recently, the pilot program of equity investment by financial asset investment companies was officially launched in beijing. the "long money" that the private equity investment industry has long called for and been looking forward to may enter the market faster.

as the leader of my country's financial system, the bank's capital shift from debt to equity investment and its massive entry into the equity investment market is not only a strong demand of technology companies, but also the long-standing expectation of the venture capital industry. the industry has repeatedly called for accelerating the exploration of reasonable and compliant ways to guide part of the bank's funds to be converted into venture capital funds, which is of great significance for the financial industry to serve technological innovation and promote the development of new quality productivity.

according to a review by a securities times reporter, since the five major banks, namely, china construction bank, agricultural bank of china, industrial and commercial bank of china, china construction bank, bank of communications, and bank of china, began to invest in equity in 2018, the financial asset investment companies (aics) under them have subscribed to over 290 billion yuan in equity investment funds and invested in over 180 funds in total. it is worth noting that aic is a rare hidden lp entity that has invested against the trend in the past two years, except for state-owned lps. people in the banking industry pointed out that although the current bank aics have accelerated their investment, they are still subject to multiple restrictions and still need more "relaxation" at the policy level.

the five major aics have subscribed to equity funds totaling over 290 billion yuan

icbc investment initiated the establishment of two funds within one month, with a total scale of nearly 20 billion yuan; bank of china successfully established a science and technology innovation mother fund with a target scale of 30 billion yuan; abc capital, bocom capital, ccb capital, etc. have all made some layouts in the equity investment field this year. according to the data sorted by the securities times reporter, as of now, the aic companies under the five major banks of ccb, abc, icbc, ccb and bocom have subscribed a total of more than 290 billion yuan in equity investment, and the total number of investment funds exceeds 180.

data source: zerone

from the perspective of investment entities, data from zhizhong zerone shows that the most active investor is icbc financial asset investment co., ltd. (hereinafter referred to as "icbc investment").

since the beginning of this year, icbc investment has invested in 10 private equity investment funds as an lp, including the 10 billion yuan tianjin zhongdian gongrong equity investment fund, the 5 billion yuan beijing gongrong transportation asset investment equity fund, the 3 billion yuan gongrong guohua (beijing) equity investment fund partnership (limited partnership), etc., with a total public investment amount of at least 30 billion yuan.

it is understood that icbc investment has invested in science and technology companies by setting up pure equity investment funds. it no longer aims to swap debt for equity, but focuses on serving national strategies and integrating into local economic development, actively deploying strategic emerging industries such as new energy and semiconductors, and helping real enterprises reduce costs, increase efficiency, and transform and upgrade. last year, lu shengdong, vice president of icbc investment, published an article pointing out that it would use equity investment as a starting point to deepen strategic cooperation with customers, and put forward three key points: focusing on key industries, promoting market-oriented transformation, and giving play to the role of the dual gp penetration decision-making mechanism.

in addition, according to the 2024 semi-annual report of bank of communications, as of the end of june, bocom investment had registered 28 funds through its subsidiary bocom capital management co., ltd., with a subscribed scale of 18.529 billion yuan, an increase of 52.51%. on august 3, information released by bocom investment showed that the registered management scale of private equity investment funds initiated and established by bocom capital exceeded 20 billion yuan.

data from zhizhong shows that while the investment of amcs and bank wealth management subsidiaries has declined, the investment of bank aics has shown an upward trend. compared with 2022, the subscribed amount of bank aics in 2023 increased by 45% year-on-year, and the number of investment transactions also increased by 50% year-on-year.

in addition, the reporter found that most of the investment institutions cooperating with these aics are state-owned capital, banks and securities investment institutions, and there are few market-oriented investment institutions. for example, icbc investment invested in gf securities, abc capital invested in cimc group and shenzhen capital group, and boc capital invested in guangzhou industrial investment, china merchants capital, hubei high-tech investment, beijing state-owned capital, etc. from the perspective of investment stage, the equity investments of these aics tend to be growth funds.

policies are stepping up to support the orderly expansion of pilot cities

in fact, the "hidden lp" in today's equity investment market was originally created only to solve the bank's non-performing assets and resolve financial risks, and its business scope is equity investment mainly for the purpose of debt-to-equity conversion.

it was not until may 2020 that the former china banking and insurance regulatory commission issued the "notice on matters concerning the asset management business of financial asset investment companies", which clarified that financial asset investment companies can carry out asset management business by issuing debt-to-equity investment plans, providing policy measures to guarantee the in-depth promotion of market-oriented and law-based debt-to-equity swaps.

in december 2021, the former china banking and insurance regulatory commission issued the "guiding opinions on the banking and insurance industry to support high-level scientific and technological self-reliance", which proposed to encourage financial asset investment companies to carry out equity investment business of science and technology enterprises in shanghai in accordance with laws and regulations within their business scope, and to establish financing and incentive constraint mechanisms in equity investment business that are in line with the investment characteristics of early and mid-term scientific and technological enterprises. therefore, aic fired the "first shot" in shanghai in its layout of equity investment in the true sense.

zeng shengjun, senior researcher at the greater bay area financial research institute of bank of china shenzhen branch, pointed out in an interview with reporters that in recent years, aic has played an important role in serving technological innovation and the real economy. "although it was originally established to solve the problem of bank non-performing assets and resolve financial risks, over time, aic has demonstrated professional advantages in venture capital, equity investment and corporate restructuring, especially in supporting technological innovation."

in june this year, li mingxiao, director of the policy research department of the state financial supervision and administration, said at the regular policy briefing of the state council held by the state council information office that it is necessary to sort out and summarize the experience of direct equity investment in the previous pilot in shanghai, study the expansion of the scope of the pilot area, give full play to the professional advantages of financial asset investment companies in venture capital, equity investment and corporate restructuring, and increase support for technological innovation. li mingxiao also mentioned that many start-up technology companies have reported to the state financial supervision and administration administration that they hope to obtain financial support in terms of capital.

the "several policy measures to promote high-quality development of venture capital" released in the same month also proposed to "expand the pilot scope of direct equity investment by financial asset investment companies." this means that the financial aic companies under the five major banks may not necessarily conduct equity investment for the purpose of debt-to-equity swaps in the future. on the other hand, the pilot scope will also be expanded from a few places such as shanghai to more regions. as a result, beijing officially launched the pilot of equity investment by financial asset investment companies, and the "long money" that the private equity investment industry has long called for and expected may enter the market faster.

aic's participation in equity investment still needs to be "relaxed" in many aspects

in fact, the entry of bank funds into the equity investment market can not only provide long-term development funds for the development of the real economy, but also expand the investment boundaries of bank assets, build diversified investment channels, and increase the return rate of investment portfolios. zeng shengjun believes that the expansion of the aic pilot will broaden the investment boundaries of banks in two main aspects:

first, the investment field of bank aic has been expanded. the pilot program has been extended from shanghai to beijing, which shows the support of the policy level for bank aic to participate in equity investment. it may indicate that more regions will open pilot programs in the future, further broadening the investment field of aic. second, banks can continuously improve the technology financial service system through equity investment linkage with aic, promote the deep integration of financial and technology industry development, transform from traditional credit business to more comprehensive financial service providers, and find new growth points in the new market environment.

judging from the current situation, although the pace of bank funds entering equity investment has accelerated, the overall amount of funds is still relatively small. what are the obstacles for bank aics to participate in equity investment?

zeng shengjun pointed out two aspects: first, in terms of regulatory policy support, first, domestic banks’ capital is very scarce, and the complex operating situation also puts higher requirements on bank capital management. bank aic’s participation in equity investment is affected by the group’s capital adequacy ratio constraints, and policy support is needed to provide more flexibility in capital management. second, regulatory requirements for banks may limit the scope and method of aic’s investment, and it is necessary to further relax restrictions on the scope of bank aic’s equity investment and allow it to invest in a wider range of fields. third, it is necessary to establish an incentive mechanism and fault tolerance mechanism that is compatible with equity investment to encourage bank aic to actively participate in equity investment.

secondly, in terms of the bank's aic management capabilities, first, the existing investment decision-making process may not meet market demand and needs to be simplified according to the characteristics of equity investment business to improve investment efficiency. second, compared with traditional debt investment, equity investment has higher risks and uncertainty of returns. therefore, it is necessary to continuously improve and perfect the corresponding risk management system to adapt to the characteristics of equity investment, and strengthen comprehensive management in terms of "raising, investing, managing, and withdrawing". third, there is a shortage of professional talents required for equity investment, and it is necessary to establish a more professional equity investment team through talent training or introduction of policies.

editor: li dan

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