manager should also maintain adequate communication with LPs. This will improve the possibility of obtaining mutual benefits through good cooperation and also create opportunities for further business relationship in the future. But tracing back to the source, the key points of successful post-investment management will go back to the choice of an excellent fund manager before investment.
Round Table Forum 2
Looking for leaders in each specific market
Several well-known FOFs, top university education foundations and Ms. Caroline Song (co-founder of DCL Investments, head of the investment department) participated in this round table discussion and shared their investment ideas and experience in the past year. Besides, they discussed how to find excellent GPs in each specific market.
In the past two years, regarding the performance of PE funds, in addition to IRR, the term DPI has also been frequently mentioned. It indicates that investors are paying more and more attention to the realization of returns and the progress of deal exits. For the discussion of this situation, the guests have said that DPI and IRR are the same important things and they need to consider both. In this regard, Ms. Caroline Song deeply understands, “As a fund manager, you need to learn to be a friend of time. The DPI of DCL special situation fund I has reached 110%, and the comprehensive IRR of the project that has completely exited has always remained above 20%. The data is a strong proof of our pursuit for both satisfactory IRR and DPI. “
When talking about “leading” fund managers, guests pointed out that during the economic downturn, money flows are often concentrated to these “leading” managers. The entire investment industry has entered the status of finding specialty and differentiation. The profit margin of the simple arbitrage model or “chasing hot-spots” model has been greatly narrowed. The investment strategy is the key consideration when the LPs want to find the “leading” managers in specific niche market like DCL Investments, who solely focuses on distressed asset investment. Besides，the “leading” managers need to build a mature and experienced team around the investment strategy and should be able to deal with and solve complex problems.
Round Table Forum 3
Balance between offense and defense: embracing the new normal and new challenges
This round table was composed of large state-owned entities, state-owned investment platforms, banks, and securities companies and Ms. Selina Zheng, president of DCL Investments to discuss the industrial restructuring and M&A opportunities that emerged during the economic fluctuation cycle. In addition, they discussed the secrets of corporate governance.
On one hand, it is currently the period of deep adjustment for traditional industries . On the other hand， various new business forms are emerging one after another. For the current industrial M&A opportunities from industry adjustment, guests said that they will not consider about merge without a clear purpose. Firstly, it is very important to focus on the main business and then select the appropriate target according to the corporate background. For financial institutions such as securities firms, they want to seize the “Cinderella” moment of the target company, and do a complete due diligence of counterparties before M&A.
With the continuous enrichment and diversification of the asset class, all the guests feel deeply that the development of middle-desk could promote the business and help to control risks. Additionally, middle-desk plays an important role in the company’s decision-making. Thus, fund managers should pay absolute attention on it and use technology to build it. Ms. Selina Zheng was deeply touched when she talked about the significance of middle-desk construction on the company’s decision-making level. It also provides a scientific and powerful decision basis for the company’s operation. “
Finally, the round table guests looked forward to 2020 with two “Certainties”, “The cooperation with DCL Investments is certain, and it is certain that DCL Investments will hand in satisfactory answer sheets! “
In the concluding speech of the guests, DCL Investments’ 2019 Annual General Meeting of Investors ended successfully.
DCL Investments 2019 Investors Annual General Meeting Special Moment