First, the risk of opaque information. Because private equity funds do not have strict information disclosure requirements, information opacity is the biggest risk of private equity funds. Investment planning, fund allocation, project tracking management and all other processes involving investment operation management may have insufficient information disclosure.

Second, investors' ability to resist risks is low. The reason why many investors participate in private equity investment is that they value the high returns of private equity funds, but high returns also correspond to high risks. Many investors do not have the corresponding ability to resist risks, so investment should focus on the risks of such private equity funds.

Third, the risk of private equity funds caused by fund managers. Due to the lack of strict industry access standards, there are obvious differences in fund managers' management ability, industry status and market recognition. In the same market environment, some fund managers can bring benefits to investors with accurate investment, while some fund managers may cause losses to investors.

Fourth, higher moral hazard. Fund projects are generally established in the form of partnership. However, due to professional, geographical and time constraints, investors can not effectively supervise and manage the project, so moral hazard is also a private equity risk that investors often encounter.

1. What are the risks of private equity funds?

1. Legal and policy risks

For domestic private equity funds, the main problem at present is the lack of legal basis and policy support, which makes them on the edge of law and policy. So far, the provisions of China's Securities Law, Trust Law and other laws have not clearly defined the meaning, source of funds, organization and operation of private equity funds. The Securities Investment Fund Law was promulgated in June 5438 +2003 10, but due to many disputes, it still failed to "correct the name" of private equity funds. On the surface, many funds seem to have legal status, but if we delve into their business, some of them are easily associated with "underground fund raising" and "illegal fund raising". It is precisely because the legal status of private equity funds is not recognized that their business activities have always been outside the supervision of laws and policies. In the event of default, fund managers and investors are not protected by law, so they face great legal and policy risks, and the larger the fund, the higher the legal and policy risks.

2. Moral hazard

Is the organizational structure of private equity fund a typical entrustment? Agency mechanism, the limited partner hands over the funds to the general partner for operation, and only makes general provisions on the use of funds, and usually does not interfere with the specific operation of the fund manager. In the process of operation, both private fund managers and fund holders pursue the expectation of maximizing investment income. The harder the private fund manager works, the greater the income will be. However, in addition to fixed management fees, private fund managers can also get performance commission fees. When the performance commission fee is greater than the management fee, private fund managers will not adopt the investment strategy of maximizing the interests of both parties, because this choice can not maximize their own interests. On the contrary, it may abuse its power to pursue more personal interests and make the assets of fund holders bear greater risks. Therefore, even if private equity funds have superior incentive arrangements, the moral hazard of agents still exists.