what is a sovereign fund?

The latest international development trend is to set up sovereign wealth funds and set up professional investment institutions that are usually independent of the central bank and the Ministry of Finance to manage these funds. The principle of commercialization, specialization and independence should be the key to the establishment of China's Sovereign Wealth fund

The so-called sovereign wealth, corresponding to private wealth, refers to the public wealth accumulated by a government through specific tax and budget distribution, renewable natural resources income and balance of payments surplus, which is controlled and dominated by the government and usually held in foreign currency.

traditionally, the management of sovereign wealth is very passive and conservative, and its impact on domestic and international financial markets is also very limited. With the rapid increase of sovereign wealth in recent years due to the soaring international oil price and the expansion of international trade, its management has become an increasingly important issue. The latest development trend in the world is to set up sovereign wealth funds and set up professional investment institutions that are usually independent of the central bank and the Ministry of Finance to manage these funds. By the end of 26, the total assets managed by global sovereign wealth funds reached about $1.5 trillion to $2.5 trillion, most of which were distributed in oil-exporting countries and export-oriented economies.

With the rapid increase in the number and scale of sovereign wealth funds, the investment management style of sovereign wealth has become more active. Its asset distribution is no longer concentrated on G7 fixed-rate bonds, but focuses on global diversified asset portfolios including stocks and other risky assets, and even extends to foreign real estate, private equity investment, commodity futures, hedge funds and other non-traditional investment categories. Sovereign wealth funds have become an increasingly active and important participant in the international financial market.

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what is a private equity fund?

the so-called private equity fund refers to a fund set up to raise funds for a small number of institutional investors in a private way. Because the sale and redemption of private equity funds are carried out through private consultation between fund managers and investors, it is also called a fund raised from a specific target.

Compared with Public Offering of Fund, such as closed-end funds and open-end funds, private equity funds have very distinct characteristics, which make them have incomparable advantages in Public Offering of Fund.

first, private equity funds raise funds in a private way. In the United States, Public Offering of Fund, such as Tong Fund and Pension Fund, generally advertise through the public media to attract customers, while according to the relevant regulations, private equity funds are not allowed to use any media to advertise, and their participants mainly join through the so-called "reliable information on investment" or directly know the fund managers.

Secondly, in terms of fundraising targets, the target of private equity funds is only a few specific investors, and the circle is small but not low. For example, in the United States, hedge funds have very strict regulations on participants: if they participate in the name of individuals, their annual income in the last two years will be at least 2, US dollars; If you participate in the name of the family, the family's income in the past two years is at least 3, US dollars; If you participate in the name of an institution, its net assets are at least 1 million dollars, and there are corresponding restrictions on the number of participants. Therefore, private equity funds have strong investment objectives, which are more like investment service products tailored for middle-class investors.

Third, unlike the strict information disclosure requirements in Public Offering of Fund, the requirements of private equity funds in this respect are much lower, and the government supervision is also relatively loose, so the investment of private equity funds is more concealed, the operation is more flexible, and the chances of obtaining high returns are greater accordingly.

In addition, a notable feature of private equity funds is that fund sponsors and managers must invest their own funds into fund management companies, and the success of fund operation is closely related to their own interests. Judging from the current international practice, fund managers generally hold 3%-5% of the shares of the fund. Once losses occur, the shares owned by the managers will be used to pay the participants first. Therefore, the promoters, managers and funds of private equity funds are as close as lips and teeth, and the interests of honor and disgrace and * * * * are the same body, which also solves the inherent weakness of managers' interests and insufficient incentive mechanism in Public Offering of Fund to some extent.

Public offering means public offering. There are two meanings of publicity: the first is that you can advertise and raise money from all people you know and don't know. The second is that the number of objects raised is relatively large, for example, it is generally defined as more than 2 people.

Private Placement means private offering or private placement. The meaning in private is as follows: First, no advertising. Second, it can only be raised from specific targets. The so-called specific object has two meanings, one is that the other party is rich and has certain risk control ability, and the other is that the other party is a specific industry or a specific category of institutions or people. Third, the number of private placements is generally small, such as less than 2 people.

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what is a hedge fund?

Many people may have heard of hedge funds, and they may still remember some hedge funds that played an important role in the Asian financial crisis, but what exactly are hedge funds?

At present, there is no uniform definition of hedge fund, and its essence is still nothing more than a kind of mutual fund, but it has the following two particularities:

First, in terms of fund organization, the number of fund investors (including individuals and institutions) is small. For example, it is a bit like a "rich investment club", but in contrast, it is ordinary. Funds are mainly issued by private placement, so most hedge funds belong to private placement.

Secondly, in terms of investment, it is generally believed that the main feature of hedge funds, which is different from other funds, is that they use more leveraged financing and invest in financial derivatives such as options and futures. On the one hand, under the same market environment, the income of hedge funds may be obviously different from that of ordinary funds; On the other hand, the amplification of leveraged financing and financial derivatives can increase the expected return, and if it is used improperly, it may also increase the investment risk.

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