The city’s state assets regulator has issued sixteen measures to clear the way for state-owned enterprise funds to invest across borders, simplifying valuation rules and allowing co-investment by fund teams.

The guidelines, published on April 8 by the Shanghai State-owned Assets Supervision and Administration Commission, address three broad areas: direction, capability, and mechanism.

Market principles take the lead. The document acknowledges the long-cycle, high-risk, people-driven nature of private equity. Legal boundaries between sponsor, manager and regulator are to be clearly drawn. Professionalism — the third pillar — calls for skilled teams capable of pricing assets and managing funds from inception to exit.

On the ground, several provisions stand out.

Fund formation now encourages linkages across different capital pools and closer coordination between municipal and district authorities. State enterprises are told to set up venture funds that target young, small, long-gestation, hard-technology projects. Industrial leaders may launch corporate venture funds to incubate startups along their supply chains.

For lead investors, state capital contribution ratios, hurdle rates and fee structures can be adjusted case by case. Early-stage tech funds get the most flexibility. Valuation methods should match the growth phase of the investee company.

Process is simplified. Fund formation and fundraising decisions are delegated to clearly defined levels within each enterprise. Investments made during a fund's fundraising period may be exempt from state asset appraisal. State limited partners may protect their interests by sending observers to investment committees or sitting on advisory boards. If a voting seat is granted, the appointed professional must be allowed to vote independently. Industry experts may be invited into the decision-making room.

Post-investment support will be coordinated at the city level, with some enterprises forming specialised teams to offer financing, ecosystem access, technology transfer, talent and information services.

Exits receive attention. SOEs are encouraged to set up secondary funds and M&A funds. The city will publish S-fund trading data regularly to improve price discovery and deal matching. Price adjustments may be based on third-party valuation reports, underlying portfolio conditions, comparable market transactions and asset liquidity.

On incentives, the guidelines allow co-investment schemes for industrial and financial funds, with management teams sharing in returns and excess profits.

Performance will be judged over a long cycle, not by individual projects or single-year results. Normal investment risk is tolerated.

Supervisory systems must prevent conflicts of interest and corruption. Party integration into fund governance is also required.

The commission said it will work with other departments to monitor new issues as they arise.