Core Viewpoint - Increasing numbers of government investment funds are transitioning from Limited Partners (LP) to General Partners (GP), focusing on direct investments and seeking new investment opportunities in both emerging industries and existing markets [1][2]. Group 1: Transition to Direct Investment - Since the release of the "Guiding Opinions on Promoting the High-Quality Development of Government Investment Funds" (referred to as "Guoban No. 1 Document"), local government investment funds have shifted their strategy to include direct investment, with a notable increase in direct investment projects [2][4]. - The scale of direct investments has reached nearly 100 million yuan in the first half of the year, indicating a significant commitment to this approach [2]. - The overall management scale of China's mother fund industry has decreased by 23.7% compared to the end of 2024, with government-guided funds seeing a 24.0% decline [4][5]. Group 2: New Types of GP Collaboration - Government investment funds are now collaborating with new types of GPs to create ecosystems and enhance industrial capabilities, moving beyond merely fulfilling return tasks [8]. - A local investment platform has made angel investments in innovative technology companies, focusing on high thermal conductivity aluminum nitride ceramic products, which are crucial for advanced industries like AI and 5G [8][9]. - The establishment of a pilot platform for material innovation teams has been initiated to facilitate the transition from research to market, addressing a critical gap in the technology transfer process [9]. Group 3: Exploring Existing Market Opportunities - A local state-owned fund in a second-tier city has recognized its limited capital strength and is focusing on finding investment opportunities within the existing market, particularly in traditional industries [12]. - Despite low profit margins in many local enterprises, some companies have shown promising financial performance, with gross margins reaching 40-50% and net profit margins around 20% [13]. - The fund plans to empower these well-performing companies through mergers and acquisitions, aiming to integrate them into the broader industrial chain and explore international market opportunities [13].

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]