Fund liquidation refers to the realization of all fund assets and the distribution of income to holders. For ordinary open-end funds, in some cases, the fund may make a liquidation decision and end its existence through liquidation and distribution of fund assets.

The main reasons for fund liquidation are insufficient scale, fund transformation and fund holders' meeting agreeing to terminate. According to statistics, since the beginning of 2020, a total of 1 13 funds have been declared to be liquidated successively, among which 55 funds were voluntarily liquidated because the fund holders' meeting agreed to terminate, which is close to half of the total number of liquidated funds, 37 funds were passively liquidated because the net asset value of the funds was lower than the contract limit, and 17 funds were liquidated because they were transferred to other funds.

Among so many reasons for liquidation, voluntary liquidation has become the main reason. According to the provisions of the Fund Contract, at the fund holders' meeting, the fund shares that agree to terminate the fund proposal account for more than two-thirds of the total fund shares represented by the holders or agents who voted out, and the proposal can be passed and enter the liquidation procedure. Among the funds that have agreed to terminate liquidation through the fund holders' meeting, small-scale funds are the main ones, and there are many typical mini-funds.

In fact, mini-fund has always been the main type of fund liquidation, so we can try to avoid choosing some funds with too small scale to avoid liquidation risks, and we should be careful in choosing funds with a fund size below 654.38 billion yuan. The most common reason for fund liquidation is that the size of the fund is less than 50 million for a long time.

After all, fund liquidation is not a particularly good thing for investors. So, how should we avoid choosing a fund with liquidation risk?

Beware of too small funds.

As mentioned above, if the fund scale is less than 50 million for 60 consecutive working days, it will face the risk of liquidation. When choosing a fund, we should try to avoid too small a fund. Generally speaking, funds with a fund size below 654.38 billion should be cautious. Optimistic investors will at least choose funds with a fund size of around 300 million or more, while cautious investors will generally choose funds with a fund size of 1 100 million or more. Of course, the bigger the fund, the better. After the fund scale reaches a certain level, the larger the fund scale, the more difficult it is to manage, and it will also have an impact on the fund performance. There is a saying that fund size is the enemy of performance, which is aimed at large-scale funds.

Beware of funds with too high a proportion of institutions.

In addition to avoiding small-scale mini-funds, we should also be wary of funds with excessive institutional funds. Under normal circumstances, we can check the structure of fund holders through the fund details page of the fund platform, and we can see the shareholding ratio of institutions, individuals and internal companies.

In a fund, if the proportion of institutional funds is too large and the number of holders is relatively small, then it is necessary to choose carefully, because once the institution redeems, the fund will be very dangerous, which may lead to a cliff-like decline in the size of the fund, falling below 50 million.

Compared with individual investors, institutional investors are more professional. What we want to avoid is funds with a high proportion of institutional investors, such as funds with more than 90% and relatively few holders.