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 the “Implementation Opinions”), which proposes 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 to avoid anxiety over short-term management income, enabling them to focus on long-term projects that require sustained nurturing.

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

Recently, the Jiangsu “Implementation Opinions” put forward 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, early-stage investments, and high-risk projects, the total government contribution ratio can be increased to 70%, with management fees raised to 3% per year, and the fund’s duration and performance evaluation cycle can be appropriately extended.

Management fees and performance incentives are the main income sources for GPs. The common fee model is “2+20”: “2” refers to the management fee charged annually at 2% of the fund size, used to cover operational and management expenses; “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 funds announced that management fees for sub-funds during the investment period were 0.5% per year based on the fund’s paid-in capital; during the exit period, fees were also 0.5% per year based on the initial investment cost of the exited projects. For direct investments, management fees during the investment period were 1.5% per year based on the fund’s paid-in capital, and during the exit period, 1.5% based on the initial investment cost, with no management fees during extension periods.

Subsequently, some regions issued new regulations requiring fund management fees to be paid from fund returns or interest, generally not allowed to be deducted from principal. If the fund has not yet generated returns or interest, fees can be prepaid from the principal and reimbursed once returns or interest are generated.

The Mother Fund Research Center previously released the “2025 China Parent Fund Panorama Report,” which mentioned that the previously common “2%” annual fee for direct investment funds is being broken. Most government LP-participated direct investment sub-funds can only charge management fees of 1% to 1.5%, with some regions even lowering to 1%. Based on this, some guiding funds link management fee payments to performance assessments, adopting installment payments and post-settlement methods. Some regions also specify that if investment progress or returns do not meet requirements, already paid 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 focused on hard technology in the Yangtze River Delta commented to reporters that this effectively recognizes the professional value of early-stage investments with real money from the government. Early-stage projects require deeper 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 financial pressure.

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

In addition to increasing management fees, the “Implementation Opinions” also propose a breakthrough in government contribution ratios. It states that for venture capital funds with good guiding effects and social benefits, where social capital participation is weak, early-stage investments, and high-risk projects, the total government contribution ratio can be increased to 70%, which is also relatively high domestically.

Previously, government-guided funds typically invested 30%–40% of sub-funds’ capital. 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 parent funds to support related industry-specific funds and sub-funds investing in broad application scenarios and high-growth brain-computer interface projects. Regions with conditions are encouraged to establish brain-computer interface industry investment funds to attract social capital and help seed and early-stage companies grow. Under the guidance of provincial parent funds, a number of supporting funds focused on niche tracks are accelerating.

The policy and industry resonance ultimately boost market activity. 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.