Horn And Alarm: Equity Investment Market In Deep Water Area

Special planning for the Spring Festival: the equity investment market in the deep water area

On February 5, fasthand technology increased by more than 160% on the first day of IPO, making the investment institutions involved in the previous nine rounds of private equity financing earn a lot of money, which also created a good start for the IPO market in 2021.

According to the data of Qingke Research Center, in 2020, the trend of difficulty in raising funds in China's equity investment market will continue. The total scale of new fund-raising will be 11971414 billion yuan, down 3.8% year-on-year. Judging from the quarterly data, the fund-raising activities gradually returned to normal level and the fund-raising rhythm was obviously accelerated in the second half of the year thanks to the effective control of the domestic epidemic situation.

In terms of investment, in 2020, there were 7559 investments in China's equity investment market, with a year-on-year decrease of 7.9%, and the decline rate was narrowed; the investment amount was 887.149 billion yuan, up 14.0% year-on-year. Investment activity will pick up in the second half of 2020.

In terms of exit, there were 3842 exits in China's equity investment market in 2020, up 30.3% year-on-year; among them, there were 2434 IPOs of invested enterprises, up 54.7% year-on-year. Thanks to the implementation of the registration system reform in China, the number of IPO cases of domestic invested enterprises increased rapidly in 2020.

The data of the past year reflect the profound changes in the equity investment industry. What will happen to the industry in 2021? What insights do many mainstream investment institutions have on investment opportunities in the new year?

The limitation of insurance funds is loose, and bank financing funds return. A number of favorable policies for the PE / VC industry to send a new year gift package.

In the past 2020, RMB fund-raising is difficult to continue, and government guided funds and state-owned investors are still an important force in the equity investment industry.

Zhang Yang, CEO of Shengshi investment, chairman and general manager of Shengshi Jincai, observed that due to the change of investment entities, the requirements of LP for industrial chain layout, regional attribute and materialization and industrialization are also gradually improved.

Zhang Yang, together with Jiang Mingming and Qin Xiaojuan, established Shengshi investment in 2010, becoming one of the early explorers of private market-oriented RMB master fund.

In the past 10 years, Shengshi investment has been exploring the master fund, government guided fund management, PE secondary market and other fields, and has created a fund chain covering angel, VC, PE, M & A and other whole stages and industries.

In this "investment outlook" series, Zhang Yang makes an analysis on the changes in the equity investment market, new regulations on private equity supervision, market opportunities and risks.

21st century: as a LP, what significant changes have taken place in the equity investment market?

Zhang Yang: in terms of target allocation, due to the further smooth exit channels of the capital market, the wealth effect brought about by the science and technology innovation board has played a great exemplary role. Now, the allocation of hard technology in the long-term capital allocation has been significantly improved.

From the perspective of investors, the proportion of LP such as wealth management and individual investors in the equity investment market decreased, while the proportion of government guided funds and state-owned investors increased year by year. At the same time, the investor group is becoming more and more mature, and the investigation of the fund is becoming more comprehensive and long-term.

In terms of investment demands, the requirements for the layout of industrial chain, regional attributes, and the requirements for materialization and industrialization are gradually improved due to the change of investment entities.

"21st century": the performance differentiation of individual stocks in the secondary market, what are the impacts on PE / VC investment? What is the suggestion as an LP?

Zhang Yang: I believe that real practitioners in the equity investment industry are advocates of fundamental law. Both the primary market and the secondary market are equity investments. The difference is that the primary market can go through the cycle. As a LP, we appreciate the fund of team building and industry deepening. As long as the segment market is large enough and grows fast enough, it will be favored by investors in capital market and gain long-term capital appreciation.

21st century: China Securities Regulatory Commission issued new regulations on private placement supervision at the beginning of the year. What impact will this bring to the development of PE / VC industry?

Zhang Yang: the new regulation on private placement supervision should be the continuation of strict supervision since financial deleveraging. I believe that the regular institutions in the industry will support and welcome appropriate regulation. At the same time, we expect that the upper law of private equity fund industry can clarify the principle of moderate supervision and practice boundary as soon as possible. It is suggested that, according to the requirements of "China's rule of law construction plan (2020-2025)", legislation in emerging areas should be strengthened, innovation driven development should be promoted, and the gap of industry upper law should be filled as soon as possible.

21st century: make an industry outlook, where are the investment opportunities in the primary market in 2021? What are the risks that need to be vigilant?

Zhang Yang: in 2021, the primary market will continue to maintain its preference for high growth and high-tech industries. However, it should be noted that if the industry with high valuation in the secondary market is affected by the liquidity tightening, the valuation center will move down as a whole, and the conduction delay in the primary and secondary markets is likely to further form price inversion.

21st century: Shengshi investment is entrusted to manage more than 100 billion government guidance funds. How will it promote the sustainable and healthy development of PE / VC industry in the new year?

Zhang Yang: in addition to continuing to do a good job in the daily work of the master fund and the government guided fund, Shengshi investment will also promote the sustainable development of the equity investment industry in the following aspects: first, continue the strategy to deeply cultivate the second-hand share fund market of equity investment. Second, promote the application and development of ESG in the equity investment industry. Third, explore the theoretical basis of Chinese master fund.