It’s been a turbulent few months for Alibaba founder Jack Ma, ever since the Chinese government abruptly halted the initial public offering of his financial company Ant Group. Some of that turbulence has now spread to Yunfeng Capital, the private equity firm Ma set up in 2010 which has invested in some of China’s fastest-growing companies.

At The Wire, we periodically focus on prominent firms investing in China, introducing them to our readers and mapping their corporate and shareholding structures. So far, we’ve featured Hillhouse Capital, IDG Capital, and 5Y Capital. This time, we take a closer look at Yunfeng Capital, the firm with a reported $7.2 billion of assets under management according to PitchBook and ambitions to be a major player in China’s tech sector.¹A spokesperson for Yunfeng emailed The Wire to say that the figure from Pitchbook is not up-to-date but did not provide a more accurate figure.

A BRIEF HISTORY OF YUNFENG

Jack Ma co-founded Yunfeng more than a decade with David Yu Feng. The two founders gave the firm its name: “Yun” from Ma Yun, and “Feng” from Yu Feng. 

Prior to becoming Yunfeng’s chairman, Yu founded Target Media, an outdoor advertising firm. That company merged with rival Focus Media in 2006 after the latter narrowly pipped it to an IPO. Focus founder Jason Jiang Nanchun later became one of Yunfeng’s original limited partners.

While Yunfeng is not as large as Zhang Lei’s powerhouse firm, Hillhouse Capital, it has bet on some of the country’s hottest startups, including smartphone maker Xiaomi and genome sequencer BGI. (See our March 2021 BGI article, “Jolly Gene Giant”.) In the past, Ma has expressed ambitions for the firm’s assets under management to grow to $100 billion, a moonshot sum that would put it among a small club of global private equity firms including Blackstone, Carlyle Group, and KKR. 

Yet Yunfeng has stakes in several businesses that have suffered from the Chinese government’s recent moves against prominent private enterprises, including Ant and NetEase Cloud Village, another company whose IPO was abruptly put on ice. It’s also set to take a hit on its investment in the ed-tech startup VIPKid, whose business model of hiring overseas tutors to provide after-school education services has all but collapsed with Beijing’s crackdown on private education.

Even before Ma fell out of favor with Beiijng last year, Yunfeng had raised eyebrows over the blurred line between his and its interests, and the resulting potential for conflicts of interest. Alibaba and Yunfeng have invested in companies together; in turn, Alibaba and Ma have both invested in Yunfeng, and Yunfeng has invested in Alibaba and Ant. 

Yunfeng co-founder David Yu said in 2014 that Ma does not sit on its investment committee that signs off on final decisions. And in Alibaba’s SEC filings, Ma says he plans to donate any of his personal earnings from Yunfeng to charity, without claiming tax deductions.²Page 208

Below are some current members of Yunfeng’s management team. 

YUNFENG’S LIMITED PARTNERS

Yunfeng Capital’s limited partners include many people in Jack Ma’s inner circle, as well as several state-owned enterprises, according to data from PitchBook. An archived version of Yunfeng Capital’s old website lists the founding limited partners who made early personal investments in Yunfeng. 

They include:

• Shi Yuzhu, chairman of gaming developer Giant Interactive;
• Jason Jiang Nanchun, founder and CEO of Focus Media;
• Liu Yonghao, chairman of New Hope, China’s biggest animal feed producer;
• Shen Guojun, founder of industrial investment group China Yintai;
• Wang Jianguo, chairman of appliance maker Five Star;
• Zhu Xingliang, chairman of Suzhou Gold Mantis Holdings;
• Wang Zhongjun, then-chairman and CEO of Huayi Brothers Media Co., Ltd.;
• Wang Yusuo, founder of natural gas distributor ENN.

THE BIG DEALS

Since 2010, Yunfeng Capital has invested in some of China’s fastest growing startups and unicorns — privately-held companies worth $1 billion or more. It’s also invested in major Chinese conglomerates: shortly after it raised $1.5 billion for its debut fund, Yunfeng joined a group of investors in acquiring a 5 percent stake in Alibaba for $1.6 billion. Yunfeng has also invested in subsidiaries of Zhang Jindong’s embattled Suning Group, which is now fighting creditors after accumulating a mountain of debt.

INVESTMENT FOCUS: HUAYI BROTHERS MEDIA

Huayi Brothers Media is one of China’s oldest and most influential private film production houses. The studio co-produced hit films such as Kung Fu Hustle (2004), Hollywood hits such as Edge of Seventeen (2016) and Molly’s Game (2017), and The Eight Hundred, a Chinese World War Two movie that was 2020’s top grossing film globally. 

Founded by brothers Wang Zhongjun and Wang Zhonglei in 1994, Huayi has close ties with Jack Ma. Wang Zhongjun was a founding limited partner in Yunfeng Capital. Alibaba and Yunfeng Capital have both invested in the studio. In November 2014, Yunfeng Capital paid an estimated $250 million for an 8 percent stake in Huayi. That stake is now held by Hangzhou Ali Venture, a company jointly owned by Alibaba executives, and Jack Ma personally, according to WireScreen — an illustration of the sometimes close relationship between Yunfeng and other parts of Ma’s business empire.³Notably, China’s other technology giant, Tencent, also invested in Huayi Brothers.

But the studio has struggled financially in recent years. In 2019, Alibaba extended a $103 million loan to Huayi, after the company lost more than half a billion dollars and its CEO stepped down. Despite the financial success of The Eight Hundred, the studio’s fortunes have continued to decline. Chairman Wang Zhongjun stepped down as chairman of the board in March of this year.

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