From: China investment
Compiler: http://www.fundcn.org

Private equity funds as capital has Holdings seamless integration of functions, unprecedented huge market demand. Listed in the high threshold of financing, banking and financial functions heavy burden, Private equity funds abroad could endanger the country’s economic security conditions, to expedite the development of China’s own Private equity funds have a team of state.

May 22, China will soon set up a national foreign investment companies that invest three billion U.S. dollars to buy U.S. Heishi Group of non-voting equity units. As preparations for the country’s foreign exchange investment company first T investment, which will become the Bohai Fund, yet another state-owned capital poured into the Private equity funds case.

If we say that the Bohai Sea has also raised funds with the policy guidance, then the current state capital Private equity investment fund it is entirely a “commercial activity” and has unusual significance.

Large amounts of funds to private placement equity fund so much, but at present, there is no domestic regulation a specialized state capital Private equity investment fund legal norms. What capital can enter Private equity funds? The state-owned capital to choose a manager? These Private equity funds related regulatory issues once again become the focus.

“The government funds, whether funds to state-owned enterprises into private placement equity fund? have much input ratio? state capital evaluation and selection of qualified management the procedure should be in place to regulate? “Ding Hui Wang Shu-venture partner, regulations on these issues should be made clear explanations.

Regulatory policy system

Carefully sorted out right Private equity fund policy will find that Although China has tabled a number of scattered Private equity funds against the content of each of the regulations, and policies, but so far, still not a specialized comprehensively regulate its code of conduct regulations.

1995, the former State Development Planning Commission, the Finance Division has begun research and development of China’s industrial investment funds. The same year, the approval of the State Council promulgated the “established outside China Industry Investment Fund Management.” This is on China’s industrial investment funds of a national regulations.

2005, the State Development and Reform Commission joint 10 ministries jointly promulgated the “Venture Capital Enterprise Management Interim Measures” Private right of the Venture Capital Fund of norms. “Venture Capital Enterprise Management” Interim Procedures for filing a venture investment company with some policy support. , The relevant departments in the country’s medium - and long-term technology planning and supporting documents, further defined the promotion of China’s venture investment and development policies.

In addition, the State Development and Reform Commission and the Ministry of Finance will jointly research and design a “State of Venture Capital Fund program guide.” State Development and Reform Commission deputy director of finance, Guo told the military disclosed that at present, Merger has been on the “promotion of venture capital funds norms to guide the establishment and operation of the guidance” to reach a consensus and formed a draft guidance. The document is the State of Venture Capital Fund of principle guiding document.

Recently, the “Partnership Enterprise Law” issued a revised version, the central bank vice governor Wu Xiaoling said, This matter is of Private equity funds of great significance.

Some people in the industry think, in fact, at present China has laws and regulations do not exist for the development of Private equity funds obstacles. SDRC financial deputy director Cao Lian said : “Trust Law,” and the promulgation of the “Company Law” “Securities Act” and the recent amendments to the “Partnership Enterprise Law” amendment basically eliminates the various Private equity funds and the establishment of industrial investment funds and the operation of the legal obstacles.

Private equity funds obstacles disappear, but right Private equity fund management are still missing.

Under the new amendment “Securities Act” and the “Company Law”, 200 people will be following the establishment of Private Fund. According to the “Partnership Enterprise Law,” can be set below the 50 Private Funds It should be said that the Private Fund has been established with a legal basis. However, the private placement equity fund specific implementation methods, the State Council also needs to formulate specific methods management, This is the current Private equity funds need to be addressed policy issues.

Bohai Sea Fund as an example, the financial head of the Beijing University Xiao Feng pointed out : Bohai Sea industrial investment funds has pushed China’s industrial investment fund, However, it does not as our future industrial investment funds to promote the development of the model One of the reasons is that its procedures unreasonable. It is to raise funds, and then look for managers, making fund investors bear the risk of uncertainty.

Against a similar situation, China still needs a special “special laws” Private equity funds to conduct an all-out link in the regulation. If not, “Private equity fund special law” is the result, on the one hand, wait for the sunshine of a large number of private equity funds will be in an unsafe worried that the inefficient operation; the other hand, Private equity funds spread risk also will be inevitable.

The latest news is the beginning of the year, “the fund management industry” has been with the draft, and the Spring Festival reported regulatory department, is now in the State Council’s Legislative Affairs Office and the communication process.

Mechanism identified

Private equity funds generally refers to invest in unlisted enterprises equity funds. China’s special conditions, based on the private ownership of the subject as taboo, generally known as industrial investment funds.

Generalized of private equity funds, including : Venture Capital (VentureCapital) Development capital (Capital Development), Growth Fund (Growth-Oriented Fund). Merger Fund (buyout / Buyin Fund). After the issuance of private placement of listed investments (Public Private InvestmentIn Equit y), especially mergers and acquisitions listed (SPAC), the publicly listed alternative (APO), Business Development Fund (Business Development Corporation) and movable property investment trusts (REITs).

1992 launch of the “Zibo Fund” can be called is first Chinese Private equity funds. At that time, similar in nature with a total fund dozens. Due to lack of supervision, a Chinese investment fund resources credibility damaged, and the state has taken to close the generation optimization method, China’s industrial investment funds showed a flash in the pan fate. In this context, the active for a long time in China of private equity fund should only foreign investment, but deals mostly offshore.

“Industry Investment Fund names can easily lead to misunderstanding and misinformation”, Mr Xiao-feng, It’s very easy for people to the industry and national policy linked. Although Private equity funds are not used to exclude cooperation and support for the country’s industrial policy, but its ultimate direction of the investment should be decided by the market. If the domestic unity to “Private equity fund” of the title. will be conducive to weakening industrial investment funds from the government to enlarge participation in the functional effects.

In addition, industrial investment funds of the title is likely to have a misunderstanding : the Fund’s investment direction is confined to a particular industry. In fact, Private equity funds one of the most important features is to spread the investment. Industry Investment Fund if called for Private equity funds, will reduce the number of people to invest in a particular industry binding.

Therefore, the name will be Private equity funds for the development of a good environment. Private equity funds and the development of China’s state-owned preserve and increase capital appreciation, independent innovation corporate finance is a very good channel.

“On the one hand, China’s own funds, very strong, but have not a good investment, and exports, and on the other hand, various sectors of the growing demand for funds, such as transportation, energy, environmental protection industry in the development of urgently needed financial support. Under such circumstances, Private equity funds which can provide a very good commercial mechanism ” Ding Hui venture investment fund partner Wang Shu “investment” said.

In recent years, China’s financial market of private equity fund development to a climax again period. Venture investment development and the trust funds set project, a special grant of Sino-Swedish industrial investment funds. than direct equity investment fund, and other means of exploration, the need for Private equity funds repositioning and regulations. Especially early Bohai Industry Investment Fund was established, how it will develop, Private equity fund regulatory issues facing the government agenda.

Xiao Feng said that Private equity funds with capital and Enterprise Seamless integration of functions, unprecedented huge market demand. Listed in the current domestic high threshold of financing, banking and financial functions heavy burden, Private equity funds abroad could endanger the country’s economic security conditions, China’s own development as soon as possible of private equity funds has reached a delay.

Regulatory principles

The past, China Private equity fund market in the development of many emerging problems, the key lies in the government functions and entered a misunderstanding. Xiao Feng noted that in the past of private equity fund for the development process, authorities did not find the government and the market equilibrium point, or excessive government intervention, or a dream.

Government intervention Private equity funds in two ways.

A special advocate is awarded. Let Private equity fund fully implement the government’s support, the intent of industries, special award will be of private equity funds into a “single industry” or “unitary regional” investment funds, lost the function of spreading risks. Worse still hope that the government will intervene in all directions — not only intervene investment, but also to intervene fund managers, Fund investors, enabling special award Private equity funds actually reduced the government’s financing tools, become another form of “second finance bureau.”

However, these two points are very easy to have adverse economic effects : First, with the right to grant special corresponding to the rent-seeking mechanism; with the two countries is relatively excessive intervention of the “who makes decisions, who bears the risk” of the price mechanism of the government.

Another idea is not legally binding specific type of laissez-faire model. The claim that June 1, 2007 introduction of the “Partnership Enterprise Law” has Private equity funds for the development of a solution to avoid double Tax forms of organization and, therefore, does not require a response Private equity funds of the special law.

However, this laissez-faire model to the Fund will not develop normally conceals hidden problems, especially in the financial innovation and prevent the risk of specially authorized by the negative effects are equally important.

Xiao Feng said that Private equity fund is a special chain of financial instruments, it has its own unique “industry chain. part of the fund investors, fund managers and fund trustees and morphology, Fund investment targets and will link up these aspects of the intermediary service institutions. Morphology only vertical chain of a ring Festival. “Therefore, Private equity funds need to control the risk of Private equity funds of the special law on the part of all-round supervision. ”

Of course, overdone, if the government simply by administrative means instead of the market means, would not only delay the Private equity fund market in the process, delaying Private equity funds to develop and grow, so hard to eliminate the foreign Private equity funds brought about by the economic security problem, but will weaken the Fund’s risk digestion function, for corruption and a new system hotbed.

In short, in the Private equity fund for the development process, we should adhere to the principles and the other is market principles, is the principle of two, And then there are the fund to become the privileged Money institutions, “said He Xiao-feng.

For the “small ones”, is another supporter of Cao Wenlian.

He supported the so-called “large” refers to the state of regional development strategies, major readjustment of the industrial structure as well as financial institutions such as the equity investment of industrial investment funds, the government should take the examination and approval system. to further guarantee pilot sectors and geographical choices are correct to avoid its evolution as “fund raising” effective protection of the rights of investors.

“Deregulate small” means that the venture capital funds and other smaller funds, the government only needs a filing system on it.

However, Cao Wenlian also pointed out that the current development Private equity funds there are many constraints. Such as : the social credit environment is not ideal enough, the credit order to establish a long way to go; Private financial institutions, equity market investment also needs regulatory authorities even reported to the State Council for approval, no universal laws; The combination of professional investment management and high-quality personnel is not enough. in particular to establish the credibility of the market still a long road; multi-layer capital market has not yet formed The investment from other channels also less. Therefore, the equity private placement market cultivation and development also requires the efforts of the parties concerned.

“Adult” game

Beijing University’s financial and industrial development research center Dr. Dou Erxiang that sound mechanism to avoid the risk of the financial system is the fundamental operation lasting, Private equity fund risk aversion is the core mechanism for “market-oriented mechanisms”, which mainly includes two components : First, the Fund’s investment decision-making process of the market, fund managers under no obligation to implement the government’s will. two fund managers of market-oriented selection process. Fund investors of the fund manager moral and operational analysis of the technical assessment, fund managers make their own decisions, Fund investors have no obligation to obey the government’s arrangements. In this two sessions, the fund manager’s decision-making mechanism is the fundamental success of the Fund.

Wang Shu also believed that China Private equity funds of a huge problem. is not mature and produce qualified investors. In Private equity funds, there are two types of partners, is a type of investment, a category is as a manager of the partners. And the sources of funds for investment in people.

Wang Shu noted that Private equity fund investors are generally large consortia, The most typical investment is insurance companies, banks, charitable foundations, insurance funds and the Civil Service Pension Fund. Such as Merrill Lynch, Goldman Sachs, they have some funds to Private equity funds, as investors. These investors generally through their performance more careful to choose the manager.

Chinese Private equity fund investors of the problem is qualified investment professionals lack. As Cao Wenlian noted, Private financial institutions, investment equity market even need to report to the State Council for approval, no universal law. For who will become the Private equity fund investors, and regulatory agencies was not a requirement.

He Xiao in-Feng view, the Private equity fund investors should include : financial institutions such as banks, insurance companies, brokerage firms and the social security funds, corporate annuity funds and even financial institutions. In addition, wealthy individuals should also include the.

In this regard, Wang Shu opinion, Private equity funds are an “adult game” considerable risk, For individuals should be investment, the government should be cautious. “The need to protect the general wage-earners, even relatively wealthy individuals. Because the capital threshold is very high, General richest people unbearable so great a risk. ”

For the government’s financial capital, the capital of state-owned enterprises, whether they can participate, What proportion of input, and how to assess and select qualified managers in these areas, the regulations should be clearly indicated. “But private companies will not need the money control, who will be willing to give to whom, That is the meaning of private placement. the government does not deal with private fund specific investment projects and approving ” Wang Shu said.

Cao Wenlian noted : “In recent years in all sectors, with the support of policy-oriented banks, securities companies, social security funds, insurance companies and postal savings investment funds already approved, Since most domestic savings concentrated in the commercial banks, therefore, departments of the recommendations has allowed commercial banks to set up fund management companies of securities under the conditions actively considering launching commercial banks to participate in the establishment of large-scale industrial investment funds. “

Copyright Fund China 2008.

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