Knowledge of fund financing: What is private equity fund and what are its operation modes?

Private equity fund is also called private equity investment, underground fund, and another name is private equity investment, which is a relatively broad concept. The reason why it is called private placement is actually a private placement. Private placement fund is an investment fund that only aims at private placement, that is, privately raising funds for a few investors, and specially sets up its operating mechanism.

Private equity investment has two essentials, namely private equity and equity investment. Private placement is relative to public funds, but only for a few specific investors. It may be mainly because private equity funds are mainly used to invest in the equity of enterprises, so the risks are completely uncontrollable, so they do not meet the conditions for public offering. This investment method and securities investment fund will not be strictly examined and approved by the state administrative organs.

The other is equity investment. His main investment direction is the equity of unlisted high-growth enterprises, and he also provides various services for enterprises to help them improve and perfect. And hope that after the enterprise matures, it will gain long-term capital appreciation through equity transfer.

The operation mode of private equity fund is as follows:

1, venture capital fund

Investors invest venture capital in newly established or fast-growing emerging enterprises, provide long-term equity investment and value-added services for financiers on the basis of taking huge risks, cultivate rapid growth of enterprises, and recover their investment through listing, mergers and acquisitions or other equity transfer methods several years later to obtain high investment returns.

2. Industrial investment funds

That is, private equity investment funds in a narrow sense usually invest in unlisted shares of enterprises in the expansion stage, and generally do not aim at holding shares. The company it is looking for needs to be relatively mature, with a certain scale, high operating profit and rapid performance growth, occupying a considerable market share and establishing a considerable entry barrier in the industry.

3. M&A of investment funds

Buy-out funds occupy a dominant position in the international private equity investment fund industry, accounting for more than half of the funds flowing into private equity investment funds every year, which is equivalent to more than double the funds obtained by venture capital funds.