Chen Daofu: The incentive and constraint mechanism is the key to the steady development of the fund of funds
Finance and economics
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(This article is the author's speech at the 2021 China Fund of Funds Summit)
Distinguished guests Good morning, it is a pleasure to participate in today's forum, and I would like to take this opportunity to share with you my two views on the fund of funds.
01 The Fund of Funds is playing an important role in promoting high-quality economic development
The structure of the fund of funds is relatively unique, and the stratification is achieved through the mother-child structure on the equity, which can not only enlarge the leverage, but also achieve risk isolation at the equity level, which is also the division of labor of professional capabilities. This structure is quite effective for China today and can play a very important role in promoting China's high-quality development.
Specifically, it can play a very important role in the following three aspects:
1. It can effectively promote finance, or the effective integration of capital with industry and science and technology. The problem of finance and industry and science and technology is a chronic disease in our country, and the fundamental way to solve it is to let finance and capital enter the industry, science and technology, see and understand the industry and science and technology, truly discover the value of industry and science and technology, and provide professional services on the basis of trust. Of course, industry and technology also need to embrace finance, mutual understanding and integration. Open, see, and merge professionally.
In fact, the fund of funds is also an important component mechanism for realizing China's multi-level capital. The equity market developed in the form of a fund of funds can better bridge the gap between the diversification of standardized financial products, services and enterprises, including industry and technology, and the personalized financial needs, and is a very important connection channel. Equity funds of funds are very important intermediaries that can play a very important role in the connection from standardized supply to individual needs.
2. The fund of funds is also an effective mechanism for realizing the operation of the state-owned capital market. The management of our state-owned assets has changed from managing enterprises and assets to managing capital now. How to better improve the strategy and efficiency of China's state-owned capital through the platform of state-owned enterprises and through the method of managing capital, the fund of funds is an effective mechanism. Many central enterprises and state-owned enterprises, including state-owned capital operating companies, have adopted the structure of the fund of funds and done a lot of exploration, not only balancing the assessment requirements between different mechanisms, but also giving full play to the efficiency of marketization as much as possible, and also realizing the national strategy and the needs of the layout of state-owned capital.
3. The fund of funds is an effective link between the government and the market. Whether it is from the "14th Five-Year Plan" or from the perspective of high-quality development, what China has to do in the future is more to solve the problem of "imbalance and inadequacy". To solve the problem of "imbalance and insufficient", it is difficult for general commercial institutions to dock, and it is necessary to have a mixed mechanism with both policy orientation and commercial efficiency, or an intermediate mechanism with policy to achieve matching. The fund of funds is a good combination channel, which can achieve a good combination of government and market.
In short, the fund of funds can and is contributing its due contribution to the high-quality development of China's economy.
02 The design of the incentive constraint mechanism of the fund of funds is crucial
After the downturn and adjustment in previous years, the fund of funds is in the stage of stock optimization. To promote the further development of the fund of funds, a reasonable incentive and constraint mechanism is crucial.
The incentive and constraint mechanism here is broad, including both the incentive and constraint mechanism in the microscopic sense, as well as the macro positioning and system design.
At present, the government and state-owned enterprises play an important role in the development of fund of funds, such as various guidance funds and industrial funds, with obvious policy orientation. At this time, the reasonable guidance of macro policies is particularly important. This year, China's manufacturing investment has recently grown relatively fast, but after in-depth understanding, it will be found that private small and medium-sized enterprises in manufacturing investment, in fact, the willingness and motivation to invest are insufficient, and the actual scale of investment is not large. The current growth of manufacturing investment is mostly related to government actions and listed companies. This not only shows the special role of the government and listed companies in stabilizing the economy, but also shows that the rationality of this part of the investment is crucial to the steady growth of the future economy, and it is necessary to avoid the rapid transformation of strategic emerging industries into industries with excess capacity.
At present, China's fund of funds is vigorously promoting the transformation and upgrading of China's manufacturing industry and promoting the implementation of policies for the establishment of science and technology. Judging from the current effect, it has played a very positive role. This kind of efficiency of "concentrating on big things" and breaking through the "card neck" technology is more obvious in the industrial investment dominated by the fund of funds. Of course, this process also needs to pay attention to the problem of choosing a technological path in the development of science and technology. There is a phenomenon that is worth further observation, in the development of new energy vapor difference, China and the United States are taking a not-so-completely consistent technical path. Tesla in the United States has focused its development on automatic driving and outsourced the battery. The development of new energy vehicles in China attaches importance to the key link of batteries and invests a lot of resources. Behind this actually involves the evaluation and selection of major technological development paths.
In short, the equity fund in the form of the fund of funds plays an active role in industrial investment and technological development under the guidance of the government, which requires us to have more overall planning for the development of the industry at the macro level, find the positioning of the development of the industrial fund, deeply and prudently treat the choice of technological development path, and grasp the development rhythm.
Policy choices at the local government level will also have a huge impact on the development of the fund of funds and become an important mechanism for their external incentives and constraints. In particular, local governments restrict the industries they invest in, and the requirements for the proportion of return investment. Different places have different stages of development and development conditions, and may have different choices, but at present, the more industrial agglomeration and market activity are, the lower the requirements for the proportion of investment returns, and the more active the industrial fund.
In addition to the macro, there is a need to adopt a more effective incentive and constraint mechanism at the micro level. There are a lot of choices in mechanism design, such as which personnel must follow the investment, what kind of projects must be followed, whether to follow the investment at the project level, or at the fund level. Another example is the setting of the assessment cycle, whether it is an annual assessment, or a project cycle assessment, or a different assessment mechanism in stages. In addition, in China, it also involves the design of the positioning of the fund of funds, whether it is mainly to achieve policy objectives, or to mainly complete industrial guidance and cultivation, or to pursue investment returns. All of this needs to be explored step by step in an environment of macro positioning, supervision and self-discipline rules.
In short, I believe that China's fund of funds industry will gradually establish a macro reasonable positioning, an incentive and constraint mechanism of orderly and standardized guidance of the industry and a compatible mechanism of micro incentive constraints, and the parent fund will develop more standardizedly and more effectively promote the high-quality development of China's economy.
[Chen Daofu: Member of the Chang'an Avenue Reading Club, Deputy Director of the Institute of Finance, Development Research Center of the State Council]
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Editor-in-charge: Liu Xingyue; Preliminary Review: Cheng Ziqian; Review: Li Yufan