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A shares also see "live water": charity fund is about to enter the market, can carry out three types of investment

November 08, 2018 08:19
Author: Xu Xiao as
source: Brokerage China
edit:Eastern Fortune Network

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Summary
[A shares also see "live water": charitable funds will enter the market to carry out three types of investment] On November 5, the Ministry of Civil Affairs issued the "Interim Measures for the Management of Charitable Organizations' Value-Added and Value-added Investment Activities", and charitable organizations can carry out three after meeting certain requirements. Investment activities - that is, you can purchase asset management products, conduct equity investments, or entrust institutional investment. (broker China)

After consulting in December last year, the investment management approach of charitable organizations finally landed!

On November 5, the Ministry of Civil Affairs issued the Interim Measures for the Management of Value-Added Investment Activities of Charitable Organizations. After meeting certain requirements, charitable organizations can carry out three types of investment activities—that is, they can purchase asset management products, conduct equity investments, or entrust institutional investment. .

The "Measures" also clarify that charitable organizations cannot directly buy stocks, nor can they directly purchase commodities and financial derivatives. The "Measures" were passed on October 25 and will take effect on January 1, 2019.

However, compared with foreign countries, there is still a big gap between China's charitable organizations in terms of investment scale and investment capacity. At present, the source of funds has long relied on donations from donors, and investment awareness has lagged behind. There are problems such as low capital utilization, narrow investment channels, and imperfect management systems.

However, the good news is that the scale of funds of charitable organizations still maintains a rapid growth trend, and the scale and development prospects of being able to participate in the investment are all favored by the market.

The official introduction of the "Measures" also means that public funds, private equity funds, brokerages, trusts and other financial institutions will usher in new opportunities for business development.

Charitable organizations can carry out three types of investment, not directly buy stocks

Since December last year, the Ministry of Civil Affairs has issued the "Interim Measures for the Management of Value-Added Investment Activities of Charitable Organizations (Draft for Comment)", the industry is waiting for the official implementation of the "Measures."

Recently, the Ministry of Civil Affairs issued the "Interim Measures for the Management of Charitable Organizations to Preserve Value-Added Investment Activities", which clarified that charitable organizations can carry out investment activities. The "Measures" was passed on October 25 and will be implemented on January 1, 2019. Charitable organizations should follow the principles of lawfulness, security, and effectiveness in investing activities. The proceeds from investment should be used for charitable purposes.

The "Measures" stipulate that there are three main types of investment activities, namely, the purchase of asset management products, equity investment and entrusted investment:

(1) directly purchasing asset management products issued by financial institutions such as banks, trusts, securities, funds, futures, insurance asset management institutions, and financial asset investment companies;

(2) Directly investing equity through initiating establishment, mergers and acquisitions, and participation in shares;

(3) Entrusting the property to an institution supervised by the financial supervision and management department for investment.

However, the "Measures" also limit the above three types of investment activities:

Purchase of asset management products requires the purchase of products that match the Organization’s risk identification capabilities and risk tolerance capabilities;

In the case of direct equity investment, the business scope of the invested party shall be related to the purpose and business scope of the charitable organization;

In the case of entrusted investment, it shall select institutions that are qualified to engage in investment management business in China and that manage prudent and high reputation.

At the same time, the "Measures" clearly prohibit charitable funds from directly buying and selling stocks; it is prohibited to directly purchase commodities and financial derivatives products. This also means that in the Foundation Management Regulations promulgated in 2004, the Foundation was allowed to invalidate the terms of funds to purchase securities such as stocks.

In addition, charitable funds also prohibit investment in personal persons.Insurance ProductsIt is forbidden to provide loans to individuals and enterprises in the name of investment; to participate in illegal fund-raising activities. The financial and asset management systems of charitable organizations and major investment programs should be approved by more than two-thirds of the members of the decision-making body.

Foreign fund investment management is very mature

For example, the Yale University Foundation has maintained an average annual growth rate of 13.7% over the past 20 years, and investment income has exceeded donor income, becoming an important source of funding. The Ford Foundation of the United States was only $100,000 at the beginning of its establishment. After investing, it has reached $12 billion.

According to previous statistics, about 60% of the funds with investment behavior in China, and the proportion of investment assets to net assets is about 40%. Obviously, the enthusiasm of the foundation investment is not high, and the main way of financing is fundraising.

Compared with foreign charities, domestic foundations not only have low enthusiasm for investment, but also low investment returns.

The annual inspection data of the Ministry of Civil Affairs Foundation shows that the average annual investment return rate of the Foundation is less than 5% in 2014-2016, while the US Foundation's annual average yield in 2007 is 10 in the slow economic growth environment. %, the average return rate of foundations with assets exceeding US$1 billion is 12%, which is much higher than the average rate of return of our foundations.

Another comparable data shows that at the end of 2016, the China Women's Development Foundation's monetary funds were 441 million yuan, accounting for 81% of net assets, and investment assets were only 1.9 million yuan. In the United States, the Rockefeller Foundation and the Ford Foundation accounted for more than 95% of total assets in 2015-2017.

Jiang Hongqing, a professor at Ocean University of China, said in the report that in theory, the foundations established by enterprises should be keen on investment, while the foundations established by 101 listed companies in China have only 36 foundations with investment behavior, accounting for only 35.6. %.

Jiang Hongqing said that at present, China's foundation investment still has problems such as small investment scale, low capital utilization rate; narrow investment channels; imperfect investment organization and imperfect investment management system. Drawing on the experience of US foundation investment management, the government should improve tax incentives and establish a supervision system to guide the foundation to establish an effective investment management mechanism; the foundation should improve the internal investment decision-making mechanism, improve the investment execution mechanism and investment evaluation mechanism, etc. Effectively prevent investment risks and improve investment operation capabilities.

  Domestic investment enthusiasm and operational capacity need to be improved

Compared with foreign countries, there is still a big gap between China's charitable organizations in terms of investment scale and investment capacity.

The 2017 China Charity Donation Report shows that in 2017, China's domestic and international donations of domestic and international donations reached a record high of 149.986 billion yuan, an increase of 7.68% over 2016. The total number of social organizations in China has exceeded 800,000, an increase of 8.77% compared with 2016. Among them, the number of foundations was 6,322, an increase of 10.68% over the previous year.

In recent years, the scale and number of charitable funds in China have achieved rapid growth. However, according to previous surveys conducted by the School of Public Administration of Tsinghua University, about 40% of the foundations are faced with the problem of lack of funds. The source of funds has long relied on donations from donors, and investment awareness has lagged behind.

Public offerings, brokerages, etc. welcome new opportunities

According to the incomplete statistics of the China Charity Federation, in 2017, there were 64 foundations with donations of over 100 million yuan, an increase of 19 over the previous year, an increase of 23%. The total social donations received reached 32.346 billion yuan, accounting for charity for the whole year. 21.6% of the total donations accounted for 49.2% of the total fundraising of the Foundation.

Obviously, the scale of funds of charitable organizations in China will continue to grow rapidly. Charitable organizations can carry out investment activities, which means that public funds, private equity funds, brokerages, trusts and other institutions will usher in new opportunities for business development.

In 2017, Tsinghua University Education Foundation entrusted Wang Yawei’s 1,000 joint ventures.Huitianfu FundAsset management was carried out by nine financial institutions including Harvest Capital and Beijing International Trust; the 2017 Annual Report of Ma Yun Public Welfare Foundation showed that it invested through financial institutions such as Debon Securities, China Merchants Bank, Industrial Securities, China Jingu International Trust and Xingquan Fund.

As the long-term prospects for development are promising, industry insiders said thatfund companyInstitutions such as brokerages and other institutions also pay more attention to the outsourcing business of charitable funds. Some established fund companies have developed such clients as charitable foundations.

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(Article source: brokerage China)

                                (Editor: DF070)

 
 
 
 

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