Recently, a report caught the attention of the small dining table. The report points out that in the past two years, there has been a blowout phenomenon in the national QFLP (Qualified Foreign Limited Partner, hereinafter referred to as QFLP) pilot, and as of early 2024, there are more than 100 pilot areas across the country.
With this conclusion, Xiaofan Dining Table consulted several investment institutions and found that many investors have indeed begun to pay attention to the QFLP model, and even some investment institutions have completed the first phase of QFLP funds this year and are ready to continue to raise funds for the next phase.
An investor Aaron (pseudonym) told Xiao Dinner: "I am recently preparing to go to the local government to apply for the establishment of a QFLP fund, and I am studying policies in various places." Aaron said that although he is still in talks with the capital, he has referred to relevant policies in many places in China, and currently believes that it is relatively easy to land in the southern region, especially Hainan.
In addition, Henry (pseudonym), a partner of an investment institution in Shenzhen, revealed to Xiaofan Table that the first phase of the QFLP fund launched by it is nearing completion, and it is currently preparing to continue to carry out the second phase of fundraising cooperation with overseas LPs, with a scale of 3-500 million yuan.
Most investors have an objective and positive view of QFLP, and they generally agree that QFLP is an effective and innovative financial means in the primary market, which can bring new ideas and new hope for fundraising.
However, there are also some relatively conservative voices in the optimism, and some investors believe that although this is a positive signal, it is a double test for the top-level design of the market system and the foreign resources of investment institutions.
Of course, there is no shortage of pioneers in the market, and with the increase of pilots in various places, more and more investors are already on the way to QFLP.
"Sharp-eyed" investors are already on the way
"We are the QFLP fund established in 2018, the cycle is 4+2, and it expires just this year, and half of the funds have been withdrawn, and the rest is still slowly withdrawing." Henry said.
According to Henry, this QFLP fund has invested in a total of 5-6 projects since its inception, "after all, the total amount of the fund is only 100 million yuan, and there will not be too many investment projects." "These projects are concentrated in the leading companies in the two fields of medical and advanced manufacturing, because the fund is still focused on mid-to-late stage investment.
Henry told Xiao Fan Table that the fund is an asset management company under an overseas securities, and most of its investment projects are in the mature stage. Therefore, LPs hope that the project can be listed as soon as possible and exit as soon as possible, and at the same time, there are also requirements for DPI.
Among these projects, a leading company in the field of consumer electronics has been listed in 2022, and the fund has invested 4-5 years to complete the exit, and has received 3 times the return when exiting. "This is already a very good situation in the current market environment."
Henry said that in fact, there is no obvious difference between QFLP and general RMB funds in terms of specific industries and projects to invest in, as well as core requirements such as DPI and management fees. Focusing on the industry or depending on what domestic GPs are focused on and good at, every requirement and detail is also negotiated by both GPs and LPs.
"Like our day-to-day project investment work, Source resources are mainly responsible for domestic investment institutions. The other party's directors in the GP company and the members of the investment committee will only give some tips on financial risks, after all, we are investing in late-stage projects, the asset-liability ratio is relatively high, and there is still a risk control on issues such as capital liquidity. Henry said.
For GPs with professional capabilities, it may not be difficult to find good projects, but the most difficult thing is how to raise funds. The first step of QFLP is also how to find foreign currency resources.
Henry told Xiaofan Table that the foreign currency resources of this issue of QFLP are also their own resource accumulation, and they have had many cooperation with this securities company in business, and the establishment of the QFLP fund by the two parties is based on years of understanding and trust.
"The core of fundraising is to understand the demands of LPs, the expectation of yield, etc., to see whether the investment strategies of the two parties can reach an agreement." Henry said.
After the end of this fund, Henry plans to continue to negotiate with the securities company about the new QFLP fund, with an amount of 300 million to 500 million yuan.
The coast drives the whole country
"The market in the coastal areas is a little bit more active, so they launched it earlier." Dong Shuang, partner of Jingtian & Gongcheng, said.
It is understood that Dong Shuang's Jingtian & Gongcheng private equity fund team is one of the pioneers in the domestic private equity legal market, with rich experience in overseas and domestic funds, and participated in the first QFLP pilot in Shanghai in 2010.
Dong Shuang told Xiaofan Table that the original intention of China's QFLP pilot was to introduce foreign capital in the field of private equity investment in China, hoping to help the healthy development of the domestic private equity market by introducing overseas first-line GPs and overseas long-term capital (LP).
In Dong Shuang's view, the development path of the QFLP pilot in the country is also slowly unfolding from coastal to inland areas.
Taking Jiangsu as an example, in addition to Nanjing, Lianyungang, Suzhou Industrial Park, Kunshan, Wuxi, Changzhou, Yangzhou, Nantong and other places, Wujiang District, Huai'an, Xuzhou and other places in Suzhou City will also successively release and implement QFLP pilot policies in 2023.
The Midwest region has also continued to keep up in recent years. Xiaofantable learned that on the basis of the pilot policy at the end of 2022, Hunan and Kunming issued relevant implementation rules (implementation plans) in 2023 to officially launch the QFLP pilot. According to Dong Shuang, the current construction situation of QFLP pilots in Gansu, Shaanxi and other places has also been opened, and the pilot results are not bad.
Due to the large number of pilot areas where QFLP has been rolled out nationwide, and the access policies of various regions are different, each region will formulate subdivided management measures that suit its own development situation according to its own market economic situation.
Taking Jiaxing as an example, on the basis of its unified QFLP pilot policy, its subordinate districts and counties such as Nanhu, Haining, Jiashan, Tongxiang, Pinghu and Haiyan have formulated their own unique implementation plans.
Hainan is the region with the largest efforts and the lowest threshold among all cities in the country to carry out QFLP. It is understood that in 2020, Hainan introduced a QFLP pilot policy, showing three advantages: "free of joint review", "zero threshold" and "wide scope".
In particular, in terms of "exemption from joint review" and "zero threshold", Hainan Province stipulates that the establishment and registration process of Hainan QFLP fund managers and funds has cancelled the pilot qualification system for joint meeting review and replaced it with a "recommendation letter", that is, the relevant functional departments directly under the provincial government, the municipal (county) people's government (or authorized financial management units at the same level), and the management committee of key industrial parks can become Hainan QFLP fund managers and fund recommendation subjects.
At the same time, on the premise of meeting the basic requirements of the Asset Management Association of China, there are no additional requirements for the registration of Hainan QFLP fund managers and funds, including no restrictions on the registered capital or the amount of subscribed capital contribution, the proportion of initial capital contribution and the period of capital contribution.
This policy has indeed attracted some investors who want to set up a QFLP system to Hainan. The above-mentioned investor Aaron once told Xiaofan Table that because Hainan Province's policies have the advantage of lower thresholds than the whole country, and the process is relatively easy, he is still more willing to consider landing QFLP funds in Hainan.
Crossing the river by feeling the stones, and constantly optimizing policies
As a means of introducing innovative finance, QFLP has indeed sent a lot of positive signals to the market. By the end of last year, more than 100 provinces, municipalities and regions across the country had carried out QFLP pilots.
Since 2010, when Shanghai took the lead in piloting, Shanghai has become a benchmark for the national QFLP pilot market. According to data from the Shanghai Municipal Financial Supervision Bureau three years ago, Shanghai has become the region with the largest number of QFLP pilot enterprises in the country, with a total investment of more than 40 billion yuan.
On June 19, Zhu Hexin, deputy governor of the People's Bank of China and director of the State Administration of Foreign Exchange, publicly stated: "We support Shanghai in taking the lead in launching the Qualified Foreign Limited Partner (QFLP) foreign exchange management pilot to attract foreign investment in leading industries such as biomedicine and information technology." It has supported 163 multinational companies to set up capital pools in Shanghai, with a concentrated external debt quota of more than US$230 billion and an overseas lending quota of more than US$70 billion, continuously improving the efficiency of global capital management. ”
Schroders, Qianji Venture Capital, Kunhang Investment, etc., have issued the second or third phases of QFLP funds respectively, and institutions such as Jiawo and Hainahua continue to expand the scale of inbound funds.
Orient Asset Management, one of the four major asset management companies, Yifeng Capital, a leading venture capital institution in Asia, and CM Venture Capital, a well-known venture capital institution, have all submitted applications for the QFLP pilot in Shanghai and have been approved.
After years of exploration, at the top-level design level, some parts that can be optimized and adjusted have also been explored.
For example, an annual observation and outlook on QFLP and QDLP for cross-border funds (hereinafter referred to as the "Report") from Merits & Tree Law Offices pointed out that the policies of many QFLP pilot regions require "foreign-invested equity investment enterprises" (QFLP products) to be filed with the Asset Management Association as QFLP funds.
However, from the perspective of the supervision of private funds, if there is no domestic fundraising, it should not be deemed that a "foreign-invested equity investment enterprise" is a private fund regulated in China, and therefore does not need to be filed with the AMAC.
Therefore, in order to solve the problem that QFLP may encounter difficulties in filing with the Asset Management Association, some places have abolished the filing requirements. Hainan is one of them.
In 2022, Shenzhen, for example, issued a "patch" to its current QFLP business rules, exempting the filing requirements for QFLP products in specific situations. In 2023, more pilot areas (e.g., the Shaanxi Free Trade Zone) confirmed this principle through written documents or regulatory caliber.
So far, QFLP has been carried out in China for 14 years, although it is to learn from overseas financial experience to enrich the domestic financial introduction means. However, we can see that many regions in China have explored some development paths suitable for themselves.
It is believed that on the basis of better policies in the future, QFLP will open up new ideas for more investment institutions.