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LF International Inc (LFI) is the international venture capital arm of the Hong Kong based trading conglomerate Li & Fung Limited. The company had managed two funds successfully since its inception, and recently attracted two major financial investors to join its third fund, and that created some concern over one of the investments in its portfolio. Winco was a major fireworks distributor in the United States, and a long-time trading partner with Li & Fung Limited. In 1993, LFI had invested US$300,000 for a 25 per cent stake in Winco. Managers of LFI had come across similar companies like Winco, and proposed setting up a US$30 million corporate fund that would invest in companies like Winco. The corporate fund would allow Li & Fung Limited to make strategic investments in business partners, but there were many operational issues, such as determining the types of companies to invest in, deciding who should make the investment decisions, evaluating fund performance, determining how to manage the investment risk, and determining the relationship between the corporate fund and the regular fund.