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At first glance, the investment strategy of veteran private equity manager Cynthia Zhang appears risky. As founder of recently launched private equity firm FutureX Capital, Zhang plans to make mid-to-late stage investments in promising Chinese tech stars, whose valuations are perhaps the highest in the world. China is home to 137 unicorns, or private companies valued at US$1 billion or more, boasting a combined valuation of US$659 billion. It's a concentration  far greater than in any other nation, including the U.S., according to China Money Network's own China Unicorn Ranking. But Zhang, who formerly headed the private equity arm of China Asset Management Co., Ltd., one of China's largest fund managers, believes that it still makes sense to buy Chinese tech stars at what some might consider exhorbitant valuations to achieve returns of "two or three times of investment in one to two years." For example, Zhang reckons that the valuation of Chinese news recommendation and entertainment content platform Toutiao is "quite reasonable, even cheap," she told China Money Network during an interview at Hong Kong's Cheung Kong Center. She noted that Toutiao has a current valuation of US$20 billion, while recorded revenue of nearly RMB16 billion (US$2.55 billion) in 2017, up from RMB6 billion (US$955 million) in 2016. Baidu, by comparison, has a current market capitalization of US$77 billion, even though Baidu recorded revenue of just RMB13 billion in 2017. As such, Toutiao could be worth a lot more than its current price tag after an initial public offering. Another Chinese tech company Zhang feels bullish about is Xiaomi Inc, the Chinese smartphone and smart device maker. Xiaomi, she predicted, could be a more affordable version of Apple for the world's middle class consumers. Given the potential size of the global market, Zhang estimated that once the company starts to monetize its comprehensive and massive user data and generate revenues from other areas such as gaming, "(Xiaomi) could be worth probably over US$100 billion in two year’s time with potential to climb even higher." FutureX Capital has secured initial investor commitment of US$200 million, and Zhang is looking actively to invest into companies similar to Toutiao and Xiaomi. This investment strategy has worked for her in the past. While at the private equity arm of China Asset Management she and her team invested RMB13 billion (US$2.07 billion) across five funds from 2014 to 2018  into companies like Alibaba Group, Chinese photo touch-up app Meitu, Chinese Groupon-like company Meituan Dianping, ride hailing firm Didi Chuxing and Kingsoft Cloud. Most of these companies, despite large valuations, have seen valuations multiply steadily over the past few years. Read an edited interview Q&A below. Also subscribe to China Money Podcast for free in the iTunes store, or subscribe to our weekly newsletter. Q: Can you give us an overview of your past work and why you started your own fund? A: I started my investment career at one of the largest mutual fund managers in China, China Asset Management, and observed big changes in the investment industry and in our portfolio companies. In 2011, I proposed to expand the company's business into private equity. Over the next five years, we made concentrated investment into ten companies including Alibaba, Meitu, Dianping, Didi, Kingsoft Cloud and others, which have all assumed leading position in their respective industries. Out of those ten companies, we have exited from eight with IRR of over 50%. Q: Coming from a public equity mutual fund background, you must have both a public equity and private equity mindset. Can you tell us a little more about your new fund FutureX Capital and its investment strategy? A: When I founded the private equity business in China Asset Management in 2014, I made a very clear strategy to do mid-to-late stage investment, including PIPE (private investment in public equity),