What Is a Fund of Venture Capital Funds?

Venture capital funds, also called venture capital funds, are a new type of investment institution that is widely popular in the world today. It absorbs the funds of institutions and individuals in a certain way, and invests in those small and medium-sized enterprises and emerging enterprises that do not have the qualifications for listing, especially high-tech enterprises.

Venture capital fund

At present, venture capital funds in the world can be roughly divided into two types: European and Asian. The main difference between them is the investment target. The venture capital fund is a modern investment mechanism of "expert financing, collective investment, and risk diversification." For venture companies, financing through venture capital funds not only has no debt burden, but also can get expert advice to expand the advertising effect and speed up the listing process.

Especially in the high-tech industry, venture capital reduces the industry risk caused by the long investment cycle through expert management and portfolio investment, so that the high-risk and high-yield of the high-tech industry can be effectively balanced, so as to provide adequate development Stable funding. In addition, as an investor in venture capital funds, they can also obtain rich investment returns from the fund's higher economies of scale and successful investment operations.

In some countries with more developed venture capital, there are two main methods for issuing venture capital funds:

One is a private equity corporate venture capital fund. Usually by

1. Investment objects: mainly small, emerging or unestablished high-tech enterprises that do not have the qualifications for listing.

2. Investment cycle: Generally, the risk capital is 2-5 years.

3.

In the development process of venture companies from scratch, from small to large, venture capital funds not only provide funds for them, but also have a great impact on their corporate governance structure. The participation of venture capital funds in the corporate governance of venture companies is mainly carried out through a series of contracts. (I do nt need to hesitate to buy a bull back after a thousand bucks)

Tom Tunguz, the head of Redpoint Ventures, an American investment company, published an article in July 2012, comparing the current state of the venture capital market in the United States with its historical situation. Tangutz pointed out that compared with the average of the past 12 years, the number of companies engaged in venture capital, the total amount of funds invested, and the size of the overall venture capital fund are all decreasing in 2011. The specific analysis is as follows:

14% reduction in venture capital fund size

In 2011, 182 venture capital firms received investment, a number 16% lower than the average over the past 12 years. At the same time, the size of venture capital funds is 14% lower than the average over the past 12 years.

A development trend during this period is that more and more venture capital flows to well-known venture capital companies, which is the performance of investors in pursuit of the quality of venture capital. In the past, the top 25 venture capital companies accounted for about 30% of the entire market. In the first half of 2011, the financing amount of the top 10 venture capital companies accounted for 69% of the entire market. The increase in the size of large venture capital companies means that the size of small venture capital funds has fallen.

Venture capital speed remains average

Although VC financing is in a downward trend,

Credit risk: Includes the credit risk of bonds, instruments and other instruments invested by the fund, as well as counterparty risks of transaction-based investments, such as repurchase agreements.

Market price exposure risk: Market price exposure risk refers to the actual market value of money market funds, that is, the risk of deviation between the fund's net value and the fund's trading price (usually the face value of the fund), which is valued according to the market price method.

Policy risks: Changes in national macroeconomic policies such as fiscal policies, monetary policies, industrial policies, and regional development policies have caused market prices to fluctuate and affect fund returns.

Business cycle risk: With the cyclical changes in the economic operation, the return level of the securities market also changes cyclically, and the return level of fund investment will also change accordingly, resulting in risks.

Interest rate risk: Fluctuations in interest rates in financial markets will cause changes in the prices and yields of the securities market. Interest rates directly affect the price and yield of bonds, and affect the financing costs and profits of enterprises. The fund's investment in bonds and stocks may be affected by changes in interest rates.

Operating risks of listed companies: The operating conditions of listed companies are affected by a variety of factors, such as management capabilities, industry competition, market prospects, technology updates, financial conditions, and research and development of new products. If the listed company invested by the fund does not manage well, the stock price may fall, or the profit available for distribution may decrease, which will reduce the investment income of the fund. Listed companies may also experience unforeseen changes. Although funds can diversify this non-systematic risk through investment diversification, they cannot be completely avoided.

Inflation risk: The purpose of fund investment is to maintain and increase the value of fund assets. If inflation occurs, the income obtained by the fund from investing in securities may be offset by inflation, which will affect the value of the fund's assets.

Risk of bond yield curve change: The risk of bond yield curve change refers to the risk associated with non-parallel movement of the yield curve. A single duration indicator cannot fully reflect the existence of this risk.

Reinvestment risk: The decline in market interest rates will affect the reinvestment yield of interest income on fixed income securities, which is mutually offset by the price risk brought by rising interest rates.

Credit risk: In the course of trading of the fund, there may be defaults in the settlement of the fund or the issuer of the bonds invested, defaults, and refusal to pay the principal and interest due, etc., resulting in loss of fund assets.

Management risk: The professional skills, research capabilities, and investment management level of fund managers directly affect their possession of information, analysis and judgment of economic situation and securities price trends, and then affect the investment income level of the fund. At the same time, whether the fund manager's investment management system, risk management and internal control system are sound, whether it can effectively prevent moral hazard and other compliance risks, and the professional ethics level of the fund manager will also affect the fund's risk return level. Make an impact.

Liquidity risk: China's securities market, as an emerging transition market, has a high overall liquidity risk. The stocks and bonds in the fund's investment portfolio will face higher liquidity risks due to various reasons, making the execution of securities trading more difficult, and the cost of buying or realizing will increase. In addition, the redemption demand of fund investors may cause difficulties in adjusting fund positions and realizing assets, which may increase liquidity risks.

Operational and technical risks: During the operation of various business links, relevant parties of the fund may cause risks due to inadequate internal control or human factors causing operational errors or violation of operating procedures, such as unauthorized trading, insider trading, transaction errors and fraud . In addition, in the back-end operation of open-end funds, due to technical system failures or errors, the normal conduct of transactions may even affect the interests of fund unit holders. Such technical risks may come from fund managers, fund custodians, registrants, sales agencies, stock exchanges and securities registration and settlement agencies.

Compliance risk: refers to the risk of violating national laws, regulations or relevant provisions of the fund contract during the management or operation of the fund.

Other risks: (1) risks arising from the imperfections in system construction, staffing, risk management and internal control due to the rapid development of fund business; (2) risks that may arise due to financial market crisis and industry competition pressure; 3) The emergence of force majeure factors such as war and natural disasters may seriously affect the operation of the securities market and cause loss of fund assets; (4) other accidental risks.