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[Original Research] TTGG: Focusing on Professional Advantages to Serve Real Economy

Date: 2017-08-10
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Along with the maturing domestic capital market and the implementation and improvement of industry regulatory policies, the private equity investment industry is entering an age of accelerated development. The ever-increasing investment scale is vigorously promoting the development real economy. According to data, 19,708 private equity fund managers have been registered with Asset Management Association of China by the end of June 2017, wherein, there are 7,317 mangers of securities investment funds, 10,759 managers of equity and venture capital funds and 694 manages of other investment funds. 56,576 private equity funds have been registered with a subscribed capital of RMB 13.59 trillion Yuan and paid-up capital of RMB 9.46 trillion Yuan. The private equity fund practitioners amount to 223,500.

Private equity fund investment directs capital to real economy.

During the furthering of supply-side structural reform, perfecting the multi-level capital market system becomes vital to the financial reform. As a significant part of multi-level capital market system, private equity investment fund has been designed to serve the real economy from its beginnings. Furthermore, as a new and highly efficient means of investment and financing, private equity investment fund is able to better raise funds and allocate resources in the market-oriented economy. It also services the real economy as a financial instrument while supporting the development of bricks-and-mortar enterprises. In such a context that the economic structure needs transition and upgrading, industrial development requires a new way out and the dividends of traditional financial business market is disappearing, private equity investment will undoubtedly become the efficient way to support entrepreneurship and innovation, facilitate industry transition and upgrading as well as cultivating and developing strategic emerging industries.

Firstly, private equity investment, as the preferred option to accelerate the linkage between capital and high-tech industry, boasts significant macroeconomic benefits and microeconomic value. Since the transfer and industrialization of technology innovation achievements is speeding up and the roles of original technology innovation, key technology innovation and system integration innovation are becoming more and more prominent, the ability of original innovation and key technology innovation has become the core of technology competitions among countries and the essential condition determining status in the international industrial division of labor and the global economic pattern as well. Private equity investment is not only a financial instrument serving the real economy, but creates an innovative, vital and promising real economy through creative methods.

Secondly, private equity investment efficiently drives the industry transition and upgrading. By promoting enterprise merger and restructuring, private equity fund is conductive to dissolving excess capacity, supporting enterprises to “go global” and grow stronger and larger and facilitating industry structure transition and upgrading.   

Thirdly, private equity investment significantly influences the support and development of strategic emerging industries. Strategic emerging industry, a major force directing the future industry and technology development, has become key object of cultivation and development by all countries. In view of its high risk and requirement of high input, strategic emerging industry can hardly obtain funds from banks or securities. However, as a financial innovation mechanism, private equity investment fund contributes to providing funds demanded by strategic emerging industry enterprises for their development, increasing enterprises’ values by marketization, boosting technological innovation, management improvement and modern serve industries’ upgrading, realizing smoothly the transfer from technology innovation to productivity, and more profoundly, accelerating the integration of emerging industry and modern service industry.

Driven by favorable policy and financial reform, China private equity investment has marching into the era of great development. With the opening of market space, industries are facing aggravating competition. TTGG, among the first batch of domestic private equity investment institutions, has become the one with certain brand influence and outstanding performance domestically after seventeen years of exploration, and developed a differentiated development path suitable for its own evolution, which can be briefly described as “one premise”, “two insists” and “three focuses”.
To be more specific, “one premise” means taking legal compliance operation as the premise and independent risk management framework, efficient decision-making system and follow-suit investment system as “three breakthrough points” to strictly control project and product risks, screen accredited investors and establish whole-process risk control system; “two insists” refers to insisting on the operation principles of “expertise, standard, steadiness and innovation” and insisting on the investment philosophies of “value creating and increment sharing”. Lastly, “three focuses” means constantly and professionally focusing on subdivided industries to continuously enhance core competitiveness in terms of assets judgment, acquisition, value increase and withdrawal; focusing on three major areas of supporting entrepreneurship and innovation of small and medium-sized enterprises, industrial merger & acquisition (M&A) of listed companies and industry funds of local governments by virtue of ceaseless transition and development, to boost the development of real economy; and focusing on customer needs and establishment of three-dimensional financial service system so as to facilitate the synergetic development of assets and liabilities.

First, focus on subdivided industries and improve the ability of specialized assets management

TTGG has been advocating “professional focus” ever since the second half of 2015, expecting all teams to seek suitable subdivided industries they can dedicate themselves to based on their adequate knowledge of and judgment on the industries, in order to be proficient in their own fields. In the process of exploring professional focus, the company, on one hand, founded TTGG Financial Research Institute to provide support for microeconomic analysis and industry research; on the other hand, the company introduced industry partner mode to accurately estimate the future development trend, risk and income formation of key industries with the aid of industry experts. Presently, 12 business teams and 6 major middle and back offices of TTGG Group have been precisely focusing on six major industries and financial service fields including  healthcare, intelligent manufacturing TMT, energy saving and environment protection, downstream and upstream of real estate and large-scale agriculture, accumulated certain professional advantages and created a series of typical cases. They are actively probing into the field of specialized fund.

Second, focus on three major businesses and support the development of real economy

Constant focusing on and deepening of subdivided industries has laid a solid foundation for the upstream and downstream extension of industry chain and the advance or postponement of investment phase of the company. In terms of supporting small and medium-sized enterprises, the Venture Capital Fund of our company has invested over 80 enterprises of such size successively, providing financial support and value-added service for them to promote their rapid development. By far, 25 projects have been listed and 24 projects listed on the New Third Board. In the respect of supporting the industrial M&A of listed companies, our company has directed, acquired and restructured some traditional industries by M&A fund to accelerate their transition and upgrading. Our company, in recent years particularly, has cooperated with almost 40 listed companies, integrated foreign and domestic outstanding industrial resources for them by M&A fund and made beneficial exploration and attempt to promote their growth and flourish and intensify industry concentration, which have been recognized by capital market and regulatory institutions. While in terms of supporting government industry fund, our company has worked with guidance funds of Ministry of Science and Technology, The People’s Government of Zhejiang Province, and governments at all levels of Hangzhou, Ningbo, Taizhou, Zhoushan, Keqiao District (Shaoxing), Wenling and Xiaoshan District to jointly promote investment in emerging industries and transition and upgrading of local economy. Our company became one of the first batch of manager of guidance funds of Ministry of Science and Technology of the P.R.C. and The People’s Government of Zhejiang Province early in 2006. Hesheng Fund, the first governmental venture capital guidance fund of Zhejiang Province managed by our company, is the first escrow fund realizing exit successfully among provincial guidance funds. In 2015, the industry fund of the People’s Government of Keqiao District, Shaoxing we participated created the new mode of “PE + government industry fund + local industrial leaders + listed companies + financial capital”, which effectively integrated superior resources of all parties and perfectly balanced their interests and risks through structural design, becoming the power that drives the regional industry transition and upgrading. The Fund has successfully launched five sub-funds up to now, with fund scale of nearly RMB 2.5 billion Yuan directly invested in enterprises in Keqiao District, generating large social effect and industry guidance effect.
Third, focus on customer service and establishing top-ranking wealth management center
Three-dimensional financial service. If professional focus is to obtain high quality assets, the high quality assets are designed to lay solid foundation for liabilities. The current investment layout of TTGG has covered the whole industry chain, namely VC and PE fund, industry M&A fund, PIPE fund, mezzanine fund, FOF fund, quasi fixed-income fund, secondary market fund, hedge fund, etc., formulating a vertical and three-dimensional financial service system. The company, on one hand, provides whole-process service covering supporting financing and industry M&A from startup to IPO and post-listing for partners, helping them create, change and increase value and share value increment; on the other hand, it forms short, medium and long term product systems and diversified assets allocation service, offering accredited investors packaged wealth management solutions.

Humanized internet service. Since 2014, TTGG has been dedicating to the exploration and layout of internet finance and Silicon Financial Service Co., Ltd. (hereinafter referred to as “Silicon Financial Service”) is so established, which is the key-point for our company to build the internet wealth management center. Silicon Financial Serve is aimed to provide all-round assets allocation service and professional investment consulting service for high-net-worth clients by internet technology. It is not only a new exploration by TTGG in the field of internet technology, but also the important media for realizing online-offline cooperation, further satisfying customers’ various needs and enhancing their experience. Currently, customers are able to search for information about fund holding, information disclosure and online roadshow on website and APP of Silicon Financial Service.

Individualized top-tier service. For the past few years, TTGG has keenly captured the needs of top-level customers and been promoting actively the full authorization businesses as the key part of top-tier service. Full authorization business refers to that the customers commission a company to design a “tailored” investment operation program based on their trust in the company, while investment advisers of the company provide individualized assets allocation service for the customers after fully understand their investment preferences and the risk attributes. This service furnishes a “once for all” commissioned investment and wealth management to high-net-worth individuals and institutions who are unable to manage their assets by themselves. The merit is that customers and companies are no longer in a sale-and-investment consulting service relation, but establish a more solid and long-term mutual trust relationship. In order to meet the individualized needs of top-level customers, a full authorization business requires highly specialized teams who have thorough knowledge of market and accurate assessment of product and are proficient in risk control and combined allocation of bulk assets, so as to raise the use efficiency of customers’ funds and guarantee their continued earnings. In 2016, TTGG established the full authorization business team, formulated Methods for Fully Authorized Management and brought in high quality exterior products to increase the utilization rate of idle funds in the discretionary accounts. By far, the company has provided full authorization service for 13 customers with a size of RMB 222 million Yuan by virtue of its professional abilities of assets management, investment research, resources integration and business innovation.

The next decade is the decade of technology innovation and renewal and moreover, the decade of real economy transition and upgrading. For a private equity investment institution, helping enterprise raise fund and aggregate talents is far from adequate. It should enhance its own assets management ability constantly and build itself into a genuine discoverer of enterprise value, resources integrator and the co-creator and co-changer of value under the premise of legal operation. Only in this way can it realize its own worth during the development course of real economy.  
(Published in the August 2017 issue of Zheshang Financier)

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