Core Viewpoint - The S Fund is increasingly recognized as a mainstream exit strategy in the private equity market, providing liquidity and supporting long-term investment strategies in a challenging market environment [1][5][6]. Group 1: S Fund Overview - The S Fund's cumulative trading volume surpassed 100 billion yuan in 2024, reflecting a 46% increase, with 395 transactions covering 374 funds, indicating a strong demand for liquidity in the market [4][6]. - The S Fund is described as the "secondary market of the primary market," playing an irreplaceable role in creating liquidity for the entire equity market [3][6]. - The S Fund is categorized into two types: "transaction-type S Funds," focused on financial returns, and "functional S Funds," established by local state-owned assets to address capital circulation and liquidity issues [7][8]. Group 2: Market Context and Trends - The private equity market is currently facing liquidity challenges, with fund durations ranging from seven to over ten years, making the S Fund's role more critical [3][4]. - The private equity industry in China has seen significant growth, with a total scale exceeding 14 trillion yuan as of July 2025, despite a decline in fundraising and investment activity over the past three years [4][6]. - The market is characterized by a structural adjustment phase, with increasing state-owned capital participation and a focus on early-stage investments in technology [3][6]. Group 3: Investment Logic and Strategy - The investment logic emphasizes finding certainty amid uncertainty, focusing on high-quality assets that have survived the pandemic and demonstrated revenue and profit growth [7]. - The S Fund is not merely an arbitrage tool but is viewed as a means to "mine for gold" within existing assets, supporting their growth and enhancing market liquidity [7][8]. - The operational model of the S Fund allows for the extension of funds or projects, enabling new capital to support projects that have not yet realized their full value [7].

Core Viewpoint - The S Fund is increasingly recognized as a mainstream exit strategy in the private equity market, providing liquidity and supporting long-term investment strategies in a challenging primary market environment [2][5][8]. Summary by Sections S Fund Market Overview - The S Fund's cumulative trading volume surpassed 100 billion yuan in 2024, reflecting a 46% increase, with 395 transactions covering 374 funds, indicating a strong demand for liquidity in the market [4][6]. Current Market Challenges - The primary market faces significant liquidity issues, with fund durations ranging from seven to over ten years, making the S Fund's role more critical [5][6]. - The private equity sector has seen a decline in fundraising and investment activity over the past three years, but there are signs of recovery in 2024 [6][8]. Policy and Economic Context - The development of the S Fund market is driven by supportive policies at both national and local levels, emphasizing the importance of S Funds in capital circulation and liquidity creation [8][9]. - The current economic environment is characterized by structural adjustments, with an increasing proportion of state-owned capital and a focus on early-stage investments in technology [5][8]. Investment Strategy and Characteristics - The S Fund is viewed as a "secondary market for the primary market," essential for creating liquidity and supporting the growth of projects [5][9]. - Investment logic focuses on finding certainty within the 14 trillion yuan private equity market, prioritizing companies that have survived the pandemic and demonstrated revenue and profit growth [8][9]. S Fund Classification and Operation - S Funds are categorized into two types: "transaction-type S Funds," which prioritize financial returns, and "functional S Funds," established by local state-owned enterprises to address capital circulation and liquidity issues [9][10]. - The operational model of S Funds allows for the extension of project timelines and the introduction of new capital to enhance value, ultimately preparing assets for secondary market entry [9][10]. Company Insights - The company has developed a comprehensive S Fund business system based on 15 years of experience in mother funds, emphasizing the high demands of S Fund transactions on team capabilities [10].