The external risks faced by private equity funds mainly include policy and regulation risks, market risks and funded enterprise risks.

1, policy and regulatory risks

Because China's capital market is in the early stage of development and the laws and regulations are not perfect, compared with the long-established western capital market, the supporting measures are uneven, and the risks faced by private equity funds are also relatively large. At the same time, the government supervision is relatively weak, and the operation process also lacks the support of relevant laws. The first is the imperfect system. At present, China still has no complete laws and regulations to protect and supervise the interests of both private investment and financing, and the whole process of private investment and financing activities faces great legal risks; Secondly, with the rapid development of private investment, local governments or non-governmental organizations will play a negative role for their own interests, so that the actual operation is accompanied by the risk of local protectionism; Third, the laws and policies on private equity investment in various countries are not consistent enough. China's early private equity investment was mainly foreign capital. With the development of local financial market, laws and policies related to transnational private equity investment need to be improved to meet the needs of market development.

2. Risk of market fluctuation

Private investment is closely related to the securities market and involves a series of financial problems. The fluctuation of securities price, exchange rate and bank interest rate in the financial market will all affect the implementation of private investment, making the actual return on investment lower than expected. In addition, there is inflation risk in the operation of market economy, which makes the purchasing power of money decline relatively, which has an adverse impact on the expected income of private equity funds. Generally speaking, the investment period of private equity funds is as long as three to five years, but the equity liquidity of non-listed companies is poor, and there is no mature market to withdraw quickly, which also reduces the efficiency of private equity funds and prolongs the withdrawal period.

3. Risks of funded enterprises

The income of private equity fund investment is closely related to the operating conditions of the invested enterprises. However, due to the limitations of their own management, technology, market and finance, the invested enterprises will put private equity security funds under joint pressure. Among these risks, management risk has the greatest impact, that is, the risk brought by the mistakes of the invested enterprises in the process of operation and management. Management risk is influenced by the personal quality of financing entrepreneurs, the organizational structure of financing enterprises and the ability of management team.

For other risk tips, please refer to notice /vc.html in the specific product contract.