Breaking the "Fee Reduction" Norm! Jiangsu Gives Early-Stage Investment a "Raise": Management Fee Cap Raised to 3%, Government Funding Can Reach Up to 70%

The Daily Economic News reporter: Yao Yanan The Daily Economic News editor: Peng Shuiping

Recently, Jiangsu issued the “Implementation Opinions on Promoting High-Quality Development of Jiangsu Provincial Government Investment Funds” (hereinafter referred to as “Implementation Opinions”), proposing multiple measures to promote the high-quality development of government investment funds.

Notably, for early-stage, high-risk venture capital funds, the “Implementation Opinions” clearly state that the management fee extraction rate can be increased to 3% per year, and the total government contribution ratio can be raised to 70%. In the context of overall declining management fees in the industry and stricter fee accrual mechanisms, this breakthrough has attracted market attention.

“That’s equivalent to the government paying out real money to ‘cover’ the professionalism of early-stage investments,” an investor told reporters. Investing in early projects requires stronger industry insights, longer incubation periods, and more post-investment services, which naturally incur higher management costs. Higher management fees allow GP teams not to worry about short-term management fee income, enabling them to make significant investments in projects that require long-term incubation and to stay patient.

Management fee cap raised to 3% per year, “support” for early-stage investments

Recently, the “Implementation Opinions” issued by Jiangsu proposed a series of measures around clarifying fund positioning and establishing a tiered and classified management mechanism to promote high-quality development of government investment funds.

It is noteworthy that the “Implementation Opinions” mention differentiated management of various funds. For venture capital funds that have good guiding effects and social benefits, and where social capital participation is weak, and at early investment stages with higher risks, the total government contribution ratio can be increased to 70%, and the management fee rate can be raised to 3% per year. The fund’s duration and performance evaluation cycle can also be appropriately extended.

Management fees and performance rewards are the main income sources for GPs. The common fee model is “2+20,” where “2” refers to the management fee charged annually at 2% of the fund size to cover operational and management expenses, and “20” refers to the 20% of fund returns taken as performance fee.

In the past year or two, there has been a clear trend of overall reduction in management fee rates, with stricter accrual mechanisms. Previously, some domestic regional industry parent funds announced that management fees for sub-funds during the investment period were charged at 5‰ (0.5%) of the fund’s paid-in capital annually; during the exit period, at 5‰ of the initial investment cost of the exited projects. For direct investments, management fees during the investment period were 1.5% of the paid-in capital annually; during the exit period, at 1.5% of the initial investment cost. Additionally, neither period had extended management fees.

Subsequently, some regions issued new regulations requiring management fees to be paid from fund returns or interest, generally not from principal. If the fund has not yet generated returns or interest, pre-advances from principal are permitted, to be reimbursed once the fund produces income.

The Mother Fund Research Center previously released the “2025 First Half China Mother Fund Panorama Report,” which noted that the previously common 2% annual fee for direct investment funds is being broken. Most government LP-participated direct investment sub-funds now charge management fees of only 1%–1.5%, with some regions dropping to 1%. Based on this, some guiding funds link management fee payments to performance assessments, adopting phased disbursements and post-settlement methods. Some regions also specify that if investment progress or returns do not meet requirements, already disbursed management fees must be returned.

It appears that Jiangsu’s move to raise the management fee cap to 3% per year is among the highest nationwide. A long-term investor focusing on hard technology in the Yangtze River Delta commented that this effectively recognizes the professional value of early-stage investments with real financial support from the government. Early-stage projects require stronger industry insights, longer incubation periods, and more post-investment services, which naturally entail higher management costs. Higher management fees enable GP teams to focus on research and supporting enterprise growth without short-term fee income worries.

Contribution cap raised to 70%, “real money” for early and small investments

In addition to increasing management fees, the “Implementation Opinions” also make breakthroughs in government contribution ratios. It mentions that for venture capital funds with good guiding effects and social benefits, and where social capital participation is weak, and at early investment stages with higher risks, the total government contribution ratio can be increased to 70%, which is also relatively high domestically.

Previously, government-guided funds typically invested 30%–40% in sub-funds. Now, higher contribution limits are becoming a common trend in reforming guiding funds across many regions, with some areas raising this ratio to 70% or more, reflecting increased support for early-stage investments.

The breakthroughs in management fees and contribution ratios have freed up real funds for “early and small” investments, and policy benefits are quickly translating into specific industries. The Daily Economic News reporter noted that recently, Jiangsu Provincial Department of Industry and Information Technology and eight other departments issued the “Jiangsu Province Brain-Computer Interface Industry Innovation Development Action Plan,” which emphasizes leveraging the guiding role of provincial strategic emerging industry mother funds to support related industry-specific funds and sub-funds investing in broad application scenarios and high-growth brain-computer interface projects. It encourages regions with conditions to establish brain-computer interface industry investment funds, attract social capital participation, and help seed-stage and startup companies grow stronger. Under the guidance of provincial mother funds, a batch of supporting funds focusing on niche tracks are accelerating their arrival.

The policy and industry resonance ultimately boost activity in the capital markets. The reporter noted that the Zero2IPO Group’s “2025 China Equity Investment Market Development Report” shows that in 2025, Jiangsu ranked first nationwide with 1,876 investment cases, totaling over 100 billion yuan in investment amount.