The following is the essence excerpted from the keynote speech by Chen Wenzheng, the managing partner of Qianhai FOF:

1. Development of domestic equity investment industry

Nowadays, GP has entered a stage of survival of the fittest. From the perspective of fundraising, in 2016, there was approximately 1.6 trillion yuan; In 2017, there was approximately 2.5 trillion yuan; In the first half of 2018, there were only a few hundred billion. People generally feel that fundraising is difficult. Meanwhile, resources will definitely be concentrated towards the top. A large number of start-up companies may face difficulties in fundraising later on, making them difficult to be the top of the list. And those who could really be the best, everyone chases after them, and most of the money was waiting for them. Also, the institution should patiently seek for the precious enterprises. The best investment period is when the market situation is not good and when people are pessimistic about the industry. During the 2008 US financial crisis, market funds were tight, and if the invested companies developed, those investors could receive substantial returns.

Because the entire market environment is changing, the tasks of management are also different. Firstly, the listing cycle has been extended, and now the threshold for domestic A-shares has been further raised. Besides, the economic downturn will increase management pressure, and if your company's business performance does not meet the standards, it will be even more difficult to obtain financing in the future.

2. How do excellent institutions stand out?

Characteristics of Excellent Institutions: Team, Strategy, Execution, and Reputation.

Firstly, team. There must be a soulful figure in the team. Secondly, investment strategy. It should adapt to the situation and grasp the development trend of the industry; and it will focus on areas of expertise. Thirdly, execution. The institution need to have enough project coverage. When competing for projects, it not only needs to control risks, but also have fast enough decision-making efficiency. In addition, post investment services are also important. Lastly, good reputation. The reputation of funds in the industry is very important.

How can new institutions stand out? There are many new GPs emerging now, so what are the advantages of excellent institutions? We are more concerned about the following aspects.

Firstly, team;

Secondly, enough money.

Thirdly, the rich source of the project.

Fourth, what resources can be provided for the project.

3. Operation and management of the FOF

The combination of fund investment and direct investment has formed a fast, efficient, and cost-effective business model. The core of selective direct investment by the FOF is the recommendation of projects by the sub fund. On this basis, the FOF has truly achieved the selection of the best among the best, and the project sources are relatively abundant, and investment decisions are also relatively fast. The FOF combines sub funds with direct investment projects to create better returns for investors.

The good returns of the FOF generally come from three aspects.

Firstly, select the appropriate sub fund. We may have looked at over 500 sub funds, but only invested in over 40. I need to ensure that my sub fund will definitely have higher returns than most sub funds in the market;

Secondly, I am selectively investing directly, and each sub fund cannot guarantee 100% project success or high returns. If we can increase the success rate a bit, such as raising the success rate of the sub fund from 30% to 50%, then the return of my FOF may be higher than the average level of general funds;

Thirdly, short-term capital return arrangements. Due to my large scale, I am able to allocate liquidity. For example, by setting aside the over 5 billion yuan invested by investors at the beginning of the year and gradually releasing it over the course of a year, it can generate short-term returns under our arrangemet that are two to three points higher than typical funds. Especially in economically well developed areas like Shenzhen, there are still many opportunities to make such arrangements.