Kunlun Trust Development Research Weekly Information No. 174

Research Results
2014/11/04 15:38


Trust PE business: new opportunities for transformation

With the intensification of the competition in the traditional trust business and the tighter regulation of the financing trust business, the enthusiasm of the trust companies in investing in the business of investment has once again risen. More and more trust companies have set up or are planning to set up PE subsidiaries. Instead of relying on channel financing, they will start a real private equity investment business and seek new opportunities for transformation.

PE business has not yet spread

Depending on the stage of development of an investee, private equity investments can be subdivided into angel investments, venture capital, growth capital, Pre-IPO and mergers and acquisitions. As early as the "one law two rules" promulgated soon, the trust company began to try PE business, in April 2007, Hunan Trust and CITIC Trust respectively launched the "Shenzhen Fortune Trust Venture Capital Investment Products Portfolio No. 1 Trust Fund" and " CITIC Fairview Park on the 1st equity fund trust plan. " However, as the trust industry is most prevalent during the Great Leap Forward, the channel business and traditional private equity investment banking business, combined with the lack of specialized PE talent pool, the trust companies have not been particularly active in the PE business.

At the regulators' level, the Bank is encouraged by the PE business of trust companies and has introduced relevant policies. In June 2008, China Banking Regulatory Commission (CBRC) issued Operation Guide for Private Equity Investment Trust Business of Trust Company, which made clear that private equity investment trust business includes the investment of shares of unlisted companies, tradable shares restricted by listed companies and other shares. In June 2011, the non-banking department of the CBRC started to draft Guidelines for the Establishment of Subsidiary Companies of Trust Companies, specifying that the trust companies can set up PE subsidiaries through the establishment of PE subsidiaries. In 2014, the CBRC issued Circular 99 to vigorously develop real Equity investment.

With the economic and policy environment entering a period of adjustment, the space for traditional private equity investment banking is shrinking. With the re-opening of A-share IPOs, trust companies will look back on PE. This year, many trust companies began to aggressively deploy the PE field. Zhongrong Trust has raised capital of 500 million yuan to Beijing Zhongrong Dingxin Investment Management Co., Ltd., its subsidiary of PE, and recently launched a fund trust plan of Zhongrong Rongrun-1 on Zhongxing Animal Husbandry for the society. Shanghai Trust invested to set up a PE subsidiary called Shanghai Puyaoxinye Investment Management Co., Ltd. with a registered capital of 10 million yuan. Huaneng Trust, Fortune Trust and Minsheng Trust are also preparing their PE businesses.

However, since many trust companies accustomed to the existing debt investment business model, the lack of corresponding PE business resources and talent pool, and do not know much about the risk control of PE business, rashly set up PE subsidiaries will give the company short-term business with To a certain degree of uncertainty, so for the conduct of PE business is still cautious.

PE industry is facing restructuring

Although the PE business has started to enter the eyes of more trust companies, the PE industry itself is undergoing continuous transformation and change. Many PE agencies that have long been doing PE business are facing a new round of reshuffling. For now, the transformation of the PE industry has the following three characteristics:

First, the traditional Pre-IPO business is highly competitive and its space is shrinking. In the past few years, the private equity investment in our country has been dominated by Pre-IPO. Because China implements IPO approval system, there is a huge premium in Tier-2 capital market over Tier-1 capital market, and the Pre-IPO project can naturally obtain high returns. However, since 2009, various funds have joined the competition for Pre-IPO projects, and the investment cost has soared. Frequent suspension of IPO is to lengthen the investment exit cycle, making the increasingly fragile PE industry worse. Even though IPO registration reform can shorten the exit cycle of investment, the uncertainty of the exit of PE investment at a premium will still increase greatly as the premium factor other than liquidity will disappear between primary and secondary capital markets.

Second, a large number of PE institutions began to backward restructuring, mergers and acquisitions into the field of business. Due to the favorable corporate restructuring policies, the M & A activity of China's enterprises significantly increased in 2013. In 2014, the CSRC further revised the Measures for the Management of Major Assets Reorganizations of Listed Companies and the Measures for the Administration of Acquisitions of Listed Companies, and committed to promoting the market-based M & A Reorganization. With the implementation of the system of market makers in the new Third Board, the exit mechanism of corporate equity has been further improved. The merger and acquisition business involving the new three-board listed companies is forming a wave in PE institutions.

Third, part of the powerful PE institutions to seek forward restructuring, making growth capital and VC. Unlike Pre-IPO, Growth Capital / VC invests in earlier-stage enterprises. Investment institutions need to not only help investees improve their operations management, but also provide support for their business expansion. Industry expertise and quality value-added services are the core of an investment institution Competitiveness. As Pre-IPO business is not professional, forward restructuring for many PE agencies face greater resistance and uncertainty, the current PE from Pre-ipo field of traditional PE forward most of the PE companies have a long history, capital Strong, professional team with the agency.

Trust companies involved in the proposal

In the past few years, trust companies have little accumulation of resources and experience related to Pre-IPO, and do not have the advantages compared with PE institutions. With the intense competition in Pre-IPO market and huge shrinkage of profit margin, trust companies have started to invest in private equity Pre-IPO should not be the main business direction. According to the development of the PE industry, private equity investment should be dominated by mergers and acquisitions and specialized growth capital / VC investments by trust companies at this stage.

In the area of ​​mergers and acquisitions business, the trust companies and PE institutions are standing at the same starting point. Trust companies should seize the historical opportunity of the M & A market and carry out M & A business in various forms. From the perspective of investment, M & A funds in Europe accounted for more than 80% of the global venture capital fund M & A funds accounted for more than 40%, while the domestic share of less than 10%, so long-term investment institutions to carry out mergers and acquisitions in China Business has broad space for development.

In the field of growth capital / VC, trust companies can try to focus on the strategic layout of several industries and may need to give play to their advantages in the background of shareholders and introduce industry professionals to establish their core competitiveness. As China's technology upgrades, consumer upgrades and service upgrades, the core competitiveness of investment institutions still able to capture investment opportunities, thus gaining a place in the market.

Emphasis on institutional funds to raise

Institutional fund-raising capability is an important guarantee for private equity investment. Whether it is mergers and acquisitions or growth capital investment, the investment cycle of such businesses ranges from 3-5 years to more and then as long as possible. Individual investors generally lack a sound long-term asset allocation plan, with low maturity of investment, strong personal discretion and high demand for liquidity. They are not a steady source of funding for the private equity investment business. The institutional investors not only large amount of funds, but also long-term asset allocation planning, can provide a stable financial support for the private equity investment business.

Therefore, in addition to setting up PE subsidiaries and introducing corresponding talents from PE institutions, trust companies should raise their own institutional fund-raising ability to carry out private equity investments, especially for those long-term capital providers such as listed companies and insurance institutions, To provide a stable source of funding for business development.

Macro situation

State Department: Promote the development of the Yangtze River Economic Belt and build a three-dimensional traffic corridor

On September 25, the State Council issued the Guiding Opinion on Relying on the Golden Waterway to Promote the Development of the Yangtze River Economic Belt. At the same time, it announced the "Three-dimensional Traffic Corridor Planning for the Yangtze River Economic Belt (2014-2020)". In the future, the Yangtze River Golden Waterway, the Co-ordinated Railway Speeding up the development of multimodal transport and establishing a safe, convenient, green and low-carbon integrated three-dimensional traffic corridor to enhance the strategic support for the development of the Yangtze River economic belt .

China Banking Regulatory Commission: The end of August the total banking assets of 162.73 trillion 14.9%

China Banking Regulatory Commission September 25 released data show that as of the end of August this year, China's banking sector total assets of 162.73 trillion financial institutions, an increase of 14.9% over the previous year. Among them, the total assets of commercial banks 126.27 trillion, an increase of 14.7%, accounting for banking financial institutions accounted for 77.6% of assets. As of the end of August, total liabilities of banking financial institutions stood at 151.42 trillion yuan, up 14.6% over the same period of previous year, a decrease of 0.1 percentage point from the growth rate of 14.7% at the end of July and down by 2 months since July . Among them, the total liabilities of commercial banks 117.42 trillion, an increase of 14.4%, accounting for banking financial institutions accounted for 77.5%.

SAFE: No significant changes in capital inflows and outflows will cancel restrictions on capital exchange

Relevant person in charge of the State Administration of Foreign Exchange on September 25 at the third quarter routine press conference said that China's capital account liberalization is a gradual process. The next step will be to phase out capital account restrictions on foreign exchange. There is no obvious change in capital inflow and outflow. In addition, the SAFE disclosed that in Qingdao found false trade-related documents, a nationwide discovery of the total amount of 10 billion U.S. dollars false re-exports, will continue to crack down on illegal trade financing. SAFE believes that the risk of China's foreign debt is very low, Chinese enterprises should make greater use of foreign exchange hedging instruments.

Ministry of Finance: Announce the operation of state-owned enterprises in January-August

The website of the Ministry of Finance announced the economic operation of the state-owned and state-controlled enterprises nationwide from September to August 2014. From January to August 2014, the total revenue from state-owned enterprises was 31,177.7 billion yuan, an increase of 5.5% over the same period of last year; the total operating cost was 300,775.4 A billion yuan, an increase of 5.7% over the same period of last year; the total profit was 1,644.111 billion yuan, an increase of 8% over the same period of last year. From January to August, the total revenue growth of state-owned enterprises continued to slow down year-on-year, while the year-on-year growth of total profit dropped while the cost growth continued to rise higher than that of revenue. In terms of the industries, the profits realized by the steel, transportation and other industries continued to maintain a relatively large increase. The profit drop in the coal, chemical and other industries was still evident. The non-ferrous industry still did not get rid of the losses.

Central Bank: The end of net capital injection, the net return of funds this week 11 billion yuan

The open market of the central bank conducted a 14-day repurchase operation on Thursday with the successful interest rate unchanged at 3.50% on the open market of $ 18.0 billion on the day and a repurchase period of 14 billion days on the open market on the day of expiry. Based on this, the net open-back of the open market Eight billion yuan. On Tuesday, the public market repurchased 18 billion 14 days and realized the net withdrawal of 3 billion on the same day. This week (Sept. 20-Sept. 26 - Sept. 26), there are 25 billion yuan repurchase due in public market, without central voting and reverse repo maturity. Based on this projection, the net return of 11 billion this week, the end of the previous continuous net operation.

Comments: In order to adjust the structure to promote reform considerations, this year's monetary policy mainly oriented regulation and control, the possibility of a comprehensive easing is small, a large area of ​​interest rates cut interest rates difficult to move, then the open market operating interest rate changes also need to wait for the late Economic status

Industry News

China Trust 2013 Social Responsibility Report was released

On September 19, 2013, "China's Trust Industry Social Responsibility Report 2013" was officially released by the China Trust Association. Report from the steady development of compliance with laws and regulations, help real economic development, Qingli protect the interests of beneficiaries, and promote the improvement of well-being in people's livelihood, and actively promote social welfare, and strive to build a beautiful China, to fully support staff growth and steady progress in responsibility management eight aspects of comprehensive and vivid It shows the efforts and achievements made by the Chinese trust industry in fulfilling their social responsibilities in 2013. With the development of the trust industry and the effective functioning of its functions, all social parties will give higher expectations and expectations to the social responsibilities of the trust industry, and the trust industry will certainly continue to strengthen its social responsibility work.

CITIC Trust: Launched the First Single Internet Consumer Trust in China

CITIC Trust cooperated with Baidu Finance, China Film and Durham in Beijing to jointly launch the "Internet Marketing" movie consumer Internet service platform on the 21st and explore a new Internet financial business model of "consumer crowdfunding + film + trust". By focusing on the dual attributes of "consumer + finance" in the film culture industry, the trust product incorporates the popularity rights of the popular movie "The Golden Age" and its peripheral products into the scope of trust. Consumers get involved in the pre-sale or group purchase of the " Movie tickets, theater cards and other physical, service or media content in the form of consumer rights.

Shun Trust: Registered capital will be increased to 700 million

On September 23, EMC issued a notice that the board of directors of the company considered and passed the "Proposal on Changing Registered Capital after Completion of Non-public Issuance". Notice shows that the company's non-public offering is completed, the company's registered capital from the current 454,109,778 yuan, to 704,109,778 yuan. As of the end of 2013, the total assets of Ansheng Trust Division was 1.6 billion yuan, an increase of 649 million yuan or 68.27% over the previous year, with total liabilities of 736 million yuan. Total operating income of 879 million yuan, an increase of 84.99%. The net profit attributable to the parent company was 279 million yuan, the owner's equity attributable to the parent company was 865 million yuan.

Zhongrong Trust: Holding Fund, changed its name to Zhong Rong Fund

On September 24, State Street Fund announced that it had officially changed its name to "Zhong Rong Fund Management Co., Ltd." and that the former foreign shareholder, DOW Global Investment Management Asia Limited, had transferred 49% of the total equity of the Dao Fu Fund Transferred to Shanghai Rongsheng Investment Co., Ltd. (hereinafter referred to as "Rongsheng Investment") and completed the relevant changes. The current ownership structure of Zhongrong Fund is that Zhongrong Trust owns 51% of the shares and Rong Sheng holds 49% of the shares, of which Rongsheng Investment is a wholly-owned subsidiary of Zhongzhi Group and Zhongzhi Group is also a shareholder of Zhongrong Trust The actual controller, holding 32.99% stake in Zhongrong Trust. Therefore, Zhongrong Trust obtained the actual control of Zhongrong Fund.

Trust in the sincere: With ICBC, investors sincerely open to the gold on the 2nd reached a consensus

On September 24, State Street Fund announced that it had officially changed its name to "Zhong Rong Fund Management Co., Ltd." and that the former foreign shareholder, DOW Global Investment Management Asia Limited, had transferred 49% of the total equity of the Dao Fu Fund Transferred to Shanghai Rongsheng Investment Co., Ltd. (hereinafter referred to as "Rongsheng Investment") and completed the relevant changes. The current ownership structure of Zhongrong Fund is that Zhongrong Trust owns 51% of the shares and Rong Sheng holds 49% of the shares, of which Rongsheng Investment is a wholly-owned subsidiary of Zhongzhi Group and Zhongzhi Group is also a shareholder of Zhongrong Trust The actual controller, holding 32.99% stake in Zhongrong Trust. Therefore, Zhongrong Trust obtained the actual control of Zhongrong Fund.

Trust in the sincere: With ICBC, investors to sincerity to open on the 2nd to reach a consensus

At 7 pm on September 23, investor representatives, China Credit Trust and Industrial and Commercial Bank of China held their first formal negotiation meeting at Beijing Zhongcheng Trust Headquarters. At the meeting, the two financial institutions reached a preliminary agreement, stating that they always and jointly promote the project's risk-handling work and indicated that they would take six months to resolve the issue of Chengzhi-2 project disposal. China Credit Trust said that in the case of the newly financed trust company New North Capital, it will use all the trust remuneration it receives for the follow-up asset disposal in order to promote the formalities of coal mines, promote the appreciation of assets and speed up the risk-taking Disposal.

China and Australia Trust: Linyi Golden Century sale of trust products

Recently, Handan real estate leader Golden Century Real Estate boss Shi Yu leopard runway incident has aroused media attention of all parties, and China and Australia Trust a trust product has also been implicated. In July 2014, Huamao Trust put on sale a product called "Longying 66 Golden Century Trust Loan Set Trust Plan", with a term of 2 years. The fundraising plan is planned to be 280 million Yuan. The trust funds are used for the payment to Linyi Jin Century Real estate loans, the trust plan guarantor for the name of Shi Yu Bao Handan Golden Century Real Estate and Hebei Xinneng Electric Power Group. Golden Century exposed problems, the Handan municipal government has led the establishment of a working group to help solve the Golden Century real estate fund-raising and debt default issues. At present, China and Australia Trust has stopped selling the above trust products.

Present: Kunlun Trust Co., Ltd. shareholders, directors, supervisors and senior management

Distribution: CNPC Asset Management Co., Ltd., Kunlun Trust Co., Ltd. departments

Editor: And Jin to feed: Lin Yin proof: Lin Yin

Tel: 010-63597713 Post Code: 100033 Address: Beijing Financial Street, No. 1 Jinyaguang Building, Room 716, Block B

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