In 2022, the international financial market will experience the first double-short of stocks and bonds in 40 years, and the global market value will decrease by more than 20%.

(Schematic, AFP)

In 2022, the international financial market will experience the first double-short of stocks and bonds in 40 years, and the global market value will decrease by more than 20%.

Private Equity Fund (Private Equity Fund), which is less liquid than general financial products, is positioned as an "Alternative Investment" project exclusive to institutional legal persons and professional investors. It is aimed at long-term investment in non-listed companies and large-scale development projects. After this wave of market ups and downs, the price of the investment portfolio has become more real, and the attractiveness of looking for a financial buyer (Buy Side) that is different from traditional assets has greatly increased.

The COVID-19 epidemic has been raging for nearly three years, and it finally ended with a sudden change in the financial market, bringing an indescribable outlook for the 2023 economy.

At this critical turning point, green sleeves emerged in Taiwan’s financial market in the private equity field, and the Private Equity Association was newly established to gather voices for the industry. Weng Jiasheng, general manager of Taishan Investment, was elected as the chairman of the board. The membership structure comes from the private equity industry and the securities industry. , investment and credit industry and venture capital industry, and key financial holding companies such as Cathay Pacific, Shin Kong, and Taishin Financial Holdings all have legal representatives to participate.

The Investment Trust and Investment Advisory Association has also newly established a private equity fund task force, with You Zhaowen, the vice chairman of the association and the chairman of First Gold Investment Trust, as the convener, and 6 credit investment companies that have established private equity companies as a fixed team, and about 20 new ones The credit industry has shown a high level of interest in private equity funds.

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The key points of guidance and management of the National Development Council in June 2021 stated that private equity funds should expand the due diligence management of the insurance industry and other sources of legal person funds. There is also good news. And Boguan Capital (BOWRINGT ON) of the international team.

The latter is the first independent fund management company to obtain the private equity fund qualification letter issued by the National Development Council. It was founded in Taiwan in early 2020 by a number of senior PE professionals who had worked for JP Morgan. "Foreigners.

According to the analysis of the Taiwan M&A and Private Equity Association, there are six types of private equity funds in Taiwan: 1. Independent types such as Dongbo, Zhuoyi, Dasheng, Huawei, etc., which are characterized by celebrities in the industry, economics and political circles calling to form a team, with many early successful cases, and Fundraising contacts are abundant.

The second is the industrial type, which includes Nengli, Qunchuang Development, Taishan, etc. The characteristics are that industrial enterprises invest in the upstream and downstream of related industries for the long-term development of their own companies. and major shareholders.

The third is the securities type, including Fubon, Taishin, etc., which is characterized by the investment of human resources by the securities group, and the one-stop service of capital, financial advisory, underwriting, and stock agency. Past customers are all fundraising targets.

The fourth type is the trust investment type in recent years, including Cathay Pacific, Fuhua, Fubon, etc., which are characterized by comprehensive research capabilities in the secondary market, financial brand awareness, and high-net-worth individuals and corporate clients who can be fundraising targets.

The fifth is from Financial Holdings, and the representative is China Development. It is the first private financial institution in China to engage in direct investment business. It has the largest number of employees, diverse types of funds, and mainly legal persons for fundraising.

The first tranche of public equity investment trust First Gold Investment Trust Private Equity Company Unveiled

Good things always pile up.

First Gold, a subsidiary of First Financial Holdings, took the lead in investing in public shares, invested in private equity business, and established First Gold Private Equity Company. The unveiling and operation ceremony was held on January 11.

Former Minister of Finance and current professor of the Department of Finance of National Taipei University Su Jianrong, General Manager of First Financial Holdings Chen Finn, President of Taiwan Financial Research Institute Huang Chongzhe, Legislative Councilor Zhong Jiabin and other guests attended and praised First Financial Investment Trust for its action at the critical moment.

Former Minister of Finance Su Jianrong said that the birth of this case represents the official entry of public equity funds into the field of private equity funds. It is the first public equity fund to invest in Taiwan's infrastructure construction. It is in line with APEC's initiative of diversified financing for infrastructure construction and affirms the stability and profitability of Taiwan's infrastructure construction. .

You Zhaowen, chairman of First Gold Investment Trust and First Gold Private Equity, pointed out that private equity funds have the characteristics of high-end financial industries and are financial products for professional investors to participate in investment. In the future, the company's business development will focus on the strategy of "real assets" as the main axis of development At the same time, it also actively cooperates with national policies and participates in promoting the development of Taiwan's infrastructure and public construction.

"'Real Assets' (substantial assets) is an important position for the investment and credit industry to invest in private equity." You Zhaowen said that such a development strategy can be adapted to the current situation, can bring stable cash flow with investment, and continue to create growth momentum, especially in After the overall interest rate market rises, it has the function of protecting existing capital.

Regarding the long-term development axis of First Gold Private Equity Company, You Zhaowen and Liao Wenwei, general manager of First Gold Investment Trust, are not drawing big cakes.

While the company was approved for establishment in November 2022, the management team actively deployed the market and contacted a number of development projects. The Tainan Shalun Science City Smart Energy Management System BOT project was the first actual case of planning and participation.

Liao Wenwei pointed out at the Tainan City Government investment promotion press conference that this is the first investment promotion case involving the investment trust private equity fund, and it is also the first state-owned financial group that has changed from passive bank lending to financing BOT, "to active equity. Investment”, private equity funds with official shares respond to the policies of the Ministry of Finance and invest in local public construction projects. At the same time, they build trust and invest in BOT projects that are fully in line with the spirit of ESG.

Liao Wenwei said that First Gold Private Equity Company has signed a letter of intent for cooperation with Ruihe Holdings, which is specialized in solar energy and energy management, and will form a team with Acer Group, which is professional in information and big data, to participate in construction management and connect the industry, academia and the private sector. Strength, professional participation in participation promotion cases, and hopes to become the leader of domestic private equity funds in participating in promotion and participation cooperation models.

Large platform for industry investment structure industry chain

"The First Gold Investment Trust team is very serious," Ding Xuewen, managing partner and general manager of Treasury Capital, said. The team visited him many times and asked him about the details of PE fund operations. There are already similar PE funds in the investment trust industry in the Taiwan market, with many investment targets. With the combination of 5+2 industries, ESG issues, and new southbound, etc., it meets the policy requirements, and finds out the cash flow returns, and endows the PE industry with a clear business model, which is more convincing to the parent company Financial Holding and the Financial Management Commission.

Ding Xuewen, who has practical experience in banking and asset management at home and abroad, is mostly positioned as a venture capitalist in the capital market, but has very close interaction with Gwangyang Industrial and other traditional industries. The geographical area of ​​investment covers mainland China, Taiwan, India and Southeast Asia. At present, it manages 7 industrial investment funds with a management scale of more than 10 billion.

He said that Treasury Capital focuses on "the establishment and investment of a global industrial capital integration platform" and puts "industry" in front of funds. It does not only look at early-stage start-ups, but as a whole is more like the private equity that Taiwan needs now. Fund looks like.

For example, one of the treasury capital funds invested US$30 million in the Southeast Asian ride-hailing leader “Grab” in early 2020. At that time, Ding Xuewen was interested in Grab’s vision of building an electric fleet, which was just in line with the development blueprint of treasury capital and its industrial partner Guangyang Locomotive .

In terms of Taiwan's policy, this is "Taiwan's new money going south."

As a result, Gwangyang Locomotive’s Ionex electric vehicles bid for a large order from Grab and were deployed in Jakarta and Singapore. Gwangyang also planned to set up a factory in Thailand.

In the following year, Treasury Capital once again formed an alliance with Taiwan's large fleet and Global Express, invested another NT$180 million, entered the electric two-wheel market, which accounted for 90% of the global market, and gradually established a large platform for the E-mobility industry.

In terms of policy, this is the real result of Taiwanese companies' deployment in the Southeast Asian market.

The other part is the shareholding ratio of the investment portfolio.

Ding Xuewen said that the investment concept of treasury capital is that each investment target "does not take an absolute majority shareholding ratio". Trust is the only way to be a profitable industrial investor.

Raj Thammineni, the founder of Boguan Capital, agrees with this point. The investment of PE funds is no longer leading the investment business. He further pointed out that "focusing on the unique industrial chain is also an important reminder when investing in PE funds."

An international independent fund management company breaks through the limit for the first time

In the spring of 2023, the establishment of the Private Equity Association and the establishment of the Private Equity Fund Task Force by the China Trust and Investment Advisory Association will inject abundant vitality into Taiwan's private equity market. In fact, these actions have a greater significance: Let Momo International PE experts who have worked for many years, so they are more sure about Taiwan's long-term development. Raj Thammineni and his Broad Capital team are one of them.

Boguan Capital was founded in Taiwan in early 2020. The founder, Raj Thammineni, used to work for JP Morgan, an international investment bank. Practitioners from well-known domestic institutions in Shanghai form a team together.

At the beginning of its establishment, the Boguan team set up a new fund with a number of industry experts and Taiwan's leading Lili law firm, including preparing legal documents, establishing investment processes and governance structures, etc., and striving to reach Taiwan's legal requirements.

At the same time, the Boguan team developed a series of solid local infrastructure construction sources, enabling the fund to invest in a short period of time.

Even so professionally oriented, the Taiwanese market has a bad impression of international PE funds from top to bottom. There has been no official statement. The team is walking on eggshells every day. The senior members of the capital have all obtained the Taiwan Employment Gold Card and are determined to start a business and work in Taiwan. However, the management of PE funds has not yet been legally reviewed.

After a lot of work by people in the industry and professional education in the market, Gong Mingxin, the chairman of the National Development Council, finally agreed to assist.

In June 2021, the National Development Council announced the "National Development Council's Key Points for Guidance and Management of Private Equity Fund Investment Industry." Private equity fund operators who intend to raise funds in the Taiwan market, especially for insurance companies, should submit this application.

Raj said that this is a very critical regulation for Taiwan's PE market, and Boguan Capital immediately began to understand the information and prepare to apply.

In order to demonstrate the professional strength of the international team, Boguan Capital completed the signing of the "Operating Principles for Impact Management" (Operating Principles for Impact Management), becoming the first legal person in Taiwan to sign, expecting to fulfill its responsibility as a good manager and create a good environment for investors In addition to investment returns, we also firmly believe that every investment can contribute to Taiwan's Sustainable Development Goals (Sustainability Development Goals, SDGs) and adhere to the principles of ESG.

However, the National Development Council did not change its strict review of the international team. The team conducted several in-depth discussions and communications in both Chinese and English with the review committee, and submitted relevant supplementary explanations.

All legalization efforts will finally be announced in December 2022: Boguan Capital’s private equity fund (PE FUND) qualification letter issued by the National Development Council is the first major qualification letter obtained by an independent fund management company.

Following the Taishan No. 6 Technology Fund invested by Taishan, it is the second tranche approved by the National Development Council.

Raj Thammineni and the whole team almost shed tears. At the beginning, they chose to believe that Taiwan would develop in the direction of international professionalism, but now they are initially affirmed.

He said happily that Taiwan's PE fund market is in its infancy before explosive growth, and it is expected to catch up with the growth trend of other developed countries in the near future.

You Zhaowen said that during the 10-year period from 2011 to 2021, the asset management scale of global infrastructure funds has grown from US$213 billion to US$898 billion, and the management scale has grown by more than 321%. There are many well-known international private equity fund operators investing heavily in Taiwan's infrastructure construction and renewable energy; while domestic pension funds and insurance funds are conservatively estimated to invest 1 trillion yuan in foreign private equity investment. It has already been revealed that domestic institutional investors and high-end The investment needs of asset customers are quite strong. Now is the time for Taiwanese asset management companies to grasp the opportunity of laws and regulations and make great strides to participate in huge and lasting business opportunities.

(This article is excerpted from the "Taiwan Banker" monthly magazine in February 2023, written by Chen Yawei)

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