Nice NYT article about the Liu family, one of China's richest.
I've created a new category for this post, called "Investor-Owner-Operators." Great investors exist along a continuum, call it the "investor/businessman" continuum. At one end are completely passive investors, who are not really businessmen at all. Most hedge fund managers fall into this category. One small step over are so-called activist investors, who try to have some managerial influence over their investments. Then come private equity and venture capital funds, who not only allocate capital to businesses but take an active role in their management via board seats and selecting the operating executives. All the way at the other end of the spectrum are the pure businessmen whom nobody really thinks of as investors at all but in fact are, because capital allocation is part of their job. I've written before that Sam Walton was one of the greatest investors of all time, even though no one calls him that. The point of thinking about it in terms of a continuum is not to say one way is better than another. It's simply to recognize that great investment records--sustained success in allocating and reallocating capital at high returns--are found in various places, and the student of investing unnecessarily limits his universe by defining the term "investor" too narrowly. It's also to underscore the importance of "looking through" in investing. Too often institutional investors forget just how many layers of capital allocation exist (each taking their cut out of the ultimate return) in one investment. An endowment that invests in a hedge fund of funds is really allocating capital to someone (the FoF manager) who in turn is allocating capital to someone (the underlying hedge fund manager) who in turn is allocating capital to someone (company management) who in turn is allocating capital. That's why even the most institutional of institutional investors, in order to succeed, must know something about evaluating businesses.
I place the Liu family into a category in the middle of the continuum, which I call the "investor-owner-operator." I think of this category as the ideal, the perfect melding of all the various functions of a capitalist. Buffett goes in this category, as does Phil Ruffin, whom I recently wrote about. If I were an institutional investor who, like Yale's endowment, allocated capital to external money managers, I would consider investor-owner-operators to be almost a separate asset class. Why pay 2 and 20 to a hedge fund manager to allocate your capital for you when someone like Warren Buffett or Leucadia or Li Ka-shing does exactly the same thing for much less, and often does it much better?