Trust Private Equity Operation Mechanisms

Private equity investment trust invests equity of the unlisted companies through trust deed which is seen as the legal form of fund-raising. Trust PE is one kind of financial services and benefite from trust function. The unique characteristics make it have greater advantage over the corporate or partnership-based PE in costs, convenience and safety. So trust PE should be one important way of the market development.Trust PE comprise three aspects in operating mechanism: the fund collecting, the investment decision-making and post-investment managing .The core of the collecting is that the publisher conforms various kinds of resources which to get through a series of agreement. Then, the risk-return structure is formed that of each attendee. In this field, the problem include the lacking of portfolio approach, instability of fund and disorderly of invest.The center of investment decision-making is to evaluate the alternative enterprise. Trust PE should choice suitable diagnostic tool to analyze the quality of the entrepreneurs, core competencies of company and the product market factors. In this aspect, the problem including the flaw of target company reserves, and non-marketization of the investment adviser.The essential of post-investment management is to promote the target company's value. The trustee should to do that to perfect the corporate governance, that to supply value added service , that to plan capital withdraw for target enterprise. The lacking of trust company is the deficiency of ability of operating company.At the system level, the trust PE has been plagued with three major problems: that investor range been bounded, that capital-withdraw been obstacle, that rust register and taxation not been confirmed, etc.For the existing problems, we should adopt measures from three aspects: optimizing the operational mechanism, improving the monitoring mechanism and improvement of the system .