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Industry leading fund faltered

September 25, 2010

Successful listing of the focus of technology and seven provincial and municipal governments to guide the Fund's focus on industrial launch, already led to a new melee, also brought new opportunities

"Finance" special on Wen Lan
Alibaba CEO Jack Ma said, "I learn to die," did not think he's loyal "fans" Shen Jinhua not only did not die, but live more moisture.
December 9, the focus of science and technology (00 231.
SZ) landing in Shenzhen SME Board, become the Alibaba, HC International, Global Sources, NetSun after the fifth visit of the local capital market B2B companies, the date of the opening price as high as 78.55 yuan. Jinhua Shen, head of Focus Technology worth more than 2.9 billion yuan in one fell swoop, this figure even more than Jack Ma (Alibaba listing, Ma only holds 189 million shares to the offer price ceiling prices of about 2.27 billion).
Shen Jinhua harvest not only generous, successful listing of the focus of technology, but also to the domestic industry's first to guide the Fund to bear the fruit.

August 2007, options to change the focus of technology companies, the Shengquan Ji Jin Jiang Su Xinquan venture capital funding on behalf of 4 million yuan, holding 0.8%, while the Shengquan Ji Jin from Suzhou Industrial Park, Jiang Su Xinquan leading venture capital funds and joint ventures set up, the total size of 2.2 billion, of which as a government to guide the Fund's Suzhou Industrial Park, fund of funds holding 23%.

In its first fruit will be born on the eve of the October 30, the National Development and Reform Commission (NDRC), Ministry of Finance in Beijing, Shanghai, Chongqing, Hunan, Anhui, Jilin, Shenzhen and other cities just seven joint set up 20 sub-funds with a total size of more than 9 billion yuan. Widely distributed in the investment industry, medicine, new materials, new energy, integrated circuits, electronic technology, environmental protection, bio-engineering and many other new industries.

"This is the first market to guide the operation of government funds, fund pilot projects to be revealed mature operation mechanism, a large number of fund will be established throughout the follow-up, the next two to three years the total number may reach 200 Fund, fund-raising to more than 100 billion element. "Zhang Xiaoqiang, deputy director of National Development and Reform Commission said.

Government Property guide the Fund launched a large-scale centralized, so that VC are just around the corner. "The government's money who does not get hold of white." Who requested anonymity VC (venture capitalists) partner, told reporters gave away the secret.
Multi-Game

"The government's money not only easy to get, not easy to get. As long as the GP (manager) professional, fund strength, a certain record of performance, getting the money is easy, but most of the GP can not take government money, worried about the local can not find enough, enough good projects. "
Venture investors DFJ Dragon Fund partner Miss King Kai told reporters.

Policies and regulations based on the current reality, the Government Property Fund guide to comply with the principle of diversification, in a sub-fund can invest up to 30% of its total amount. For example, if a local government fund of funds industry and jointly set up a sub-VC fund size of 1.2 billion, of which, the Government Property guide the fund can invest only up to 36 million yuan, less than the rest of Bufen must You VC self. After the sub-fund money into GP then the specific enterprise.
, The Government Fund and the VC industry together to guide the composition of LP (the investor) team, and through the GP market professional teams, the money put into concrete enterprises.

In fact, as a member of the LP industry guide of government funds, and the simple folk LP in nature, namely, that of the GP "control" are very strict, but precisely because of strict control, resulting in the Fund and the Government Property guide VC civil background differences are already beginning in the cooperation started.

Government to guide the Fund's theme of "guidance" to support local economic development as the goal, and VC are always the subject of "profit" to "return" as the ultimate goal, where there are good projects, they go bad.

In the investment stage, the Government hopes to guide the Fund to invest more in early stage companies, aims to support; the VC is more hope in the latter part of the mature investment company, aims to facilitate short-term cash.

In the investment sector, industry, local governments have different policies, such as Xi'an support aerospace-related industries, requires a large proportion of investment fund related projects; while VC requires closely follow the world trend, the most profitable investment in the industry.

Also in the interests of the two demands are essentially different. Government guidance funds not for profit, in order to secure the main principal. To this end, to guide the Fund in terms of fund investments, tend to management fees, performance incentives on the principal amount of back pay after. The GP's management fee for its survival unwilling to compromise, often leading to the two sides finally broke up.

In reality, the Chinese fund management structure and features of the game are often the result of the decision: LP strong intervention, GP accommodate compromise. Although the LP is not involved in the project in principle, specific management, but most folk LP is the business owner himself, has many years of business experience, they tend to be more trust themselves. Therefore, investments, LP hope more involved in GP is responsible for the investment management projects, and even required to have veto power.

With the Government Property guide fund start another boom, the future co-operation with the VC will be more and more closely, together with the Fund have been expanding, GP will not only face the problem of difficulties in financing, will face a "get rich quick," the pressure, so that the Government Property to guide the Fund's long-term investment philosophy will also face challenges. Therefore, the Government guide the fund industry and VC, GP and civil LP, infighting and game will be carried out from a clear delineation of "Chu milky world" is still long way to go.
Administrative detention is still concentrated
As of now, around the size of government to guide the Fund's total nearly 20 billion yuan, in theory, the funds can be leveraging more than 60 billion, could support about 30 medium-yuan fund.

The Oct. 30 debut in Beijing Diaoyutai State Guesthouse of 20 sub-group funds claim to be a country first "market" of the operation of government guidance funds: on the one hand, the Government will no longer, as the Fund's decision-making and operation of the main square, but only as an equity investor (LP) of all funds entrusted to professional investment team (GP) management.

"This is the first time in China. Means that the government guidance funds Youxiang market a step forward that will help guide the policies of government funds and-leveraging, help foster new economic growth point, the development of new strategic industries. "National Development and Reform Commission Zhang Xiaoqiang, deputy director has publicly commented.

In the local industry fund of funds, most funds invest still have a strong administrative color, especially in regions rich colors, they obviously do not want their money is take the matter to other people to lay eggs.

However, the local industry to guide the Fund's administrative constraints, but also restricted its growth and development of sub-funds. Because oral VC and LP fear government restrictions on industry to guide the Fund's administrative and industrial restrictions in particular regions, will artificially increase their investment risk, and therefore not to invest.

Prior to 2007, Suzhou Industrial Park Venture Fund of Funds has with Softbank China and Jiang Su Xinquan VC venture capital and other co-established the five yuan sub-funds, the scale of about 500 million yuan respectively. Among them, the Suzhou Industrial Park to guide the Fund had invested 100 million yuan, the rest of the VC self. Taken in the operation, "a fund + a fund management company," the structure and break Suzhou local area investment restrictions, the government created a domestic market fund industry to guide the operation of precedent.

After that, with the development of market operation, binding upon the government's detention of industry leading fund already has signs of loosening. It is reported that in March this year, the Anhui provincial government, industry and guide the establishment of the Fund, has allowed its investment sub-fund will invest 50% of the capital of Anhui Province outside.

Now, with the focus on the success of technology industries listed and seven provincial and municipal governments to guide the Fund's focus on launching and get rid of the government and industry to guide the operation of administrative detention fund investment the best opportunity in the offing.

Filed under: Armored Iron Horse (Financial set)

Tags: Finance, Fund, gp, lp, Shen Jinhua, Suzhou, vc