On May 16, The Best Practices of Private Fund Governance in China: from the Perspective of ILPA Principles 3.0 prepared by Beijing Fund Town Institute was officially released. From the perspective of investor protection, it provides the best practices with Chinese "characteristics" for general partners and limited partners to establish and maintain long-term trust partnerships, and may serve as an important guidance for the sound operation of the private equity fund industry.

Since the revision of the Partnership Enterprise Law in 2006, China's private equity fund industry has been developing rapidly. As at the end of March this year, 22,200 private fund managers had been registered and 150,400 private funds had been put on record in China, with funds under management (FUM) exceeding 20.33 trillion yuan. However, in general, the industry is still at an early stage of development. Private fund managers have an error understanding of fiduciary duty and disputes over investment interests occur from time to time, for which full-fledged governance practices are urgently required for reference.

After the implementation of the full registration system, the requirements for institutional investors have become increasingly stringent, and higher requirements have been put forward for private fund managers in terms of project judgment, investment and research ability, fund governance, etc., according to Prof. Liu Shuwei, Honorary Director of Beijing Fund Town Institute and a research fellow of the China Family Business Research Center of the Central University of Finance and Economics. In response to the issues of private fund governance, Beijing Fund Town Institute prepared and released The Best Practices of Private Fund Governance in China to make this research result known among more industry organizations and promote more excellent practices in the private equity fund industry.

According to Wang Wei, a fellow of Beijing Fund Town Institute and an equity partner of Beijing Tian Yuan Law Firm, ILPA is one of the most influential private equity industry associations in the world. The ILPA Principles were formulated for the first time to mainly serve investors and limited partners and to provide a global standard for the management of the GP-LP relationship. In accordance with the "ILPA Principles 3.0" (i.e., the principles of common interest, transparency and governance) and based on the supervision of Chinese laws and regulations and the current situation of Chinese market, this report covers the in-depth interviews with representative private fund managers and summaries the problems found in the industry self-regulation, administrative supervision and litigation disputes in the past two years. Combined with specific scene elements, it provides the best practices of private fund governance in China, as well as the corresponding reference proposals for general partners, private fund managers and investors to establish long-term cooperative relationships.

Beijing Fund Town Institute was established under the sponsorship of Beijing Fund Town. It has carried out relevant research on financial issues with colleges and universities such as the Central University of Finance and Economics and the China University of Political Science and Law, professional service institutions such as well-known law firms and accounting firms, as well as top institutional investors, and released a series of research results, including the Manual on Protection of Private Fund Investors jointly issued with the CSRC Beijing Office and the Asset Management Association of China in 2021. In 2022, the Institute published the first China Quantitative Funds White Paper, as well as public welfare research reports such as the Compliance Reference for Private Funds, the Practical Manual for Fund Taxation, and the Research Report on the Distribution Method of Taxable Income for Partnership Private Equity Funds.

As the relevant person in charge of Beijing Fund Town Institute said, in the future, the Institute will continue to conduct professional and systematic research and investor education activities, promote the formation of an industry ecosystem for proactive compliance, prevent and mitigate financial risks, protect the legitimate rights and interests of investors, and facilitate the scientific, healthy and sustainable development of the private equity industry in China.