My Government Venture Capital Fund Risk Management

In recent years,with the dilatation of the high technology industries, and ourgovernment constantly pay more attention to boost the high-tech industrialization,many local governments in our country set the Ventrue Capital guiding funds insuccession,so as to improve the operation efficiency of financial fund,supporting thehigh-tech firms at the early stage. The Guiding Fund participate in venture capital willexpress the financial capital leverage amplification, guiding more social capital flowinto the venture capital area to support the development of venture capital industry,inorder to support our local economy. Beginning in2006, Driven by relevant policiesand legislations, China’s government guidance funds have formed a dual-increasingtrend in the number and size of funds each year.Since the money of the Venture Capital guiding fund is from the government,thepurpose of its investment is to achieve the policy goal,which is different fromcommercial Venture Capital fund that is search for economic profit;and as a kind ofspecial mother fund,it only joint the shares of baby funds with other investors,anddoesn’t interfere the daily management and investment decision-making of the babyfunds. That resulting a typically ternary principal-agent relation，and the risks aremore complicated.First of all，because of the asymmetric information, Governmentguidance funds can’t acquire all the information about cooperation agencies andinnovation programs, which let these subjects be faced by different agents lead toadverse selection and moral hazard. Secondly, Functional department managers haveassigned to guide the discretion of the capital, and a large number of venture capitalorganizations and small and medium-sized technology-based start-ups is anindisputable fact, in order to guide the Fund’s support,the managers may takerent-seeking to the Government officials because of the scarcity of resources, which isanother major risk factors that affect the efficient operation of financial funds.Moreover, Guidance Funds is also facing with policy conflicting risk and exit risk in the course of Sub-Funds,as well as market risk and technical risk within the ventureprojects,etc.To research the government guidance Fund risk management,we shouldanalyze above risk factors firstly.How to manage these risks more effectively theexisting and newly established Guiding Funds to promote the financial capital in localereas come into play and support the local creative industries is a practical issue.Therefore, in this paper, we from the departure of the government’s point of view,elaborating the management measures taken by the Government on the risks fromdifferent levels of agents in the combination of some cases practically, then putforward some suggestions to the Government to strengthen the rent-seekingmanagement and regulatory.