Whilst Li Lu is not as well known as his good friend, Charlie Munger, his investing track record is even better. Several articles on the net say that he has compounded at 30% per annum over 25 years – see https://medium.
The focus of this entertaining long essay by Eleanor Olcott is Mr Lu’s incredibly interesting life. The essay underscores that for remarkable individuals like Li Lu, investing is just one manifestation of their incredible range of skills and talents. The story starts with Mr Lu’s birth in 1966 in a family of radical intellectuals who were sent to Mao Zedong’s labour camps: “Li spent his childhood bouncing between caretakers and an orphanage. By the age of 10, he’d survived a catastrophic earthquake in Tangshan, which official records show killed 240,000 people, including all the members of Li’s adoptive family.”
We then fast forward to the young Li Lu joining the students at Tiananmen Square for their fateful protests in 1989: “…Li followed the crowd towards Tiananmen Square.
The scale of the square is hard to appreciate without seeing it first-hand. It is so vast that, on a normal day, The Gate of Heavenly Peace appears to sit on the horizon in the far distance. The day Li arrived, it was filling with masses of human beings demanding freedom. Protesters wanted political reform, and some were prepared to starve themselves for it. Demonstrations lasted for months, during which students organised themselves into factions and held leadership elections. Despite not hailing from one of Beijing’s pre-eminent institutions, Li won a seat. He represented the radicals…
Not only did Li not trust authorities to honour a deal, but he always seemed to advocate the most aggressive methods to hold their attention. He played a pivotal role in orchestrating a six-day hunger strike in mid-May which galvanised public sympathy but also provoked the ire of the government.
When protesters’ morale began to sag, Li announced that he and his girlfriend were going to get married in a symbolic public ceremony. In photographs from that day, Li is dressed in a scruffy tank top and boxy aviators, a revolutionary banner hanging skew-whiff around his neck.”
In the wake of the Chinese authorities’ massacre of the students, Mr Lu fled to Hong Kong after being named in list of ‘most wanted’ students by the Chinese police. This remarkable man then sought asylum in USA in 1989 and rebuilt his life: “He learnt English over the course of a summer, before enrolling at Columbia University, where he eventually became one of the first students to simultaneously earn an undergraduate degree in economics and graduate degrees in business and law. In class, his quiet authority and probing questions impressed others. “He was not hampered by deference to the professor like many other students are,” said one former teacher. “You got the sense he was moving somewhere.”… After attending a lecture given by Warren Buffett, Li started investing his student loan in the stock market, making significant returns.”
Most middle-class offspring of affluent parents would be happy to get a job in a Wall Street investment bank after graduating from Columbia. With that job secured they would then rise up the corporate ladder at said investment bank. By now, you and I can guess that that is NOT what Li Lu did: “By the time he graduated in 1996, Li had successfully integrated his student activism with the need to earn a living. He’d become well known among New York A-listers with an interest in human rights, his graduation earning him a short profile in The New Yorker. Wall Street institutions queued up to offer him a job. But within a year, Li opened his own hedge fund instead….It was practically unheard of for a fresh college graduate to strike out on their own, let alone to court high-profile investors such as Jerome Kohlberg, co-founder of the renowned private equity buyout firm KKR. But most graduates didn’t have Li’s life story. The decision to invest with him, Kohlberg told The New York Observer at the time, “wasn’t my usual cautionary thing, but my admiration prevailed”.”
And then followed 25 years of blistering returns in the midst of which Li Lu met Charlie Munger in 2003: “Munger and Li struck up a conversation about stocks and were still talking a few hours later. It was the beginning of a partnership that would last 20 years. “He was a very intelligent, self-confident young man,” says Munger, who is 99 and still vice-chair of Berkshire. “He so liked being a principal instead of being an agent working for somebody else. That was immediately obvious to me and, of course, that’s how I am. So, I naturally had considerable sympathy for him. I tried to get him to work at Berkshire, but I was fighting against nature.””
For more stories of how the two legendary investors got along and made each other incredibly wealthy you should read this superb article in the FT in its entirety.
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Note: The above material is neither investment research, nor financial advice. Marcellus does not seek payment for or business from this publication in any shape or form. The information provided is intended for educational purposes only. Marcellus Investment Managers is regulated by the Securities and Exchange Board of India (SEBI) and is also an FME (Non-Retail) with the International Financial Services Centres Authority (IFSCA) as a provider of Portfolio Management Services. Additionally, Marcellus is also registered with US Securities and Exchange Commission (“US SEC”) as an Investment Advisor.
