What is an equity investment fund? Equity investment funds are usually called private equity investment in China. From the perspective of investment methods, according to the definition of relevant foreign research institutions, it refers to the equity investment in private enterprises, that is, unlisted enterprises. In the process of transaction implementation, the future exit mechanism is considered, that is, through listing, mergers and acquisitions or management buyback, the shares are sold for profit. A few PE funds invest in the equity of listed companies (such as PIPE mentioned later). In addition, some PE investments, such as mezzanine, also use debt investment.

Characteristics of equity investment funds

1. In terms of fundraising methods, it is mainly raised by a few institutional investors or individuals through private placement, and its sales and redemption are conducted by fund managers or fund sales companies through private consultations with investors. In addition, the investment method is also carried out in the form of private placement, which rarely involves the operation of the open market and generally does not need to disclose the details of the transaction.

2. More equity investment is adopted, and debt investment is rarely involved. Therefore, PE investment institutions enjoy certain voting rights in the decision-making management of the invested enterprises. Reflected in investment instruments, common stock or transferable preferred stock and convertible bonds are commonly used.

3. Generally investing in private companies, that is, unlisted companies, and rarely investing in publicly issued companies, will not involve the obligation of tender offer.

4. It is more inclined to a molding enterprise that has formed a certain scale and generated stable cash flow, which is obviously different from VC.

5. The investment period is long, generally reaching 3 to 5 years or longer, which belongs to medium and long-term investment.

6. The liquidity is poor, and there is no ready-made market for the transferor of a non-listed company to directly reach a deal with the buyer.

7. There are many sources of funds, such as wealthy individuals, venture funds, leveraged M&A funds, strategic investors, pension funds and insurance companies.

8.PE investment institutions mostly adopt limited partnership system, which has good investment management efficiency and avoids the disadvantages of repeated taxation.

9. Diversified investment exit channels, including IPO, TRADESALE and M&A.

Second, the direct investment departments of large diversified financial institutions, such as Morgan Stanley Asia, JP Morgan Partners, Goldmansachsasia and Citiccapitaletc.

3. Newly established private equity investment funds after the promulgation of the Laws and Regulations on Sino-foreign Joint Venture Industrial Investment Funds, such as Hony Capital, Shenbin Capital and Admiralty Fund;

Fourth, the investment funds of large enterprises serve the development strategy and investment portfolio of their groups, such as GECapital.

5. Others such as Temasek and GIC.