August 18, 2014 01:00 By Suwatchai Songwanich
Fosun Group isn't as famous as Berkshire Hathaway, Warren Buffet's exemplary investment company, but one day it might be. China's biggest private-sector conglomerate has spent 20 years successfully spotting trends in China's economy, taking strategic stak
Its recent investment focus on consumer brands and insurance reflects China’s shift to domestic consumption rather than export-led growth, and also the rapid ageing of the country’s population.
Fosun was founded in 1992 by four graduates of Shanghai’s Fudan University, who started by applying their quantitative skills to market research.
In its early years, it was more of an industrial company than an investment firm.
Its first big venture was in the health sector, starting with diagnostic kits and then moving into pharmaceutical wholesaling when the market was opened to private firms.
When private firms were allowed into the property business, Fosun established one of China’s biggest developers, Forte. And in the 2000s, when there was a boom in heavy industry, Fosun started one of China’s largest steelmakers, and one of its largest miners of gold and iron ore.
Now, Fosun is determined to transform itself into an insurance-oriented financial firm, following Berkshire Hathaway’s example of using “float” money generated from premiums to pay for long-term investments.
Already Fosun has formed a joint venture in China with US company Prudential Financial, and is pursuing LIG, a South Korean insurer.
Listed on the Hong Kong Stock Exchange, Fosun is also investing heavily in consumer brands, riding the swelling tide of middle-class Chinese consumers.
It has taken stakes in international companies and introduced them to the Chinese market. These include Club Med of France; South Africa’s water-themed amusement park, Atlantis; fashion brands from Greece, Italy and the US; an Israeli cosmetic-surgery company; and Secret Recipe, a Southeast Asian lifestyle restaurant chain. In July alone, Fosun announced investments in a Spanish ham, wine and spirits company; a Shanghai film producer; and a German fashion brand.
Company co-founder and chairman Guo Guangchang makes no bones about his desire to emulate Warren Buffett.
In large part, this involves taking stakes in long-term stable businesses. The challenge is finding the right ones.
Given China’s growing middle class and elderly population, Fosun’s latest focus might persist for some time.