The development trend of private equity fund industry in the next five years to 10 can be summarized as "four modernizations".
The first is scale. At present, there are only 185 fund managers whose fund management scale exceeds 10 billion in China, which is very few. In the future, resources in the industry, including funds, will be concentrated in excellent institutions, and will become more and more concentrated, thus bringing scale effect.
The second is specialization. In a fund, its portfolio is often in multiple fields. However, people in different fields do different things, which forces the industry to be specialized, and the fund team must also be specialized, so as to understand the industry, grasp the industry trend and invest accurately.
The third is long-term. At present, the proportion of the whole cycle from investment to withdrawal in the industry is not high, according to the data of the China Foundation, it is between 20% and 30%. Now China has passed the impetuous era and the era of popularizing knowledge in VC/PE. Everyone knows that the withdrawal period of the fund will be longer and longer, so we should be patient enough. In addition, the source of funds should also tend to be long-term. "We call on more long-term funds, including insurance and pensions, to participate more in equity investment."
The fourth is the whole industrial chain. The so-called whole industrial chain is in practice, from early stage to expansion, to maturity, to Pre-IPO and even to mergers and acquisitions and secondary markets.
There are two systematic opportunities for industrial structure innovation in the future. First of all, the fixed number of years of RMB funds does not match the actual cycle. He pointed out that China's exit channel is not smooth compared with that of the United States. In the past, most domestic funds had a term of 5+2, but in the past two years, most RMB funds have reached the age of 7, but they have not completely withdrawn, so the issue of withdrawal has been widely concerned.
In this case, domestic private equity funds have the demand of PE secondary market. If we can do a good job in the PE secondary market, it will not only be a good investment opportunity, but also greatly shorten the exit cycle. Systematic innovation in this area may form a healthy closed loop for the industry and distribute cash to investors earlier, which is very necessary.
Secondly, we can do some funds with mixed primary market and secondary market, which can solve some common problems in the industry now. He pointed out that the biggest problem in the industry at present is insufficient liquidity, but for investors such as insurance companies and banks, liquidity is very critical, and even directly related to the assessment and personnel changes of these investors. At present, it is difficult to generate cash flow by relying solely on the primary market. "If we can properly consider the secondary market and solve the balance problem between the two markets through some mechanisms, we will certainly solve the problem of poor liquidity."
In practice, many investors should not distinguish between the primary market and the secondary market when they look at the investment target and study the industry. In some fields and industries, the primary market and the secondary market are upside down. However, compared with the primary market, the liquidity of the secondary market is obviously better. If the fund manager stands still and strictly distinguishes between the two markets, it may affect the future development of the fund. He bluntly said that value investment is value investment, and a good target is a good target. If there is an innovative structure, it should be able to achieve several goals and solve how to meet the short-term liquidity requirements of real institutional investors, including distribution. When there is a bubble in the next market and flour is more expensive than bread, it is problematic to ask the fund to buy flour.
In the future, we may need to call on the whole industry to do more innovation. Under the economic system of Socialism with Chinese characteristics, due to the different living environment of VC/PE, it is impossible for China to completely copy the American style of play. I'm even thinking that in the future, by holding listed companies and then joining forces to make follow-up investments, it may be better to break through the obstacles of capital cycle and cash distribution.