my country’s private equity funds have a single investment channel

China’s securities market is still in the initial stage of development. In the absence of a short-selling mechanism, private equity funds are restricted in investment channels, and the market is Financial products are single and there is a lack of hedging tools to hedge risks. The single type of investment has led to an increase in the overall risk of the fund. In recent years, the reason why private equity funds have mushroomed is largely due to the good economic trends in China and the rapid development of the securities market in recent years. It is also relatively fast, so private equity funds have achieved higher returns and relatively better growth. Since my country's financial market and the market for financial derivatives are still extremely limited, the stock market can only go long. When the market consolidates or falls, due to the lack of hedging tools in index futures, it is difficult to guarantee returns and defaults will occur. Bank funds that illegally flow into the stock market through private equity funds cannot be recovered, and the financial risks based on financial leverage are It may show up and may trigger a chain reaction, leading to major financial risks across the country. In addition, in China, since the investment scope of asset management is limited to domestically-listed stocks, bonds, funds and other financial instruments permitted by the China Securities Regulatory Commission in accordance with the law, there is still a lack of index futures, stock futures, options, etc. in the market. Derivatives make it difficult to resist the systemic risks of the market.

The legal status of private equity funds in my country has not yet been fully established

Currently, no law in our country has formally recognized the form of private equity funds. Private equity funds are mainly subject to comprehensive adjustments by the Contract Law, Company Law, Securities Law and Trust Law. In addition, due to certain imperfections in my country's current laws, the same kind of securities entrusted investment business is governed by the "Trust Law" in the relevant regulations of the People's Bank of China, and is governed by the "Contract Law" in the relevant regulations of the China Securities Regulatory Commission. Constraints make legal entities at a loss as to what kind of institution and form to establish a private equity fund. After the private equity fund is established, what is the legal relationship between the participating entities. In addition, my country's original legal system is not suitable for the operation of private equity funds. Quite a few important laws closely related to the operation of private equity funds have not yet been formulated. Some important contents required for the operation of private equity funds are not reflected in my country's existing laws. . Overseas, private equity funds generally adopt the limited partnership system. This organizational form has not yet been listed as a legal norm in my country’s Company Law. It can be seen from the above analysis that the establishment and operation of private equity funds are not officially recognized by the law, and private equity funds in my country have no legal status. In real life, this is reflected in the fact that private equity funds in our country cannot be established in the form of funds, and other legally recognized forms are not suitable for their own development. They can only survive and develop in the cracks of the law. This makes private equity funds in our country Funds come in all kinds of strange forms, but the risks involved are not small.

Private equity funds are outside supervision and are in a gray area

Currently, management’s supervision of private equity funds is still in a hazy state. Some of the reasons are that they still do not understand the living conditions of private equity funds. , some are afraid that private equity funds may cause other financial risks, while others point out that the concept of private equity funds must be defined first, and then regulatory responsibilities can be defined. After all, it is currently unclear whether private equity funds are supervised by the central bank, the China Securities Regulatory Commission or other regulatory authorities. , there is still no clear idea, and there is no specific policy on supervision or supervision. Moreover, the problem of information disclosure of private equity funds has not been resolved. Although private equity funds are not obliged to disclose relevant information to the society, it is their unshirkable responsibility to disclose information to fund investors and regulatory authorities. However, because the regulatory system is not yet clear, the disclosure of funds There is no way to talk about the system.

The internal control mechanism of my country's private equity funds is not sound and the control is weak

Currently in our country, private equity funds do not have a large team and research power guarantee. At this time, the role of individuals is very prominent, although this can Personalized investment decisions are formed, but at the same time, due to the obvious role of individuals, it is easy to breed internal corruption and moral hazard among private equity fund managers. Moreover, at present, private equity funds still lack risk control mechanisms and risk measurement measures. Private equity fund management companies do not have a quantitative standard for risk control, so the subjective assumptions of private equity fund managers can easily amplify the risk of the fund. Furthermore, there is a lack of Necessary supervision means are currently not yet developed in domestic private equity fund management companies, and the means to use high-tech technology to track and supervise the fund investment process are not yet in place.

The abnormal interest distribution mechanism of private equity funds in my country

In order to attract customers, most private equity funds in my country have private promises to customers, such as ensuring the safety of principal and ensuring year-end yields, etc. Commitment constitutes the unique distribution mechanism of my country's private equity funds, that is, the abnormal interest distribution mechanism of "guaranteed sharing".

As we all know, public equity funds achieved impressive results in 2007, and private equity funds overall underperformed public equity funds.

But why do such huge amounts of money still choose private equity funds? There may be several reasons: first, these funds cannot enter the stock market openly; second, these funds hope to seek higher yields; third, the disposable persons (not owners) of these funds hope to receive additional benefits; Fourth, the manipulators of these funds may use these funds to conduct illegal activities. It is precisely because of these various purposes and motivations that the abnormal distribution mechanism of private equity funds has resulted. In our country, the most common form of interest distribution for private equity funds is "guaranteed returns" for investors. In addition to "guaranteed returns", there are also high dividends for managers, or huge returns for a small number of people. These abnormal distribution mechanisms have led to This is a spectacular sight of huge amounts of money flocking to private equity funds. Even private equity funds can become popular even if they achieve poor investment returns. Of course, these constraints have also led to the abnormal investment philosophy of private equity fund managers. In order to fulfill their promises, private equity fund institutions have to obtain excess returns through short-term speculation in the securities market. Large institutions attract small and medium-sized institutions to take over the business and let them make their own profits. Pay the bill, while small and medium-sized institutions turn their attention to large individual investors and small and medium-sized retail investors who are weaker than themselves, thus creating a situation of "big fish eating small fish". This method of operation of private equity funds can achieve the expected rate of return when the securities market is prosperous and will not have much impact on itself; however, once the securities market is affected by economic and political factors and experiences a downturn, many small and medium-sized retail investors will Withdrawing from the securities market, when no one is paying for private equity institutions, a risk backlash mechanism will be formed. Small and medium-sized institutions will be unable to fulfill the rate of return promised to investors, defaults will occur, and financial risks based on financial leverage may will show up and eventually have to stop itself. Large institutions also face a similar fate after losing their small and medium-sized institutions.