Critical position of private equity fund _ What is a critical position?

What does the critical position of private equity fund mean? What is the critical explosion position? What does this concept do for us? The following are the critical positions of private equity funds brought by Bian Xiao, hoping to help you.

The key position of private equity fund

The critical position of private equity fund refers to the situation that the net value of private equity fund falls below a certain threshold, resulting in the fund unable to meet the redemption demand of investors or unable to continue its normal operation. This critical point is usually set by the fund contract or fund company, which will vary according to different fund strategies and risk control requirements.

When the net value of private equity fund falls below the critical point of short position, one or more of the following situations may be triggered:

Redemption freeze: Fund managers can suspend or delay accepting investors' redemption applications, so as to avoid the fund scale being greatly reduced due to a large number of redemptions, which will affect the fund operation and the disposal of investment varieties.

Forced liquidation: the fund manager can take compulsory liquidation measures according to the contract to realize the position as soon as possible and meet the redemption needs of investors. This means that the fund manager may sell a large number of investment products held by the fund in a relatively short period of time to cope with large redemption.

Fund dissolution and liquidation: If the short position of the fund is very serious and out of control, the fund manager can decide to dissolve the fund and conduct liquidation. This means that the assets of the fund will be sold and returned in proportion to the share held by investors.

The critical point of short position is set to protect the interests of funds and investors, and also conforms to the risk control principle of fund operation. Different types of private equity funds will consider their own characteristics, strategies and risk tolerance when setting the critical point of short positions. When investors choose private equity funds, they should pay attention to and understand the provisions on the critical point of short positions in fund contracts and the corresponding risk warnings.

What does the explosion of private equity fund mean?

The short position of private equity funds refers to the situation that the market price of securities or assets held by private equity funds has fallen sharply, resulting in extremely serious net loss. Once the private equity fund encounters short positions, it will lead to significant losses of investors' investment principal.

Generally speaking, the risk exposure of private equity funds will bring different degrees of risks and impacts to fund managers and investors:

1. For fund managers, the exposure of private equity funds may damage their reputation, dampen investor confidence, and may be held accountable by the regulatory authorities.

2. For investors, the risk exposure of private equity funds will directly lead to the loss of their investment principal, and even face the risk of total loss in extreme cases.

3. For the whole market, the exposure of private equity funds may lead to negative effects such as tight market liquidity and stock price plunging, and even lead to systemic risks.

What should I do with it?

The short position of the fund refers to the negative equity of the account, which means that the principal is not only completely lost, but also owed. In this case, the investor can only compensate the arrears. But at present, there is no short position risk in Public Offering of Fund and most private equity funds, and only a few leveraged private equity funds have short position risk. Many investors buy money funds through the online banking background, that is, through the third-party account set up in the bank to transfer money to the fund company. This money is guaranteed, and the money is still protected by the bank and will not explode.

Will the fund account explode?

Theoretically, it is possible for a fund to break out, but the probability is not great. Because the foundation has a series of risk control measures, such as holding a single stock does not exceed 5% of the total market value of the position. If the fund bursts, it means that the risk control is too bad. The situation of private equity funds is relatively large. I have seen that private placement has no risk control measures at all, and Man Cang can hold a stock.

lever action

Leverage principle is the charm of futures investment. Futures market transactions do not need to pay all the funds, and domestic futures transactions only need to pay 5% margin to obtain future trading rights. Due to the use of margin, the original market has been enlarged ten times. Assuming that the daily limit of copper price closes on a certain day (the daily limit in futures is only 3% of the last trading day), the operation is correct. The return on capital is as high as 60%(3%÷5%), which is six times the daily limit of the stock market. (You can make money only if you have the opportunity)

investment risk

Take advantage of use risk

The capital amplification function magnifies both income and risk. Therefore, how to use the lever of 10 times and how much to use it will also vary from person to person.

Strong peace and explosion risk

Exchanges and futures brokerage companies have to settle accounts every trading day. When the investor's margin is insufficient and below the specified proportion, the futures company will forcibly close the position.