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Investment Market - Private Equity Investment

I. Overview

Investments can be divided into 3 categories:

1. Investment in fixed asset construction projects

2. Securities investment (equity assets, fixed income assets and currency assets traded in the traditional open market)

3. Alternative investments (lack of regulation, poor transparency, weak liquidity, difficult valuation)

Alternative investments can be broken down into:

3.1 Private Equity

3.2 Property and Shops

3.3 Mining and Energy

3.4 Mass Merchandise

3.5 Infrastructure

3.6 Hedge Funds

3.7 Collection Market

The key private equity investments are carried out as follows:

2. Private equity investment

Private equity investment (PE), the use of private equity to raise funds, equity equity investment in non-listed companies. Usually in the process of transaction implementation, the future investment exit mechanism is considered, and certain conditions are used to exit the income.

Its investment philosophy is to invest in enterprises that can meet the listing conditions within a certain period of time in the future, so as to cash out on the secondary market after listing.

By amplifying capital, sharing risks, and realizing excess investment returns.

The selection criteria for investment projects typically include an outstanding management team, an effective business model or core technology, sustained growth capabilities and viable exit options.

The main types are specialized private equity investment funds, direct investment departments under large financial institutions, institutions specializing in equity investment and management business, and investment fund departments of large enterprises.

In the form of funds as a carrier of fund raising, there are professional fund management companies to operate.

The fund manager is a key element of the private equity business model, and after the establishment of the fund, the fund manager has the responsibility of finding investment projects, negotiating projects, monitoring project operations and achieving investment exits.

The main capital of the fund comes from various investors such as the government, enterprises, and natural persons.

The vast majority of private equity funds are organized in the form of limited partnership, with fund managers with management responsibilities often referred to as general partners (GPs), while various types of investors in the fund are referred to as limited partners (LPs).

The return on the Fund's investments comes from the difference between the total value recovered at the time of the exit of the investment project and the initial investment value of the project.

The management fee is usually charged at 0.5%-2% of the size of the fund during the life of the fund, in addition to 15%-20% of the profits of the fund's investment projects.

Institutionally, in order to align the interests of the fund manager with the investment, the fund manager can only share the income dividend if the investor recovers all the principal and realizes a certain guaranteed return (threshold yield).