Firms could invest in non-listed peers
(Xinhua)Updated: 2007-01-19 14:45
As He Ying, assistant to the president of Guosen Securities believes, lifting the ban on venture capital investment could bring many benefits to securities firms, such as high yields of about 20 to 30 percent and the right to help innovative companies sell shares.
Given the source of the money, direct equity investment falls into two totally different models. The securities firms can either use their own money or use the capital raised from a separately incorporated investment fund or subsidiary company.
There is doubt over whether securities firms are suitable to operate direct investments themselves since they usually don't have enough in-house capital and have many other businesses to take care of.
But this model has at least one merit that the other one lacks, that is, the avoidance of possible embezzlement of the raised capital, such as has happened in the past.
As experts believe, private equity investment usually demands a huge amount of money, it takes a long time for investments to show a return and it often involves high risks.
Due to these considerations, the fund raising model for direct equity investment seems to be more practical, according to a report from the 21 Century China Business Herald.
However, no matter which model is chosen, the risk-control factor in addition
to the feasibility factor has to be secured, since high risks were the main
reason the securities regulator initially imposed a long-time ban on direct
investment.
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