A far-reaching metabolism is going on in the body of the private equity industry.
Since the beginning of this year, in the face of frequent chaos in the private equity industry, supervision has continued to increase. For example, recently, Guangdong Securities Regulatory Bureau issued supervision letters to 7 private equity managers within 8 days, and Shenzhen Securities Regulatory Bureau announced 6 administrative supervision measures decisions within 1 day. In addition, data from the Asset Management Association of China (hereinafter referred to as AMAC) shows that as of June 6, the AMAC has cancelled more than 2,000 private equity institutions over the years.
Faced with the escalating measures of the regulatory authorities to “support the good and limit the bad”, many private equity managers have improved the company’s compliance and risk control level by recruiting compliance professionals and strengthening employee compliance training. Client management and equity performance.
Directly hit the sinking: there is nowhere to hide from illegal operations
The private equity fund industry officially entered the era of 20 trillion yuan at the beginning of this year, becoming an indispensable and important force in the asset management industry.
However, the galloping private equity fund industry still has stubborn problems such as “illegal fundraising”, “loss of contact”, “promise to keep capital and just cash”, and “self-merging in disguise”. In this regard, the supervision has hit hard to regulate the compliance of private equity institutions.
The strengthening of supervision has accelerated the clearing process of “pseudo private equity” and “chaotic private equity”. The information published by the China Foundation Association shows that as of June 6, 2092 private equity institutions have been cancelled by the China Foundation Association due to violations, including Chunxiao Capital, Chuangshixiang and other former star venture capital and champion private equity. Judging from the annual cancellation data, the number of private equity institutions cancelled by the China Foundation Association from 2018 to 2021 was 90, 516, 608 and 593 respectively. The number of private equity institutions has also exceeded 200.
“In the past, private equity institutions grew savagely, and most small private equity firms did not even have special compliance and operation positions, and there were loopholes in product raising, operation, post-investment management, investor suitability management and other aspects. Illegal operations show a zero-tolerance attitude, which greatly reduces the space for private equity institutions to operate improperly, and the concept of compliance first has gradually become a consensus among private equity institutions.” said Rong Hao, partner of private equity Pai Pai Wealth Management.
Compliance First: Private Equity Firms Face the Law of Survival
In addition to eliminating the stubborn diseases of the industry, the regulatory authorities have also introduced many “supporting and excellent” policies in recent years.
Since February 2020, China Foundation Association has carried out the pilot work of the private equity fund product filing system, so that resources are gradually tilted towards high-quality private equity institutions. On June 2 this year, the China Foundation Association released the updated “List of Application Materials for Private Fund Manager Registration” and “Key Points for Private Investment Fund Filing”, which further refined the professionalism and compliance requirements of private equity institutions. It provides convenience for private fund managers and applicants to handle registration and filing business.
The continuous escalation of regulatory measures to support the good and limit the bad has led many private equity managers to re-examine and improve their own compliance and risk control systems.
“In the past, the company did not have special compliance positions, and they were all held by other positions. However, in the past two years, the frequency of random inspections by the regulatory authorities has increased significantly, and the measures to support the good and limit the bad have been continuously upgraded. For the sake of long-term development, the company recruited last year. A new compliance director has been appointed. The director has been working in a large asset management institution for a long time and is very experienced. I hope that the company’s processes will be more professional and standardized in the future.” said a tens of billions of private equity executives in Shanghai.
Relevant recruitment information shows that whether it is a newly established private equity or a head agency, senior compliance talents are being recruited.
For example, tens of billions of quantitative private equity Jukuan Investment is recruiting compliance managers, requiring applicants to be familiar with industry regulatory policies, corporate internal control norms and other regulations. Jinjiang Heming Assets, which has just been established for 2 years, is also recruiting compliance managers, requiring more than 2 years of legal compliance work experience in public or private securities funds. Wang Huan, chairman of Zige Investment, revealed that although Zige Investment is a cutting-edge private equity firm that has been established for less than two years, the company has placed compliance and stable operation in an important position from the very beginning, and has set up special personnel to be responsible for risk control and compliance work. supported on the system.
“In terms of internal control and risk management, the company has recruited a number of senior managers, set up senior management positions for compliance and risk control, and paid attention to the establishment of firewalls, as well as the qualifications and professional assessment of personnel involved in each link.” He Jinlong, general manager of Li Investment, said.
Ren Bo, deputy director of Mingsheng Dongcheng Investment, also believes that the standardized development of the private equity industry will help to further play the important role of private equity in residents’ wealth management and serving the real economy. Therefore, since its establishment, the company has continuously improved its compliance risk control system by strengthening compliance training, improving employees’ compliance awareness, and actively recruiting compliance talents.
Back to the Origin: Head Private Equity Starts Healthy Competition
In the context of a consensus that compliance comes first, a reporter from the Shanghai Securities News found that the healthy competition of top private placements has quietly started.
According to the data of the tripartite platform, as of May 31, the number of private placements worth 10 billion yuan reached 109. Compared with the beginning of the year, five private placements including Hefu Investment, Tongben Investment, Wangzheng Asset, Jiaken Asset and Yude Investment have dropped out. In the tens of billions of echelons, Egret Assets, Renqiao Assets, etc. bucked the trend and entered the top ranks.
Xia Junjie, founder and investment director of Renqiao Asset, pursues contrarian investment and attaches great importance to the safety of valuation. Although he has never become the performance champion in a certain year, his medium and long-term returns are stable. Egret Asset Management is a quantitative private placement. It has layouts in stock alpha, CTA, options, etc., and mainly adopts compound strategies. Its multi-strategy products have performed steadily this year.
“With the rapid development of the industry, competition will inevitably become more intense. However, today’s competition is no longer a competition for short-term ultra-high performance, but on the basis of adherence to compliance, focusing on customer service levels, performance stability, and income diversification. contest.” A private equity researcher said bluntly.
Wang Jun, chief strategist of Black Wing Assets, said that as the private equity industry gradually enters a stage of high-quality development, short-term performance is no longer the winner, and “going steadily” and “going long” are the keys to winning in the future. Therefore, the company will adhere to the concept of diversified investment, build a multi-level risk control system, and provide investors with a long-term and stable investment experience.
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