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How Women Won a Leading Role in China Venture Capital Industry

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How Women Won a Leading Role in China Venture Capital Industry
My thanks to a subscriber for this fascinating article by Shai Oster and Selina Wang for Bloomberg.  Here is the opening:

The largest venture capital fund ever raised by a woman isn’t in Silicon Valley or even the U.S. It's in Beijing and is run by a former librarian who keeps such a low profile that she’s a mystery in her native China. Chen Xiaohong rarely attends industry conferences or events. She hadn’t given a media interview in more than a decade until agreeing to break her silence this summer. “I don’t like being part of a club,” said Chen during a four-hour discussion at her firm's headquarters. “I believe in staying independent, making your own decisions.”
Chen, 46, is part of an unusual group of female investors who have risen to the top of the venture business in China and helped fuel the country’s technology boom. They’ve backed some of China's most successful startups and their influence is growing as they raise more money, recruit other women and seed the next generation of technology companies.
Chen and her peers have become part of the mainstream in China in a way that's proven elusive in the U.S. American venture firms have faced accusations of sexism and discrimination for years, including in an unsuccessful lawsuit filed by a female partner against storied Kleiner Perkins Caufield & Byers. Despite the criticism, the firms have made little progress in promoting women. Among the top U.S. venture firms, women make up about 10 percent of the investing partners and only half of the firms have any women of that rank. China is already more balanced: About 17 percent of investing partners are female and 80 percent have at least one woman.
An increasing number, like Chen, lead their firms. Kathy Xu is founder of Shanghai's Capital Today Group, which has $1.2 billion under management and was an early backer of the e-commerce company JD.com Inc. Anna Fang is CEO of ZhenFund, one of the most influential angel investors in China. Ruby Lu, Chen’s partner at her firm H Capital until this month, previously co-founded the China business for DCM Ventures.
Their success is bringing more women into China's technology industry. The Chinese government estimates females found 55 percent of new Internet companies and more than a quarter of all entrepreneurs are women. In the U.S., only 22 percent of startups have one or more women on their founding teams, according to research by Vivek Wadhwa and Farai Chideya for their book ‘Innovating Women: The Changing Face of Technology.’
Chen and her colleagues are building on a tradition of opportunity for women in China that dates back to before the days when Mao Zedong declared they held up “half the sky.” Women worked out of necessity in fields and factories when the country was poor, and fought alongside men during the country's civil war. By comparison, collaborating in an office is simple. Lu’s mother, who served in the People’s Liberation Army, laughed when she heard about her daughter’s diversity training at Goldman Sachs Group Inc. “She said ‘That’s ridiculous. What’s your job got to do with women or men?’ ”
The country is hardly free from discrimination. Men still hold most positions of power in politics and business, and there's plenty of crude sexism in technology. But China has quietly become one of the best places in the world for women venture capitalists and entrepreneurs. Chen raised a new $500 million fund, the biggest ever by a woman, according to Preqin, and increased her assets under management to about $1 billion. The largest women-led fund in the U.S. was about half that size, according to Preqin’s data.
“China is fundamentally different,” said Gary Rieschel, an American who founded the China-based Qiming Venture Partners, where four of the nine investing partners are female. “The venture capital industry in the U.S. has been a private men’s club. It has been much more of a meritocracy for women in China.”



David Fuller's view
This speaks well for China and its long-term economic potential – an important point given its current problems in the transition from a predominantly manufacturing based developing economy, to the developed economic model led by consumer industries.
Veteran subscribers may recall my comments over the years that one could predict the long-term potential of economies by the emancipation of their women.  After all, they hold up “half the sky”, which is surely one of Chairman Mao’s more sensible quotes.
Countries which subjugate their women, no matter how it is rationalised, are invariably hampering their economic and social development.  It should be an obvious point as women are half the population and educated women have the additional advantage of emotional intelligence.
How will China resolve its current economic problems?
This item continues in the Subscriber’s Area.  

 



Theresa May has Called a Wall Street Summit to Reassure US Banking Giants in the Aftermath of Brexit
Here is the opening of this topical article by Mark Sands for City A.M:

Prime Minister Theresa May is to go on a charm offensive with US banks, holding a summit with some of the biggest institutions in a bid to reassure them over potential repercussions of Britain's vote to leave the EU.
Wall Street heavyweights invited to attend the special summit later today include JP Morgan Chase investment banking chief executive Daniel Pinto, Blackrock chief executive Larry Fink, Goldman Sachs chief financial officer Harvey Schwartz and Morgan Stanley president Colm Kelleher.
It is understood that the American executives want assurances that the rights of their employees based in Britain will be protected once the UK leaves the EU.
The prime minister, who is attending the United Nations General Assembly in New York, has sought to meet them amid concerns that they could be preparing to move their European headquarters out of the UK in the wake of the Brexit vote.
She has also invited the likes of technology behemoths Amazon and IBM, as well as bosses from engineering firms Aecom and United Technologies, and Sony Pictures. Several of these firms are currently engaged in large inward investment into the UK.
The meeting will represent the government's first major interaction with US investors since May came to office earlier this summer.
As well as seeking to reassure the Wall Street giants, May is holding a trade and investment event where she is hoping to encourage around 60 “current and expanding” firms to boost their investment in the UK.
Foreign secretary Boris Johnson is also expected to hold a meeting with business representatives on Wednesday.
Tonight, May also addressed the United Nations General Assembly, where she sought to build a global consensus on measures to tackle human trafficking, as well as entering talks on migration where she defended the right to limit the movement of people.
"We need to be clear that all countries have the right to control their borders and protect their citizens and be equally clear that countries have a duty to manage their borders to reduce onward flows of illegal and uncontrolled migration," May said.



David Fuller's view
This is very positive, essential work by the PM, not least as only she can really speak for Britain today.  I am sure she will be effective.
Theresa May also has the intelligence and strength of character to negotiate effectively with the EU.  Unlike her predecessor, the message will not be a version of: I want to stay in the EU but please give me some concessions so that I can gain support at home.   
Instead, I think she will make it very clear that Britain will accept nothing less than favourable terms for Brexit, which will also be in the EU’s interests.  This will only be considered if Angela Merkel understands that the UK is prepared to walk away from the European single market, without further negotiations or delay. 
Behind Europe’s angry bluster, the reality is that the EU needs the UK more than the UK needs the EU.  Mrs Merkel will lose further political support if German businesses find that they have to renegotiate trade terms with a UK that has already withdrawn from the EU.  Nevertheless, she may decide to accept this risk, if only for the sake of consistency, knowing that she is near the end of her career.
The biggest risk for the UK, including the Conservative Party, would be the unproductive masochism of a tortuous and expensive multi-year negotiation, with a destructive organisation determined to deter others from abandoning its sinking ship. 

 



Email of the day
On the EU and Islam:
From your comment yesterday: “The EU is a club which European democracies can join, but apparently not leave of their own free will when the rules change, as they certainly have.”
It just struck me that this is similar to Islam in that you are encouraged to join, required not to question and to subsume personal freedom to the will of the Almighty and woe be onto him who turns to apostasy. Little wonder they are welcoming in millions of Middle Eastern migrants with wide open arms.



David Fuller's view
Thanks for your original comparison, which is certain to amuse and appal subscribers, as it did for me.  



The Markets Now
Here is the new brochure for our next meeting at The Caledonian Club on Monday evening, 10th October 2016. 




David Fuller's view
I look forward to seeing another friendly and interesting group of subscribers, at this event, and bring along any spouses, relatives or colleagues who would enjoy an evening in the genteel Caledonian Club.  These are unusual times in the markets so we should also have some interesting discussions, not least over refreshments following the three presentations. 

 



Banks Are Now Too Scared to Even Make Money
This article by James Mackintosh for the Wall Street Journal may be of interest to subscribers. Here is a section:
In both cases, those shifting money across borders want to avoid foreign exchange risk, so they hedge using basis swaps. These involve swapping yen or euros in exchange for dollars, which will be swapped back at the end of the contract at the forward rate, typically a year or more later. Meanwhile they pay each other interest at the Libor rate for their currency, plus (or minus) the basis, which moves with demand.

Without banks willing to take the other side of the trade, the basis has blown out to levels usually only seen when the financial system is in meltdown, as in 2008-9 after Lehman or in 2011-2 as the euro seemed to be failing.

Most investors care as much about basis swaps as they do about cash-settled butter futures, but the shifts in the basis have already had highly visible effects. U.S. companies now have little reason to issue bonds in euros, because the basis cost has risen so much it almost entirely offsets the benefit of issuing at a lower yield in Europe. Japanese investors have no reason to buy U.S. Treasurys, as the extra yield they earn would all be eaten up by the basis when they hedge.

In short, the world’s banks aren't doing what they should be doing to grease the flows of money between countries. They’re too regulated and too scared of the risks, slight as those are.

We should welcome the fact that banks now try to price such risks, rather than the precrisis practice of simply ignoring them, but perhaps they are going too far the other way.



Eoin Treacy's view
The reorientation of the money markets funds sector due to take place on October 14th has been a contributing factor in the uptick in LIBOR rates seen over the last couple of months. As the above article highlights it is not the only factor.

Cross Currency Basis Swaps represent one of the most expedient ways of hedging currency exposure to interest rates and therefore are a hedged carry trade. LIBOR rates breaking out may be considered one of the unintended consequences of negative interest rates.
 

 



Tesla Wins Massive Contract to Help Power the California Grid
This article by Tom Randall for Bloomberg may be of interest to subscribers. Here is a section:
Tesla Motors Inc. will supply 20 megawatts (80 megawatt-hours) of energy storage to Southern California Edison as part of a wider effort to prevent blackouts by replacing fossil-fuel electricity generation with lithium-ion batteries. Tesla's contribution is enough to power about 2,500 homes for a full day, the company said in a blog post on Thursday. But the real significance of the deal is the speed with which lithium-ion battery packs are being deployed.

"The storage is being procured in a record time frame," months instead of years, said Yayoi Sekine, a battery analyst at Bloomberg New Energy Finance. "It highlights the maturity of advanced technologies like energy storage to be contracted as a reliable resource in an emergency situation."



Eoin Treacy's view
Tesla is essentially a battery company which also happens to produce electric cars. It has been my argument for quite some time that the only way solar can achieve grid parity is if it is used in conjunction with batteries. As long as solar power is subject to intermittency which forces utilities to maintain excess capacity it will not be taken seriously as a viable alternative to fossil fuels.

 



Performance and valuations of junior gold companies
Thanks to a subscriber for this report from RBC which may be of interest. Here is a section:
As shown in Exhibit 1, the GDXJ index of smaller cap gold companies (up 129% YTD) is holding near highs of the year despite a recent pull back in the gold price, and since May has outperformed the GDX index of larger cap names, which has risen by 89% YTD. Similarly, junior gold companies we track are currently trading at an average EV/oz valuation of $64/oz versus the YTD high of $74/oz seen in mid- August, the highest level since the $70/oz observed in 2011 and well above the $20–30/oz range of the 2013–2015 trough (Exhibit 2). We believe these valuations are in part due to a scarcity of higher quality gold projects, and we would expect a pick-up in M&A activity and the junior gold companies to continue to post strong relative returns during the remainder of 2016.



Eoin Treacy's view
A link to the full report is posted in the Subscriber's Area.

Precious metal prices have been confined to a reaction and consolidation, of this year’s impressive early gains, for the last few months with many instruments having already completed reversions to the mean. With the Fed and BoJ meetings tomorrow it is reasonable that investors are not rushing to initiate long positions with so much debate about what exactly central banks have planned and the headwind higher rates would pose for precious metal related instruments.

 



The Andalusian 2016 World Cup




Eoin Treacy's view
This event showcasing the skill and grace of Lusitanos (Iberian horses) in a display of working equitation at South Point in Las Vegas takes place on the 23rd. If you would like to attend this event, as my  and Nevada Trust Company’s guest please RSVP to [email protected]



The Chart Seminar 2016
We are pleased to confirm two venues for The Chart Seminar in 2016.




Eoin Treacy's view
We are pleased to confirm two venues for The Chart Seminar in 2016.

The first will be in London on November 24th and 25th. We will be working with a partner to co-promote the event and expect a full house (we cap the event at 50). The Radisson Blu Edwardian Vanderbilt on Cromwell Road will be the venue for the seminar. 

If you are interested in securing your place please contact Sarah Barnes at [email protected]

The full rate for The Chart Seminar is £1799 + VAT. (Please note US, Australian and Asian delegates, as non EU residents are not liable for VAT). Subscribers are offered a discounted rate of £850. Anyone booking more than one place can also avail of the £850 rate for the second and subsequent delegates.

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