What do you mean by leveraged funds?


When buying funds, many investors know that there are various types of funds, such as money funds, bond funds, hybrid funds, index funds, stock funds, etc., but they are relatively unfamiliar with leveraged funds, so what is meant by leveraged funds? What are the characteristics of leveraged funds? For you to answer one by one, want to know the partners quickly to see it!

What is a leveraged fund?


Leveraged funds are a kind of hedge funds. Domestic leveraged funds belong to the leveraged share of the graded fund (also called aggressive share). Ordinary index funds, that is, how much the investor invests, then it is equivalent to buy how much the amount of index funds, and leveraged funds is to say that in addition to the principal invested by the investor, will also borrow money from people to form leverage.

What are the characteristics of a leveraged fund?


The main feature of a leveraged fund is that it divides the fund product into two classes of shares and gives different expected annualized expected return allocations. For example, a graded fund product X (X is called the parent fund) is divided into C shares (agreed annualized expected return shares) and D shares (leveraged shares).

The C share agrees to a certain expected annualized rate of return, and all remaining assets of fund X after deducting the principal and accrued expected annualized return of the C share are attributed to the D share, with losses borne by the D share holder up to the net asset value of the D share.

When the overall net value of X declines, the net value of D shares will have priority to decline, and correspondingly, when the overall net value of X increases, the net value of D shares will also have priority to increase relative to C shares.

C shares generally receive priority in the distribution of the benchmark expected annualized return, D shares maximize compensation for the principal and benchmark expected annualized return of the preferred shares, and D shares generally receive some leverage by participating to a greater extent in the distribution of the remaining expected annualized return or by taking losses.

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