An industrial development fund was launched in Pudong New Area on Wednesday to help the area better develop into a leading force for China’s socialist modernization, a mission the central government assigned to Pudong a year ago.
This is the first fund of funds (FOF) that the Pudong government has set up since the guideline to transform Pudong into a pioneer for socialist modernization was released on July 25, 2021.
The first phase of the FOF, which is valued at 5 billion yuan ($741 million), comprises investments from the Pudong government. Financial institutions, State-owned enterprises, foreign companies and privately-owned enterprises are allowed to participate in the underlying portfolios or funds under the FOF.
Pudong government officials said that more than 100 billion yuan in social capital is expected to be attracted.
According to Zhang Hong, the head of the Pudong financial bureau, the launch of the FOF will help draw capital, projects, technologies and talents to the area, thus forming a higher level of circulation between technology, industry and finance.
In terms of detailed investment practices, the local government will be responsible for all capital required for the construction of major projects. Companies and institutions joining the underlying funds or portfolios under the FOF will focus on nurturing projects in the early development stage, said Zhang.
To ensure the efficient use of capital, authorities have created an exit mechanism that consists of the 10-billion-yuan secondary fund launched on Wednesday, and the pilot program that kicked off at the Shanghai Equity Exchange in early December last year. Under this program, investment shares of private equities (PE) and venture capital firms can be transferred.
Secondary funds, which are widely seen in the PE industry, usually have a portfolio of interests acquired from initial partnership subscribers. While traditional PEs directly acquire corporate equities, using companies as their transaction objects, secondary funds use other investors as transaction objects by acquiring equities and shares from other investors.