Core Insights - The government investment funds are shifting their focus from traditional fund-of-funds (FoF) models to direct investment strategies, influenced by new policies aimed at enhancing the quality of government investment funds [1][3][6] - The overall scale of China's mother fund industry has decreased for the first time since 2015, with a notable decline in both government-guided and market-oriented funds [2][3] - There is a growing trend among local government investment platforms to seek new types of general partners (GPs) and to collaborate with innovative technology companies, particularly in emerging industries [6][9] Investment Strategy Shift - Since the release of the "Guiding Opinions on Promoting the High-Quality Development of Government Investment Funds," the number of GPs contacted by local government investment fund managers has significantly decreased [1] - The direct investment model has gained traction, with local government funds making substantial investments in direct projects, reaching nearly 100 million yuan in the first half of the year [1][2] - The government encourages a higher proportion of direct investments compared to sub-funds, necessitating fund managers to develop direct investment capabilities [4][5] Market Trends - As of June 30, 2025, the total scale of China's mother fund industry was 34,845 billion yuan, a 23.7% decrease from the end of 2024, with government-guided funds managing 29,973 billion yuan, down 24.0% [2] - The number of newly established mother funds in the first half of 2025 was 33, with a significant decline in the scale of government-guided funds by 66% compared to the same period in 2024 [2] Direct Investment Opportunities - Local investment platforms are increasingly focusing on direct investments in innovative technology companies, such as those involved in advanced materials, to leverage local academic resources [6][8] - A new materials chain platform has been developed to facilitate the transition of scientific research into marketable products, addressing gaps in the technology transfer process [7] - The financing model includes a credit guarantee mechanism that allows technology companies to access loans with lower interest rates, significantly reducing their financing costs [7][8] Exploring Existing Markets - Some local funds are targeting traditional industries within their regions, recognizing the potential for investment in companies that may be overlooked by larger funds [9][10] - Despite low profit margins in many traditional sectors, there are opportunities to identify and support companies with higher profitability, potentially through mergers and acquisitions [10] - The strategy includes collaborating with organizations that assist companies in expanding into international markets, aiming to enhance their global competitiveness [10]