​1. What leads Everest's journey? 

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Picture this: 2011, me, a 22-year-old young student in an empty classroom, watching Prof. Robert Shiller's “Financial Markets” Yale open course. That's how I first “met” David Swensen, who was a guest speaker in the lecture.

 

Fast forward to post-graduation, and I dove headfirst into an investment career. After almost seven years of navigating the asset management industry, I've discovered a strong passion for long-term, fundamental-driven investments—my treasure hunt for the next big ideas.

 

But here's the twist: I've also seen the “scale-first” mentality, the 'follow-the-herd' indexing, and the 'short-term' sprint that's particularly rampant in China. It's like everyone's talking about a marathon but is only training for a sprint. Many funds claim that they put investors first and that they are long-term, but their incentive structures often lead to the opposite. It's like they're more focused on filling their own piggy banks with fee income rather than achieving long-term returns for the investors. The interests between LPs and GPs are misaligned. 

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Then, I stumbled upon David Swensen's book, “Pioneering Portfolio Management: An unconventional approach to institutional investment”. It was David's teachings that made me realize the importance of aligning interests with LPs. It's like finding a dance partner who not only shares your rhythm but also your love for the tango. And so, with a spirit of adventure, I embarked on a quest to solve these problems, which led to the birth of Everest Growth Capital.

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2. What does the fund's name mean?

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"Everest Growth Capital". Three simple words: First, "Everest" has two meanings: it refers to Mt. Everest, the peak of peaks and a symbol of my lofty aspirations. Plus, I love mountain trekking, and my start-up epiphany hit me at the Everest Base Camp in Nepal, so it's personal. Next, "Growth" means my focus on growth companies with value investing philosophy. Lastly, "Capital" means the endeavor of compounding capital. 

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3. When was Everest founded? 

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Everest was incorporated in the Cayman Islands on 17th Aug 2021. 

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4. What's the investment strategy?

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The strategy is anchored to three simple principles: 1/ Growth Investing: Everest uses value investing approach on growing businesses; 2/ High Concentration: Everest selectively invests in up to 10 companies. The largest holding currently commands around half of the portfolio. This approach might seem to diverge from the conventional wisdom of diversification, and many LPs may view it as riskier. I disagree. I believe a concentrated approach can actually reduce risk, provided that it increases both the rigor with which Everest analyzes a business and a deep conviction in the economic strengths of the companies we choose to back. 3/ Long-Term Perspective: thinking like a long-term business owners sets us apart from the short-sighted 'stock renters' prevalent in China. This perspective is not just a strategy; it's a competitive edge that we believe is pivotal for sustainable success. 

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5. How is Everest designed? 

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The ultimate goal of Everest's design is full alignment with investors: firstly, I have my entire net worth invested alongside my shareholders. Secondly, Everest's incentive scheme is very carefully designed by using a budget-based management fee and 3-year performance fee above the 8% fixed hurdle. 

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The importance of incentives is always neglected. In Charlie Munger's speech The Psychology of Human Misjudgment, Charlie reflects on how the power of incentives never disappoints him: Well, I think I’ve been in the top 5% of my age cohort all my life in understanding the power of incentives, and all my life I’ve underestimated it. And never a year passes but I get some surprise that pushes my limit a little farther. So incentives are important. 

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Everest's budget-based management fee design is the same as Costco's business model of shared scale economy. Although we are all interested in scale, it must never be done at the expense of Everest's philosophy. Scale must be obtained by better organization design, better investing, emphasis on selling the kind of services I want to buy for myself and my family, having a skin in the game, lower costs, higher operating efficiencies, etc. To put in simpler words, scale should come morally and naturally. For the typical fund managers, they follow a fixed (and mostly are very high) management fee rates and justify it on the basis that they are still "prioritzing" investors' best interests. Unfortunately, this could only lead to a rude awakening in the future. 

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Everest's long-term performance fee design coincides with the fund's long-term lock-up requirement. That makes sure all the investors' attention centers on capital compounding over a long period of time. It then ensures the durability of the capital. We cannot possibly do long-term investing with short-term capital. It's just like building a castle on a sand dune - the faster you build, the quicker it collapses (even when there is mild wind, just like market volatility). Typical hedge funds choose the incentive of charging annual performance fee. However, I believe this incentive design is deeply flawed. This design is definitely good for them - taking money back home every year. But the money taken out should have compounded longer for the investors. Also, by designing a 1-year performance review period, their longest investment horizon is 1-year - at the beginning of each year - may be this is the reason why so many sellsides and buysides like the idea of writing a new year outlook.

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6. What is Everest's competitive advantage? 

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Bill Miller once shared insights with Columbia Business School students about the three key competitive advantages in investing: informational, analytical and behavioral. Informationally, primary sources are important. I've visited major plants of portfolio businesses and even sent interns at one to gain first-hand insights. I love doing diligence in founders’ hometowns (two are hidden in mountains) to assess their integrity. I once discovered a eulogy to an entrepreneur who was pivotal to my portfolio company's founder. Analytically, I commit to reading 500 pages weekly, mostly annual reports. I focus on acquiring knowledge with long shelf life (I recently read reports 50 years ago) and expanding my thinking horizons. Behaviorally, I carefully cultivate habits to enhance focus, such as living in a quiet suburb and checking stock prices only four times a year. Adding to the three advantages, Everest’s unique structure and full alignment with LPs is another tailwind (will be stronger in future). 

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7. Has Everest taken outside capital?

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I secured initial outside capital from three private investors whom I have known for my entire career. The fiduciary duty of stewarding their hard-earned capital represents one of the most significant privileges of my career to date. From inception, I have managed this capital without seeking additional money. It’s important to have and maintain high standards - some LPs were turned down as they didn’t fit. Others didn’t invest in Everest because: 1/ Many have withdrawn from Chinese market after prolonged periods of underperformance; 2/ Some LPs perceive Everest as too small and too un-institutional, preferring larger and more institutionalized firms; 3/ Some view Everest’s concentrated strategy, focusing on 5 to 10 companies, too risky; 4/ Everest’s requirement for a 3-year lock-up is at odds with liquidity preferences of certain investors. 

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8. What kind of LPs is Everest looking for? 

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For future shareholders, I maintain the mindset of only partnering with the right ones with the following qualities: 1/ a long-term mindset: the shareholders must share the long-term mindset with Everest and Everest’s portfolio companies; 2/ a mutual respect for autonomy: autonomy is important for rational investment decision making. Just imagine - the worst thing that can happen to an NBA basketball player is to listen to the crowds when shooting or playing. That will only make the player distracted or nervous. This is the same for me to run Everest as well; 3/ a right value: I am looking for the shareholders who share the value with Everest. I want to work with LPs who have a bigger purpose than simply generating profits. Endowments, foundations and family offices, with meaningful social purposes, are the ideal shareholders that Everest are keen to partner with for the long term.

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9. Is there any outside ownership of Everest? 

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Currently, I am the sole owner of the firm. This will evolve as the firm develops. My vision for the future ownership structure includes two strategic shifts: 1/ Employee empowerment: I plan to distribute ownership to future employees, fostering a culture of shared interests and entrepreneurial spirit. This alignment is essential for nurturing a fiduciary mindset and creativity, which are vital for the firm's enduring success. It's about building a legacy that benefits all stakeholders, not just the founder; 2/ Philanthropic commitment: A portion of the ownership will be dedicated to a philanthropic foundation, focusing on critical social initiatives, such as the education of children in rural areas whose parents work in urban centers. This foundation will be funded by the firm's retained earnings, ensuring that my work not only delivers financial returns but also contributes meaningfully to society. 

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10. What's Everest long-term development plan? 

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Fund's success highly relies on talents. At present, Everest Growth Capital operates as a solo endeavor. I am seeking partners who share my passion and embrace Everest's philosophy. The search for a compatible partner mirrors the quest for a lifelong spouse—ideal in its singularity. I am patient in this pursuit, echoing the ancient Chinese wisdom that a true confidant is a rare gem (知音难觅). I have been fortunate to collaborate closely with an exceptional intern called Zhouzhou Cui for the past two years. I have also worked with a few investors with great potential during their internship in Everest. It is my goal to naturally develop Everest by identifying individuals whom I both admire and trust.  

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Everest's long-term aspiration is to become a valuable fund that will continue to develop the best long-term results, make positive impacts and prosper beyond myself. The key is to adopting an ecosystem mindset. Even though Everest is a one-man-fund now - just like one mountain, its future will be a chain of mountain ranges. How? Everest will develop new talents and incubate new ideas. For example, if there is a new fund's idea that is worth having a try. After careful thoughts, other Everest teammates can lead the new fund. Everest will not only seed it with long-term capital, but also be a shareholder of the new fund. Since a part of Everest's future ownership will be distributed to employees, Everest's employees will also be a shareholder of this new fund, incentivizing them to contribute to the success of the new fund. Unfortunately, the vast majority of the hedge funds have a very closed system, just like a fortress with high walls. Most of the decision making and economics are controlled by the founder. When the founder retires, the fund also disappears. I believe the outcome can be avoided with the right organization design that must be an open, evolving and growing one. ​​​

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11. Why is Everest still invested in China? 

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Indeed, past several years are the most challenging period. Since China came out of the COVID restrictions at the end of 2022, business activities and consumer sentiment haven’t come back. Most people were negative about investing in China. However, I have a different view. First, I believe that economic conditions are cyclical in nature, so things will undoubtedly get better at some point. Second, China is an important player on the global stage, with the world's second-biggest economy, population and equity market. I believe China could remain a growth market with enormous alpha generation opportunities in the long term. Third, during the downturns, instead of getting distracted by external environment, which I cannot control, I have focused on things that I can control, like keeping costs low and honing value investing skills. This is what makes Everest different – Everest dares to chart its own course, even in turbulent times; Everest can withstand the headwinds as long as it is convinced that it is partnering with the right shareholders, investing in the right companies, and on the right path. Everest is like grass - small but resilient. In the storm, many trees will get crushed, but the grass will survive. When the storm leaves, the sun will rise. The grass will thrive. So will Everest.​​