10 billion, Xi'an Perpetual Mother Fund established

Why has the perpetual duration become a new trend for government-guided funds?

In the investment industry—decoding LPs—recently at the Xi’an Emerging Industry Investment Development Forum, Xi’an High-tech Emerging Industry Investment Fund (hereinafter referred to as “Emerging Industry Fund”) announced a major upgrade: the fund size will be further increased from 5 billion to 10 billion yuan, and the fund’s duration will be adjusted from 30 years to “long-term/perpetual.”

This marks the arrival of China’s first “perpetual parent fund” in Shaanxi Province.

Recall that in February this year, the Guangdong provincial government released a “Hundred-billion Strategic Emerging Industry Investment Guidance Fund Plan,” which explicitly proposed a groundbreaking design of “no fixed duration.” Amid the waves of market changes, the practice of patient capital continues to unfold.

100 Billion Parent Fund

Duration Extended to “Perpetual”

Back in 2016, under the leadership of the Xi’an High-tech Zone Management Committee, the Xi’an High-tech Emerging Industry Investment Fund was initiated with an initial scale of 5 billion yuan, representing an important step in exploring market-oriented operation of government-guided funds in the high-tech zone.

The fund focuses on key strategic emerging industries and hard technology industries supported by Xi’an High-tech Zone, mainly through equity participation and other cooperation methods with other investors to establish or increase capital in existing funds, as well as direct investments to support local enterprises.

To date, the Emerging Industry Fund has invested in 18 sub-funds, with a total scale of 16.7 billion yuan, leveraging external capital by 4.9 times; among them, 12 funds target seed and early-stage companies, and 6 funds target growth and mature-stage companies; additionally, direct investments support 74 local enterprises.

In terms of investment results, these sub-funds have made 440 investments, totaling nearly 12 billion yuan.

After a decade of operation, the Xi’an High-tech Emerging Industry Investment Fund has been upgraded. The total fund size has doubled, with all additional funds coming from within the High-tech Financial Holdings system: including management company XiGao Investment (1 billion), High-tech Hard Technology Group (2 billion), and High-tech Financial Services (2 billion). This further expansion brings new vitality to the industry.

At the same time, the emerging industry investment ecosystem is being jointly built, gathering provincial, municipal, and district state-owned assets, industry investment platforms, university think tanks, and leading enterprises to create a higher-level platform for cooperation, resource sharing, and exchange.

More importantly, the fund’s duration has been changed from 30 years to long-term/perpetual, further strengthening the attribute of “patient capital.”

The “perpetual parent fund” is rare; the only notable precedent is the Guangdong provincial government’s release of the 100-billion strategic emerging industry investment guidance fund plan in February this year, which features this innovative design. This guidance fund was fully established by the Guangdong Provincial Finance Department, with an initial scale of 50 billion yuan, and long-term operation without a fixed duration, establishing a recycling mechanism for rolling investments.

More positive changes are underway.

Patience, a little more patience

On April 30, 2024, “patient capital” was mentioned for the first time at a Central Political Bureau meeting. Since then, expanding patient capital has become a consensus.

A landmark moment was in December last year, when the National Development and Reform Commission and the Ministry of Finance jointly launched the National Venture Capital Guidance Fund (referred to as the “National VC Guidance Fund”), which is considered “carrier-grade.” Focused on hard technology, the fund’s duration is 20 years, longer than typical equity investment funds.

Extending the fund’s duration is undoubtedly an important way to embody “patient capital.”

Thus, we see more and more government-guided funds proposing longer durations in their management regulations. Until the beginning of this year, two perpetual parent funds emerged successively, further breaking the limit on fund duration.

This is a new mission bestowed upon guidance funds by the times.

Looking today, a new round of industrial upgrading competition is intensifying, and the demand for developing emerging industries across regions is evident; meanwhile, in the global tech race, accelerating high-level technological self-reliance and self-strengthening, as well as cultivating new productive forces, are especially urgent.

Technological innovation is not achieved overnight. Behind strategic emerging industries, most focus on hard technology, which involves long cycles: it often takes 10-15 years from establishment and R&D to industrialization for a hard tech company, especially those based on fundamental science, requiring long-term support from venture capital funds.

However, for a long time, RMB venture capital funds have faced the reality of short durations. Due to the nature of state-owned assets, government-guided funds generally do not exceed 10 years, forcing many funds to exit before the technology is fully mature. In other words, most RMB funds find it difficult to support a tech project over the long term.

But now, guidance funds are undergoing profound changes.

Perhaps soon, we will witness more and more “perpetual funds.” After all, only longer-term, more patient capital can truly match technological innovation and industrial rise.