From August 12 to 13, 2020, Zero2IPO Group and PEdaily hosted the 14th China LP/GP Summit in Shanghai, which shortly after drew to a successful close. Many prominent representatives across China from Fund of Funds (FOFs), government guidance funds, sovereign wealth funds, family office funds, insurance institutions, bank capitals, PE/VC institutions and publicly-listed companies gathered at the summit to discuss developing trends within the global markets and asset allocation strategies to safeguard future investment.
Partner James Yong Wang, a seasoned international private equity, venture capital, and investment funds lawyer, was invited as a guest speaker to the event. Mr. Wang unveiled the official Chinese version of “ILPA Principles 3.0: Promoting Transparency, Governance and Alignment of Interests between General Partners and Limited Partners (Principles 3.0)”, which was co-authored by Jingtian & Gongcheng, Institutional Limited Partners Association (ILPA), and the Limited Partners Association of China (LPACN).
I. Highlights of Mr. Wang’s Speech
Partner James Yong Wang delivered his insights on the current state and new developments within the investment fund sector relating to new opportunities in portfolio management. Mr. Wang believes we are in the midst of unprecedented “changes,” including the novel coronavirus pandemic that is circulating around the world leading to dramatic changes in the global ecosystem. Drawing upon his past two decades of experience, with the first half in the United States and the latter half in China, and his investment fund experience at top law firms in both countries, Mr. Wang shared his personal perspective with the participants on the American and Chinese economies, in particular on changes in the investment fund industry.
Mr. Wang discussed the similarities and differences between the General Partner (GP) and Limited Partner (LP) structures in the domestic and foreign investment funds that his team worked with on behalf of his many clients. Based on his professional experience, he summarized the essence of fund investment management as the alignment of interests between GPs and LPs; or fiduciary duty from a legal point of view, which is the entrustment of money by LPs to GPs, whereby GPs assume the fiduciary duty. This is at the core of fund investment management, which provides a guiding constant for all industry participants.
II. Official Chinese Version of “ILPA Principles 3.0”
The summit published the official Chinese version of “ILPA Principles 3.0: Promoting Transparency, Governance and Alignment of Interests between General Partners and Limited Partners”, co-authored by Jingtian & Gongcheng, ILPA, and LPACN. Mr. Wang’s team was commissioned by ILPA to conduct all of the translation work for the official Chinese version of Principles 3.0.
About Principles 3.0
Principles 3.0 provides guidance on best practices for the private equity industry while taking into consideration evolving dynamics within the industry. These guidelines are based on the input of both Limited Partners (LPs) and General Partners (GPs) and aims to provide a basis for discussion when both partners seek to form partnership agreements and manage funds. Principles 3.0 focuses on the ease of operability and GPs and LPs will have opportunities to incorporate it into their daily activities through the templates, best practices and instructions published by ILPA. Principles 3.0 is also unique in that it covers the following nascent topics:
• Expense Reporting and Reasonable Costs
• Scope of Fund Audit
• Subscription Credit Facility
• Co-investment Allocation
• Notification and Policy Disclosure: ESG, Code of Conduct and Regulatory Compliance
• Change in GP Ownership or Control
• GP-led, Private Equity Secondary Market Transactions
About the Institutional Limited Partners Association (ILPA)
Established in the 1990s, ILPA is a member-driven organization serving limited partners in the global private equity industry. ILPA currently has over 500 institutional members from more than 50 countries, with over USD 2 trillion in assets under management. In September 2009, ILPA published its ILPA Principles designed to strengthen relationships, communications and alignment of long-term interests between GPs and LPs through the provision of best practices and market practices for private equity funds. Principles 1.0 were first published in September 2009. An updated version (Principles 2.0) was subsequently published in January 2011 and the latest version (Principles 3.0) was released in June 2019.
About the Limited Partners Association of China (LPACN)
LPACN is a non-profit organization launched by prominent domestic and international institutional investors and the first organization in China that is principally constituted by LP organizations. LPACN was founded in 2008 and has over 100 leading LP members globally, with more than USD 1 trillion in assets under management. Since its inception, LPACN has been active in organizing exchange programs, conducting research, publishing research reports, providing educational services, promoting communication and cooperation between international LPs and domestic LPs, relevant Chinese government bodies and practitioners in PE organizations, and pushing for the implementation of international best practices for private equity investment in China. It has achieved remarkable results and become a trusted voice in the industry.
About Jingtian & Gongcheng
With over 200 partners and approximately 600 lawyers, paralegals and assistants, Jingtian & Gongcheng is one of the oldest and most prominent full-service law firms in China and was named Asia Firm of the Year at the 2020 Asia Legal Awards by The Asian Lawyer. Jingtian & Gongcheng's investment fund employees have an extensive track record in domestic and international fundraising, investment, and fund management. Our team completed close to 2,000 fundraisings in the domestic and global markets and received the 2019 Investment Funds Firm of the Year from China Law & Practice .
