Competition in the field of culture investment is going to be increasingly fierce.”
Shanghai launched United Media FOFs on Sunday, the first fund of funds initiated by a State-owned media group to focus on culture investments.
United Media FOFs — a fund of funds, an investment strategy of holding a portfolio of other investment funds — is financially backed by Shanghai JinWin Investment Co, Ltd, an investment platform directly under the jurisdiction of the Shanghai municipal government’s Information Office, Shanghai United Media Group, the Venture Capital Guiding Fund of the Minhang district government, Shanghai International Group and Shanghai Pudong Development Bank.
In its initial phase, the fund will have 3 billion yuan ($452.2 million) and it will grow to a total of 10 billion yuan. The 10-year-term fund will make its investments over its first three years.
About 60 percent of the FOFs total capital will go to general partner teams focusing on projects in culture industries with high growth such as technology, media and telecommunications, as well as internet-based content creation. Forty percent will go to funds with clear models at a stable and mature stage.
FOFs do not invest directly into venture projects. Instead, they invest in funds that have portfolios. They have been widely regarded as a way to diversify risks while maintaining a stable income.
“United Media FOFs will diversify risks through investments in a wide range of varieties regarding growth stage, segments, and teams’ background, making portfolios that meet demands for stable and steady performance,” said Zhang Qian, a founding partner of the initiative.
a partner in Oriza FOFs Investment Management and investment partner in United Media FOFs
According to the National Bureau of Statistics, the total value of China’s culture sector industries last year was more than 3.08 trillion yuan, a 13 percent year-on-year increase, and it is likely to further expand in the next few years.
In China, investments in social media, internet-based media technologies, content creators such as production teams of sitcoms, reality and talk shows, program distribution by subscription and game and educational programs, have been rising fast in recent years, according to a McKinsey & Co research report.
“Competition in the field of culture investment is going to be increasingly fierce, and for investors, knowledge, expertise and insight into the sector is important for choosing the right projects and funds,” said Wang Jipeng, a partner in Oriza FOFs Investment Management and investment partner in United Media FOFs.
Wang said that as the internet lowers the threshold for content creation and distribution, enabling more people to enter the market, a higher capacity to screen projects and funds with high potential becomes more important than ever before.