What Is the Private Fund Market?
Definition of the Private Fund Market
Private funds cannot be publicly offered or promoted, and they require high investment amounts, with strict restrictions on investor qualifications and numbers. Compared to public funds, private funds offer greater operational flexibility, allowing investments in derivative financial products, short selling, as well as speculative trading in foreign exchange and commodity futures.
Qualified investors in private funds refer to institutions and individuals with the ability to identify and bear risks, who invest at least RMB 1 million in a single private fund and meet the following criteria: institutions with net assets of no less than RMB 10 million, or individuals with financial assets of no less than RMB 3 million or an average annual income of no less than RMB 500,000 over
the past three years.
Private funds are subject to moderate and baseline regulatory principles. The China Securities Regulatory Commission (CSRC) oversees private funds under the Securities Investment Fund Law and the Interim Measures for the Supervision and Administration of Private Investment Funds, while the Asset Management Association of China (AMAC) conducts self-regulation of member institutions in accordance with industry rules.
Private Fund Market:
According to the Interim Measures for the Supervision and Administration of Private Investment Funds, private investment funds (hereinafter referred to as private funds) are investment funds established within the territory of the People’s Republic of China that raise capital from investors through non-public offerings.
Private fund investments include trading stocks, equity, bonds, futures, options, fund shares, and other investment targets specified in the investment contract.
Private funds are mainly categorized into four types:
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Private Securities Funds: Primarily invest in publicly traded stocks, bonds, futures, options, fund shares, and other securities and derivatives as stipulated by the CSRC.
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Venture Capital Funds: Mainly provide equity investments to growth-stage enterprises at various entrepreneurial phases.
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Private Equity Funds: Primarily invest in non-publicly traded enterprise equity, excluding venture capital funds.
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Other Categories of Private Funds: Invest in areas other than securities, derivatives, and equity.