This year has seen a flurry of policies encouraging insurance funds to increase their equity investments, with such funds continuously boosting their presence in the equity investment sector. Recently, under the impetus of the Shenzhen Municipal Guidance Fund, a replicable and promotable innovative fund with a scale of ten billion yuan, known as Ping An Fund, has been successfully established. After completing the registration and capital subscription processes, this fund will guide the long-term "living water" of insurance funds to flow towards sci-tech innovation enterprises.
According to incomplete statistics from China Securities Journal reporters, this year has seen multiple insurance companies participate in the establishment of private equity funds, with several funds reaching a scale of ten billion yuan. Industry insiders believe that insurance funds are large in scale, long in term, and stable in source, which aligns well with the capital needs of major projects. The increased investment in equity by insurance funds can, on one hand, support the development of the real economy, and on the other hand, meet the long-term allocation needs of insurance funds, helping to enhance the investment returns.
Ping An Fund, initiated by Shenzhen Municipality and primarily funded by top insurance institutions with joint investment from state-owned enterprises in Shenzhen's districts, is a large-scale fund with a scale of 10 billion yuan. Ping An Life subscribed 9.45 billion yuan, Shenzhen Municipal Guidance Fund subscribed 260 million yuan, and Longgang Financial Control subscribed 240 million yuan.
According to a person in charge of the Shenzhen Municipal Finance Bureau, Ping An Fund adopts a dual GP (General Partner) model, co-managed by Ping An Chuangying Capital Management Co., Ltd. and Shenzhen Ocean Investment Management Co., Ltd. It takes the form of "direct investment + fund of funds," investing 90% of the investable funds in key infrastructure construction and major industrial investment projects in Shenzhen, and 10% in Shenzhen's private equity funds. The fund's duration does not exceed 15 years.
Zhang Kaifeng, a non-bank financial analyst at Minsheng Securities, believes that the fund focuses on high-end intelligent manufacturing and local government infrastructure construction. Its establishment is expected to set a new model for the linkage between insurance funds and local government investments, leveraging the professional and resource advantages of local government-owned enterprises and insurance funds to contribute long-term stable investment returns for both parties.
The reporter noticed that this year, insurance funds have been very active in the field of equity investment, with many insurance companies participating in the establishment of private equity funds at the ten billion yuan level. For example, in August, China Life Insurance (Group) Company's Guoshou Investment's Yangtze River No. 1 project was launched. The project has a total scale of 10.004 billion yuan, jointly funded by China Life, the National Council for Social Security Fund, and Yunnan Energy Investment Group Co., Ltd., to establish the Yunnan New Energy Equity Investment Fund. This fund helps Yunnan Energy Investment to introduce capital in the form of an equity investment fund, supporting the revitalization of its high-quality hydropower assets. In July, PICC Capital, in conjunction with PICC Property Insurance, PICC Life Insurance, and PICC Health Insurance, established the PICC Modern Industry Investment Fund with a total scale of 10 billion yuan. This is the first equity investment fund in the insurance industry with the core goal of building a modern industrial system.
In addition, according to data from Zhizhong ZERONE, as of October 15, among the private equity funds filed this year, insurance funds as LPs (Limited Partners) have participated in the capital contribution of 21 funds, with a contribution amount close to 40 billion yuan.
In addition to private equity funds, insurance funds also engage in equity investment through equity investment plans and other means. The website of the China Insurance Asset Management Association shows that this year, several equity investment plans have been registered, including China Life - Huaneng Carbon Neutrality Equity Investment Plan, Guoshou Investment - Huaneng New Energy Equity Investment Plan, China Life - CNNC Carbon Neutrality Equity Investment Plan, CCB Insurance Asset Management - Yingli Pharmaceutical Equity Investment Plan, and Minsheng Tonghui - Smart Manufacturing No. 1 Equity Investment Plan, among others.
Meeting the Asset Allocation Needs of Insurance FundsCurrently, against the backdrop of economic restructuring and declining market interest rates, the structure of insurance capital investment is undergoing a transformation. In the alternative investment business of insurance capital, the registration scale of debt investment plans has declined, and some insurance capital is turning its attention to equity investment plans and private equity funds.
A person in charge of alternative investment at a small and medium-sized insurance asset management institution believes that the current economic structure is in a period of transformation, and there are fewer good projects in some traditional industries, so there are fewer projects that insurance capital can do. To meet the return requirements, insurance capital will seek alternative assets, and assets with relatively stable cash flows and investment returns, such as infrastructure, have become one of the new directions for insurance capital investment.
Industry insiders believe that in the context of declining interest rates, it is a general trend for insurance companies to increase their equity investment efforts, which can leverage the advantages of insurance capital as "patient capital" and long-term investment to increase investment returns and support the development of the real economy.
Wan Yiqing, Secretary of the Party Committee and President of PICC Capital, recently wrote in an article that in recent years, regulatory policies have actively guided long-term funds such as insurance capital to invest in equity, and the scale of insurance capital investment in direct equity and private equity funds has risen rapidly, achieving good results in insurance capital equity investment. From the perspective of equity in unlisted companies, the scale of insurance capital investment has accounted for about 8% of the current insurance capital utilization balance. At this rate, it is expected that the scale of new equity investment funds for insurance capital in the next 5 years will exceed one trillion yuan. Fully leveraging the unique advantages of insurance capital equity investment can provide stronger financial support for the development of the real economy.
Reporters learned through research that when insurance capital engages in equity investment, it pays more attention to the long-term and stability of returns. The person in charge of alternative investment at the aforementioned insurance asset management institution said that other PE/VC invest in growth-oriented enterprises when engaging in equity investment, and obtain returns from valuation increases when exiting. When insurance capital engages in equity investment, it will consider more from the stability of enterprise operations and dividend stability, which aligns with the needs of insurance capital's asset-liability matching, cost-benefit matching, and duration matching.
Key areas supported by the national key, such as high-tech fields and strategic emerging industries, have become the focus of insurance capital equity investment. The person in charge of a small and medium-sized insurance asset management institution said: "Our focus is mainly on the national development strategy, such as semiconductors and medical health, which have projects landing in recent years."
Ding Zhenyu, a senior investment consultant at Ju Feng Investment Consulting, said that insurance capital equity investment mainly focuses on the elderly care and big health fields closely related to the main business of insurance, as well as national major strategies and key areas.
Optimizing the environment for insurance capital equity investment
Relevant data shows that the proportion of long-term equity investment in the asset allocation of insurance capital is relatively low at present. Industry insiders believe that to improve the enthusiasm for insurance capital equity investment, it is necessary to further optimize the environment for insurance capital equity investment and improve the investment research and risk management capabilities of insurance capital.
Wan Yiqing believes that as an important part of the asset management industry, the investment and use of insurance capital are subject to strict financial regulation, and due to its unique liability attributes, it faces many constraints. In view of these constraints, insurance capital equity investment must adhere to the principle of innovation while maintaining integrity.Wan Yiqing further explained that adhering to principles means strictly following regulatory laws and regulations, ensuring effective matching of assets and liabilities, focusing on the characteristics of one's own funds, persisting in serving the main insurance business, and serving the high-quality development of the real economy. Innovation requires insurance capital institutions to continuously deepen their investment philosophy and innovate their investment models according to the characteristics and needs of equity investment, accurately exploring directions and paths that match insurance capital, and providing more diversified and professional financial products and services to effectively leverage the unique effectiveness of insurance capital equity investment.
Yang Fan, General Manager of Beijing Paipai Network Insurance Agency Co., Ltd., said that at present, insurance capital faces difficulties in equity investment such as insufficient investment experience, the need to improve risk identification and control capabilities, and imperfect exit mechanisms. It is recommended that insurance capital strengthen the construction of internal investment teams, improve professional quality, establish and improve risk assessment systems to ensure investment safety, improve the exit mechanism of equity investment to enhance liquidity, and strengthen cooperation with governments and industry organizations to strive for policy support and resource integration.
The person in charge of the aforementioned small and medium-sized insurance asset management institutions believes that when insurance capital engages in equity investment, in addition to financial investment, it can also consider from a strategic perspective and leverage the synergistic effect between the invested projects and the main insurance business.
Currently, regulatory authorities are actively guiding insurance capital and other long-term funds to support the development of new quality productive forces. Industry insiders believe that it is also necessary to improve the corresponding risk management and assessment mechanisms. "Investment in new quality productive forces is significantly different from traditional equity investment, and there are differences in investment tools," said a person in charge of a large insurance asset management company. When the company engages in traditional equity investment, it relies more on the form of equity investment plans, but for investment in new quality productive forces, it relies more on the form of private equity funds. The company's existing performance assessment and risk control mechanisms may not be very suitable for the needs of investment in new quality productive forces.
The person in charge revealed that the company is exploring and researching the establishment of a package of project assessment mechanisms according to different types of investment projects, and establishing a long-term assessment mechanism that is adapted to the profit cycle and cross-cycle investment.
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