CCTV Beijing, May 1 (Reporter Qi Zhiying) On April 30, the AMAC issued the "Guidelines for the Operation of Private Securities Investment Funds" (hereinafter referred to as the "Operation Guidelines"), which will come into force on August 1, 2024.
AMAC said that in order to strengthen the self-discipline management of private securities investment funds, standardize the business of private securities funds, protect the legitimate rights and interests of investors, promote the healthy development of the private equity fund industry, and maintain the order of the securities and futures market, the Asset Management Association of China has drafted the "Operation Guidelines" under the guidance of the China Securities Regulatory Commission.
The content covers the fundraising, investment, operation and other aspects of private securities funds
There are a total of 42 articles in the Operational Guidelines, covering all aspects of the raising, investment and operation of private securities funds, highlighting problem-oriented and risk-oriented, and scientifically setting differentiated regulatory requirements. The content mainly includes the following five aspects.
The first is to strengthen the requirements for fund raising, clarify the initial fundraising and survival scale of private securities funds, strengthen the suitability requirements for investors, and clarify the arrangement of early warning stop-loss lines.
The second is to standardize investment operations, clarify the consistency requirements of investment strategies, emphasize portfolio investment, prohibit multi-layer nesting, regulate bond investment, over-the-counter derivatives trading and programmatic trading, establish and improve the internal control system, strengthen liquidity management, and clarify information disclosure requirements.
The third is to emphasize the responsibility of fiduciary management, prohibit disguised guarantee of principal and returns, make it clear that channel business shall not be carried out, regulatory requirements shall not be evaded through over-the-counter derivatives and asset management products, and the provision of performance remuneration shall be regulated to ensure fair treatment of investors.
Fourth, establish the concept of long-term investment and value investment, standardize the past performance of the fund, guide investors to pay attention to long-term performance, and strengthen the management of short-term investment behavior.
Fifth, a reasonable transition period should be set up. Differentiated rectification requirements are set for existing private securities funds, and some rectification requirements are provided with a certain transitional period to avoid adverse effects on the normal operation of the funds.
According to the data, as of the end of March 2024, there are more than 8,300 private securities fund managers registered with AMAC, managing 92,000 private securities funds with a scale of nearly 5 trillion yuan, and have become important institutional investors in the capital market. At present, the top 400 private securities institutions account for nearly 80% of the industry's management scale, and the 2,000 private securities institutions under management account for only about 0.15% of the industry's management scale.
AMAC pointed out that the polarization of the industry is more serious, small, chaotic, scattered, and poor business formats are still more obvious, and some institutions deviate from the basic attribute of "being entrusted by others to manage money on behalf of others", and the investment operation lacks necessary constraints, harming the legitimate rights and interests of investors, and is not conducive to the stable operation of the market.
AMAC believes that in view of this, it is necessary to strengthen standardized management and promote the steady and healthy development of the industry.
AMAC said that the next step will be to conscientiously implement the "Operational Guidelines", continue to optimize the filing and self-discipline management of private securities funds, and further promote the high-quality development of the private securities fund industry.
Appropriately relax the terms of fundraising and survival thresholds, transitional arrangements, etc
AMAC said that during the public consultation period of the "Operation Guidelines", the association received more than 600 opinions and suggestions, and the opinions of industry institutions mainly focused on the threshold of fundraising and survival, the opening frequency of application and redemption and lock-up period arrangements, portfolio investment, over-the-counter derivatives trading, and transition period arrangements. Based on the feedback from the industry and full evaluation and calculation, the Association moderately relaxed the above-mentioned provisions, and made the following explanations on these five key issues.
First, on the scale of the fund's existence. At the same time, after triggering the cessation of subscription and before entering the liquidation procedure, the buffer period will be increased "if the net asset value of the fund is still less than 5 million yuan for 120 consecutive trading days after the subscription is stopped, it shall enter the liquidation procedure", and at the same time, a certain transition period will be given, and the starting time for a long-term period of less than 5 million yuan will be set as January 1, 2025.
Second, with regard to the opening frequency of subscription and redemption and the lock-up period of shares, AMAC said that from the perspective of safeguarding the interests of investors, the AMAC has absorbed relevant opinions, relaxed the opening frequency of subscription and redemption from at most once a month to at most once a week, and relaxed the 6-month lock-up period requirement to 3 months, and allowed private securities funds to replace the mandatory lock-up period arrangement by setting short-term redemption fees to return the option to the market. In addition, there are no mandatory rectification requirements for the subscription and redemption and lock-up period arrangements of private securities funds that have been filed before the issuance of the Operational Guidelines.
Third, about portfolio investment. AMAC said that in order to guide private equity fund managers to improve their professional investment capabilities and diversify investment risks, the "Operation Guidelines" refer to the "Regulations on the Operation and Management of Private Asset Management Plans of Securities and Futures Operating Institutions" to put forward a double 25% portfolio investment requirement, that is, a single private securities fund invests in the same asset no more than 25% of the fund size, and the proportion of all private securities funds managed by the same private equity institution investing in the same asset does not exceed 25% of the asset.
After soliciting industry opinions, the Operational Guidelines maintain the overall requirements for portfolio investment. In response to market institutions' reflection that the implementation of portfolio investment needs to consider changes in the market value of investment assets, clarify the calculation basis for different types of assets, and adjust arrangements after passive over-proportion, the Association has optimized the relevant provisions, clarifying that the investment ratio can be calculated according to the method of purchase cost and market value, and supplemented the definition of "same asset" and the requirements for adjustment of investment ratio after passive over-limit, so as to facilitate the implementation of the industry.
Fourth, on over-the-counter derivatives trading. AMAC said that the "Operational Guidelines" require private securities funds to carry out OTC derivatives transactions with the goal of risk management and asset allocation, and regulate the overall risk exposure of a single private securities fund participating in OTC derivatives transactions from the perspective of deleveraging and risk prevention.
Since February 2024, the scale and leverage of private equity funds participating in the long-short income swap (DMA) business have decreased, and the risks have been released. In view of the situation in which private securities funds conducted leveraged transactions through DMA in the early stage, the Operational Guidelines clearly require that private securities funds shall not participate in DMA business with more than 2 times leverage, so as to further control the level of business leverage.
In addition, the Operational Guidelines specify that the notional principal of a private securities fund's participation in snowball-structured derivatives shall not exceed 25% of the fund's net assets, which is in line with the implementation of the private asset management plan of securities and futures operating institutions to participate in snowball-structured derivatives to reduce regulatory arbitrage space.
Regarding the transitional arrangements for OTC derivatives transactions, AMAC said that considering that the Association had conveyed to the market in the early stage the requirements of limiting the leverage ratio of DMA business and controlling the concentration of derivatives investment in snowball structure, after the official implementation of the "Operation Guidelines", it is required that private securities funds that do not meet the terms of OTC derivatives transactions shall not be newly raised or extended, but the existing OTC derivatives contracts that have been opened can continue to operate until maturity without being affected.
Fifth, arrangements for the transition period. AMAC said that in order to ensure the smooth issuance and implementation of the "Operational Guidelines" and avoid the impact on the market, it has fully absorbed the opinions of the industry and significantly relaxed the transitional arrangements.
The specific arrangements for the transition period are as follows: first, for existing funds that do not meet the terms of portfolio investment, the transition period will be greatly extended to 24 months, and the relevant funds can be opened for subscription and redemption and normal investment operations during the transition period; (CCTV Capital Eye)
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