Bian Xiao shows you what is the discount premium of closed-end funds? What does the discount rate mean?

Financing fund: Due to the influence of listing on the exchange and the relationship between supply and demand, the transaction price (market price) of closed-end funds is not necessarily equal to their unit net value, but is determined by the balance of market buying and selling power. When the market price of closed-end fund is higher than its unit net value, it is called premium; Conversely, when the market price of a closed-end fund is lower than its unit net value, it is called discount.

Discount rate is a unique index of closed-end funds. When the phenomenon of discount occurs, the discount rate appears. This is because the transaction price of the fund is discounted on the basis of unit net value, and the discounted amount is displayed by the discount rate in the quotation software. The greater the discount rate, the higher the discount degree.

When closed-end funds are converted into open-end funds, the discount of closed-end funds can become the object of investors' attention. When the fund is closed or the closed-end fund expires, the discount of the fund disappears, and the price is set at the unit net value, so investors can earn the difference.

Discount formation

Because closed-end funds are listed on the exchange, their buying and selling prices are greatly influenced by the relationship between market supply and demand. When the market supply is less than the demand, the buying and selling price of fund shares may be higher than the net asset value of each fund share, and then the fund assets owned by investors will increase, that is, a premium will be generated; When the market supply exceeds demand, the fund price may be lower than the net asset value of each fund unit, which means discount. At present, the discount rate of closed-end funds is still high, mostly between 20% and 40%, among which the discount rate of small and medium-sized funds with short term is low. It is certainly better to buy the same fund when the discount rate is high; However, the choice of funds should not only look at the discount rate, but also choose some small and medium-sized funds with moderate discount rate and short term.

According to the experience at home and abroad, it is normal for closed-end funds to discount their trading prices. Discount will affect the investment value of closed-end funds. In addition to investment objectives and management level, discount rate is an important factor in evaluating closed-end funds, and investors with high discount rate have certain investment opportunities.

Because closed-end funds should be paid or liquidated according to their net value after the operation expires, the higher the discount rate, the greater the potential investment value.

computing formula

Discount rate calculation formula Discount rate = (net fund share-unit market price)/net fund share × 100%( 1)

According to this formula, we can see that:

(1) The discount rate is greater than 0 (that is, the net value is greater than the market price);

(2) When the discount rate is less than 0 (that is, the net value is less than the market price), it is a premium.

In addition to investment objectives and management level, discount rate is an important factor in evaluating closed-end funds.

Premium rate calculation formula Premium rate = (unit market price-net value of fund shares)/net value of fund shares × 100%(2)

Note: (1) When the unit market price is greater than the net value of fund shares, the premium rate is greater than zero, which is called premium;

(2) When the unit market price is less than the net value of fund shares, the premium rate is less than zero, which is called discount.