Zhou Buqi asked: "What about the division? What are the standards?"

Rick Efron glanced at him and said with a smile: "The conditions for your fund are so good, the share must be the highest standard. 25% or 30% is fine."

According to industry practice, 25% of the profit share is usually the highest. For some private placements with particularly good performance, the commission may be as high as 30%.

However, Rick Efron also said about the new industry status quo, "This year's market impact on Wall Street has been too great. The bigger the accident, the greater the change. I have handled several projects recently, and I have begun to seek details of the commission method.

Divided.”

Zhou Buqi didn't understand and asked for advice: "So?"

Rick Efron laughed and said: "Usually in private equity, the annual commitment is 8%, and excess profit sharing is adopted. That is, only the income exceeding 8% will be shared. Generally speaking, the annual commitment exceeds 10%.

It's not excess profit sharing, but full profit sharing. For example, if you make 100 dollars, the excess profit sharing model is to deduct 8% and share the remaining 92 dollars.

For example, with a 20% share, you can earn 18.4 US dollars. If it is a full profit sharing model, you do not need to deduct 10% or 20% of the annualized income. With a full share of 100 US dollars, you can earn 20 US dollars. In other words, it is not a promise

The higher the guaranteed annualized return, the less the fund manager will earn, and different rules can be designed. Now a new model has emerged, the progressive model."

"Progressively?" Zhou Buqi raised his eyebrows, "Progressively?"

Rick Efron said: "The gameplay of private equity is all kinds of weird, and the latest trend is to advance layer by layer. Just like a case I handled before, the product benefit distribution was less than 8% of the return, and the fund did not participate in the share; 8%-15%

The income part is divided into 20%; the income part between 15% and 30% is divided into 40%; the income part between 30% and 50% is divided into 50%; the income exceeding 50% is divided into 75%.”

"75% share..."

Zhou Buqi took a deep breath.

Depend on!

He felt that his idea was wild enough, but the Wall Street bosses didn't take it seriously at all. The most indispensable thing on Wall Street is lunatics. This is simply absurd.

Taking investors' money to invest, and after making money, 25% goes to the investors, and 75% goes into your own pocket? No matter how bold Zhou Buqi is, he would not dare to do this.

Rick Efron explained: "Wall Street has encountered many difficulties this year and needs change and innovation. I think this progressive commission model will become the mainstream of private equity in the future. These three red lines you have done are all very good.

If you are radical, you might as well try this new model.”

Zhou Buqi immediately refused, "No need, let's use the traditional model. Perception is greater than facts, and investors' opinions are the most important. My fund takes 30% of the total profit, isn't that excessive?"

Rick Efron smiled: "Of course it's not too much. The guarantee conditions you offered are so good, 20% annual commitment, refund of management fees, and compensation for losses. These three rules are enough to qualify for a 30% fixed payment."

Divide.”

Zhou Buqi knew it well, "What about the third point? How about the loss compensation mechanism?"

The market and common sense often run counter to each other, so leeks are everywhere.

The higher the return, the smaller the fund size; the lower the return, the larger the fund size. In other words, the more profitable the business, the less people will do it; the more unprofitable the business, the more people will squeeze it out.

.

Returns and risks are equal.

The largest single financial asset in the world is U.S. debt, with a total scale of up to 10 trillion U.S. dollars, because of its low returns and low risks.

If the income exceeds 50%, you can get a 75% commission... Such a rule is too crazy. It is conceivable that in order to get 75% of the income, fund managers will increase leverage crazily and continue to engage in high-risk operations.

.Most investors don’t like this.

The scale of private equity is far smaller than that of public equity. Private equity giants such as KKR and Black Rock, the most famous in the industry, only manage a capital scale of US$30 billion.

One of the very important reasons is that the risks of private equity are too high.

Zhou Buqi is a newcomer in the private equity field.

If you want to gain recognition from the market and investors at an early stage and obtain large-scale investment, the most important thing is to operate with low risk within the scope of common sense and to absolutely guarantee the interests of investors.

The guaranteed annualized return of 20% is a bit high, which means that few investors are willing to participate. In order to make up for the shortcomings of this rule, a capital preservation policy is introduced. Once the fund loses money, the fund will replenish the lost part to ensure investment.

People's principal is not damaged.

Of course, the financial elites on Wall Street have already applied this model that even Zhou Buqi can think of.

"Okay, it's good." Rick Efron agreed with this clause. Anyway, it was not him who paid for the loss. "Of these three clauses, this one is the most important and the most important for your fund."

Attractive place. The more responsible a fund manager is, the more sought after by investors. Well, you are an entrepreneur, you should understand."

Zhou Buqi is not modest at all. He is an American here, and modesty can be mistaken for inferiority. He said very confidently: "Of course, both the market and society like responsible entrepreneurs. I am

Such people."

Rick Efron nodded, "But, as for your loss compensation, you won't set a stop loss limit?"

"What's the meaning?"

"I recently worked on a tpg project, and a fund is to raise US$5 billion. As you know, the market is risky now, and many idle funds are unwilling to enter the market and are waiting to see. In order to attract investors, the fund

The manager made a similar promise, investing US$50 million out of his own pocket. If the project suffers a loss, his share will be lost first.”

"ah?"

Zhou Buqi wanted to scold the public, since when did Wall Street capitalists become so conscientious? When the fund loses money, it first follows the fund manager's personal investment to lose money, and after losing the US$50 million, it then loses the investor's principal.

In order to raise funds, I am reluctant to let go of my children and not be able to trap the wolf.

Rick Efron said: "50 million US dollars, which is only 1%. It is equivalent to the fund's commitment to compensate for losses of up to 1%. What about your side? No upper limit?"

"That's not necessary!" Zhou Buqi waved his hand with an awe-inspiring tone, "A 20% loss on a $5 billion business is only $1 billion. I can afford it. When I do business, the most despised thing is for investors to lose money.

I feel uneasy inside."

"Well, it's worthy of admiration."

Ric Efron gave a thumbs up.

I was extremely suspicious.

He didn't have much contact with this Zhou rich man, so he didn't quite understand the way this kid spoke, so righteously... Did he deceive himself into thinking he was a layman? Or did he really think so?

But one thing he was sure of was that it was all nonsense.

Can people who follow the rules outplay those who make the rules?

Just like the new project of tpg Capital, which raised US$5 billion, the fund manager invested US$50 million out of his own pocket. If he suffered a loss, he would lose his own money first... At first glance, it feels so righteous, so high-minded, and there is an opportunity.

Go cut the capitalist's leeks.

However, the fund is run by a fund manager, how could he allow himself to lose money? In terms of investment strategy, he will definitely be conservative and choose some low-risk investments.

This kind of upright clause is actually just a decoration, using the power of rules to fool investors into paying out money. It is estimated that it will not be used in ten or twenty years.

Now is a financial crisis, and the world will definitely release a lot of water. Before the next economic crisis comes, various important high-quality assets will definitely accumulate water and appreciate in value.

Zhou Tuhao’s terms are probably similar.

He must have seen the big picture clearly.

Global quantitative easing requires a large amount of water. Hot money flows into the market, and it is difficult to lose money as long as it is not heavily leveraged.

Zhou Buqi smiled and said: "So, these three clauses are no problem?"

Rick Efron said: "It's okay to look at them one by one. There are precedents. However, it is the first time I have seen these three together. Those with high risks will not compensate for losses, and those who do will not promise to compensate.

High yield. Those are two contradictory things, and you combine those two things, and that's the most... well, the most innovative thing."

Zhou Buqiruo said profoundly: "Only by combining high returns with loss compensation can we attract the best investors."

Rick Efron laughed loudly, "Mr. Zhou is indeed a big business man. In my heart, you are like Bill Gates and Buffett. You are much better than these idiots on Wall Street."

Zhou Buqi ignored the compliment and asked, "What do you think the capital size should be?"

Rick Efron said: "It shouldn't be too much, 10 billion US dollars is enough. You have just started in this industry, and it is not easy to allocate such a large amount of funds for asset allocation. Take your time first."

This idea coincides with Zhou Buqi's, "Well, that's what I thought too."

Rick Efron said: "In the past few months, due to market panic, many investors have withdrawn their funds from private equity. For the middle and lower-income classes, they have had a very difficult time. But for a small number of people,

What they worry about is that they can’t find good investment targets and have a lot of idle funds. We have internal estimates that there are at least 1.3 trillion US dollars idle in the global market.”

"Well, choose the best."

"Yes, as long as the conditions you offer are good enough and the capital scale is small enough, many dignitaries and celebrities, including European royal families and Middle Eastern princes, will find connections to get closer to you, build relationships and build friendships, hoping to win a share of the investment.

.”

Rick Efron has a half-smiling look on his face.

He had already seen it.

This is the main purpose of this kid.

Zhou Buqi openly admitted that Wall Street is different from Silicon Valley and Hollywood. It is closer to politics. Members and dignitaries come and go. He asked, "I do have such an idea. Do you have any good suggestions?"
Chapter completed!