CreditEase sees ‘angel fund of funds’ as more transparent way to invest seed capital
The wealth management unit of US-listed online financial services firm has invested in five general partners of angel funds since its launch in April
Borrowing lessons from now-defunct peer to peer operator Ezubao, which engineered China’s biggest Ponzi scheme after its founder used a fraudulent online investment scheme in 2015 to fleece investors, managers of China’s private equity sector now see fund of funds (FOFs) as the antidote that could combat scammers that have also tainted the sector.
Cally Liao, managing partner of FOFs at CreditEase’s wealth management unit, said FOFs bring more discipline and transparency to private equity and venture capital investments – a much-needed advantage that investors of seed capital into early-stage start-ups can benefit from.
Fund of funds is an investment strategy in which a fund invests in other types of funds instead of investing directly in bonds, stocks and, in the case of private equity, into a company’s unlisted equity.
Providers of FOF often tout the benefit of diversification and more stringent risk management and due diligence process of the managers that they invest in through their FOF platform.
In April, the company launched its first angel FOFs in collaboration with IDG Capital, a venture capital firm.