Private equity fund investors can negotiate with fund sponsors to determine the investment direction and objectives of the fund, which has the nature of agreement. Fund sponsors unilaterally decide related matters, and investors passively accept them. Its sale and redemption are carried out by the fund manager through private consultation with investors.
In view of the characteristics of private equity funds, compared with Public Offering of Fund, private equity funds have the following advantages: (1) Because private equity funds face a few specific investors, their investment objectives may be more targeted, and they can provide tailor-made investment service products according to the special needs of customers; (2) Generally speaking, private equity funds require fewer procedures and documents and are subject to fewer restrictions. General regulations are not as strict and detailed as public offering funds. For example, if the investment restrictions on a single stock are relaxed, an investor can hold more than a certain proportion of fund shares, and the minimum limit on the size of private equity funds is even lower. Therefore, the investment of private equity funds is more flexible; (3) In terms of information disclosure, private equity funds don't need to disclose detailed investment portfolios regularly like Public Offering of Fund. Generally, they only need to announce their investment portfolio and income privately for half a year or one year. The government's supervision over them is far looser than that of Public Offering of Fund, so the investment is more hidden and the chances of getting high returns are greater. However, private equity funds also have obvious defects: private equity funds are relatively loosely regulated by the government, and their operation lacks transparency, and there may be illegal acts such as insider trading and market manipulation, which will not be conducive to the protection of fund holders' interests. Although they may get higher returns, they contain greater investment risks, such as moral hazard and agency risk of fund managers. In addition, the number of fund securities issued in this way is generally small, and investors' recognition and liquidity are poor, so they cannot be listed and traded. (4) The entry threshold for private equity funds is relatively high, much higher than 1 10,000 yuan in Public Offering of Fund, and it is a place for rich people to play.
There is a private equity fund called Sunshine Private Equity Fund, which is issued by a trust company and filed by the regulatory authorities. It mainly invests in the secondary securities market, and the funds are managed by a third-party bank, and its performance reports are published regularly. The area between Sunshine Private Equity Fund and general (so-called "grey") private equity funds.
More importantly, it is mainly standardized and transparent, because issuing on the platform of trust companies can ensure the safety of private subscribers' funds. Sunshine private equity funds generally only refer to private equity funds issued in an "open" way. The so-called openness means that fund subscribers need to bear all investment risks and enjoy most of the investment income. Private equity firms do not promise returns. The profit model of private fund management companies is generally about 2% of the total fund management fee, and 20% of the investment profit is used as commission income, which is also commonly known as the "2-20" charging model (2% management fee +20% profit commission). This 2-20 charging model is a popular charging model for private equity funds in the world. The famous Soros Fund, Tiger Fund and Huili Fund in Hong Kong all adopt this charging model.