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Recently, regulators have requested to steadily promote the risk classification and rectification of private funds, carry out in-depth rectification of "pseudo private placement" and "pseudo gold exchange", strengthen division of labor and cooperation, and eliminate the regulatory vacuum. The classification and rectification of the private fund industry will enter a new stage.
Securities Times securities china reporter found that the regulatory authorities have long promoted the development of private equity fund risk classification rectification work, reward the good and punish the bad is the main tone. Due to the characteristics of the private equity industry such as opaque information, in recent years, while the industry has developed rapidly, supervision has been further strengthened.
According to the latest data from the Asset Management Association of China, as of the end of 2021, there were 24,610 private fund managers and 19.76 trillion yuan in the scale of funds under management, an increase of about 8 trillion yuan over the beginning of 2019. The scale of private securities funds was 6.12 trillion yuan, an increase of 63% year-on-year.
The industry further clarifies the bottom line of compliance
"Since the outbreak of more risk events in the private equity industry in 2018, supervision has gradually promoted the corresponding risk classification and rectification work." Xi Weitian, investment director of Beijing MSCI Dongcheng Private Equity Fund Management Center (Limited Partnership), said bluntly. The data shows that since the comprehensive management of the industry, there are about 4,000 private equity managers that have been cancelled cumulatively, and the private equity industry has made obvious progress in removing the essence of wucun.
Xi Weitian believes that the regulatory logic mainly revolves around rewarding the good and punishing the inferior, encouraging excellent private fund managers who are really engaged in investment to accelerate their development, and punishing pseudo private equity or inferior private fund managers who carry out non-investment activities in the form of private placement. As a FOF fund management institution, THE PRINCIPLES OF MSCI'S INVESTMENT ARE HIGHLY CONSISTENT WITH THE REGULATORY CONCEPT OF THE CLASSIFICATION GOVERNANCE OF THE PRIVATE EQUITY INDUSTRY. Pay close attention to the fundamentals of fund managers, such as equity structure, governance structure, experience level of investment research team, personnel stability and investment style characteristics. These studies have more intuitive reference significance for judging whether private fund products have investment conditions.
For classified supervision, Xi Weitian believes that on the one hand, it is possible to rely on market professional institutions to strengthen the screening of the private fund industry through market-oriented methods, select the best among the best, and promote the continuous development and growth of high-quality private fund managers; on the other hand, the supervision of the governance of private fund managers puts forward compliance bottom line and management standards, rewards the good and punishes the bad, breaks the law, and solves problems in development, so that the private equity industry is more conducive to the stable and far-reaching development of the capital market, benign and orderly development.
Wang Wei, a partner at Beijing Tian Yuan Law Firm, said that many non-professional investors do not have a basic understanding of private equity funds, do not understand the operation and financial situation of the partnership, and there is a huge risk of information asymmetry. Protecting investors' right to know and allowing investors to fully understand the operation and financial situation of the partnership is an effective means to help investors and managers eliminate information asymmetry to the greatest extent. Consideration could be given to making provisions in higher-level laws, such as the Interim Regulations on the Management of Private Equity Investment Funds, and increasing the cost of default for managers to breach such obligations. Clear provisions on the right to know and the obligation of appropriateness in higher-level laws can not only have a clear legal basis for judicial adjudication, but also reduce the cost of investors' rights protection.
Competition is fairer and more transparent
Relevant people of the MingShi Partner Fund believe that the standardization and supervision of the industry is the premise of its healthy development. From the perspective of the general phenomenon in the market, the shareholder structure of private equity funds is complex and the sources of funds are diverse, and the Asset Management Association requires private securities, private equity and other private equity businesses to operate in a classified manner and not to operate concurrently, and adopt different classification review standards for them, which not only avoids the risk of major interest transmission at the manager level, but also maintains the essence of the fund and promotes the professional development of the industry.
At present, "classification supervision" is based on unified legislation and unified filing, according to the investment targets of various types of private equity funds, private securities, private equity and venture capital funds are filed separately, different regulatory requirements are put forward, and classified monitoring and inspection are carried out according to the dimensions of management scale, number of investors, compliance risks and so on. On this basis, improve the registration and filing system for private funds and the classification and publicity system, strengthen the establishment of creditworthiness in the private fund industry, give strong incentives to institutions with a high level of compliance and creditworthiness, and give due restraints to institutions that violate the law and are untrustworthy.
"We believe that the level of compliance management is the basis for private equity institutions to improve the quality of long-term development, and only by paying close attention to compliance issues and improving compliance awareness and compliance level can we survive and win in the competition of high-quality development." A relevant person from Shanghai Sixun Investment Management Co., Ltd. said that the company actively responded to the requirements of the regulatory authorities and further improved the effective safety and compliance operation control system in accordance with the regulatory requirements. Sixun Investment's recently hired compliance director has been a professional lawyer of a well-known law firm in China and has many years of professional lawyer practice experience, and her participation will further promote and supervise the implementation of sixun investment's internal control system and strengthen the compliance and effectiveness of the company's various departments.
Beijing Xingshi Investment Management Co., Ltd., one of the first batch of sunshine private equity companies in China, said that the supervision of private funds in the next stage can be managed in layers according to the scale and management capabilities of private equity companies, mainly to strengthen the risk supervision of newly established institutions with smaller management scales. In general, private equity firms with larger management scales have better risk management frameworks and capabilities, while newly established private equity firms with fewer employees or small management scale may have poor risk management capabilities themselves.
"Some institutions with more hidden risks will withdraw or carry out greater rectification, the competition in the private equity industry will be more fair and transparent, and the current private fund management institutions with better operational compliance and risk control systems may usher in a good opportunity to expand their scale." Fang Lei said.
Unified management standards for consignment agencies
In addition to the private equity institutions themselves, the sales agencies also have great expectations for the classification and evaluation of private equity institutions.
In the past two years, the distribution of financial products is being rapidly promoted by various securities companies, banks and third-party wealth management institutions. Recently, regulators have also issued a circular to securities companies, requiring securities companies to carry out consignment sales and custody business can not be "passed" in the qualification review, and even relax the standards to ensure that there is no risk in compliance control.
The relevant person in charge of Hengtian Wealth, a large domestic third-party wealth management institution, said that private equity funds are a non-public fund product, and in essence, non-public does not represent non-compliance. In recent years, regulatory regulations have been continuously improved, and the supervision of private funds has also been escalating. For the control of private equity products, the company has established an independent risk management system from the beginning of its establishment, and attaches great importance to the cooperation access of managers. Through system construction, the company strengthens data collection and performance analysis, conducts multi-dimensional and multi-angle substantive evaluation of cooperative managers, selects high-quality managers with good market reputation, excellent industry ranking, strong asset management ability and good professionalism to cooperate, and first excludes managers who do not meet regulatory requirements and have regulatory penalties.
"At present, the distribution agencies are also seriously involved, and some securities companies and other sales agencies have relaxed the entry thresholds and control standards for private equity products, and the information disclosure is not in place." A relevant person from the financial product department of a leading securities company in Beijing said that the classification and supervision of private equity products is conducive to securities companies and other consignment agencies to further improve the control mechanism of consignment custody business, eliminate ambiguity and blank areas, help establish unified industry management standards, and promote the standardized development of the entire industry.
Observation: Private placement, please follow the right path and keep mindfulness
Since the implementation of the registration and filing system in 2014, private equity funds have developed rapidly in China, and while the scale has grown steadily, top talents are also gathering, which has become a force to be reckoned with in the capital market.
However, it is undeniable that the development of the domestic private equity industry is still in its early stages, and behind the extraordinary expansion also brings some "growth troubles" - private equity is mixed, and risk events occur from time to time. How to further standardize development is a common issue that the whole industry needs to face.
Yi Huiman, chairman of the China Securities Regulatory Commission, proposed at the system work conference a few days ago that it is necessary to steadily promote the risk classification and rectification of private funds and carry out in-depth "pseudo-private placement" rectification, which has pointed out a new direction for the supervision of the private equity industry. In order for the private equity industry to "remove the false and save the truth", it is necessary to take multiple measures at the same time, and it must take the right path and keep righteous thoughts.
First of all, we should continue to improve the relevant laws and regulations and regulatory systems for private funds. The new Fund Law, revised in 2013, clarified the legal status of private funds, and a series of regulations and self-regulatory rules promulgated since then have formed the basic system of private equity supervision. At present, private equity supervision is mainly divided into two categories: administrative supervision of the CSRC and self-discipline supervision of the Asset Management Association, the former keeping the bottom line of supervision, and the latter continuously optimizing the detailed rules and fine daily management.
In recent years, the supervision of private placement by the regulatory authorities has been strengthened, but high-quality private placements have generally responded positively to this, and the efficiency improvement of the regulatory authorities in daily business processing has won wide praise, which shows that the effect of "supporting the good and eliminating the inferior" has been shown in the industry.
Second, private equity managers should start from themselves to improve their compliance level and risk management capabilities. The essence of asset management is "entrusted financial management", and compliance risk control ability is an important core competitiveness of private placement in addition to investment performance, so private equity managers should faithfully perform the obligations of trustees, be diligent and conscientious, honest and trustworthy, and strengthen compliance management. It can be seen that in some past "pseudo-private placement" or private placement violations, the violating entities often lack awareness of this aspect, and the product fundraising and operation links have thus become a high incidence area for violations of laws and regulations.
It is gratifying that large private placements in the industry are continuing to strengthen their compliance awareness and operations, and some small and medium-sized private placements are also paying more and more attention to this. A quantitative private placement in Shanghai clearly stated that the company's newly hired compliance director was a professional lawyer of a well-known domestic law firm, and the allocation of legal professionals will promote the continuous improvement of the company's internal control and compliance level.
Third, when choosing private placement, private placement channels and investors should abandon the erroneous idea of "performance-only theory" and resolutely say "no" to illegal private placements. As a professional institution, the consignment channel should look at the essence through the phenomenon, put the legal compliance risk management ability of the private equity manager in an important position in the evaluation standard, and help investors to do a good job in the first pass.
When investors buy private equity products, they should also polish their eyes, understand more about the actual operation of private equity managers, and beware of being fooled by the high returns of "pseudo-private placements". In this way, the entire industry will form a virtuous circle, accelerating the cultivation of excellent private placements, and at the same time accelerating the clearance of bad managers.
According to the latest data, there are currently nearly 25,000 private equity fund managers in China, with a management scale of nearly 20 trillion yuan. Compared with the United States, one of the developed economies, the number of private equity managers in the mainland has been 8 times that of the United States, but there is still a big gap in the scale of management, and the concentration of the industry needs to be further improved.
Editor-in-charge: Tactical Constant
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