As an investment category, funds also have many special words to describe various situations of funds, such as fund liquidation. What is capital settlement? How should investors handle fund liquidation? For these problems, this paper will discuss them with the help of relevant knowledge and provide reference for everyone.

What is capital settlement?

Fund liquidation refers to the fund manager realizing all fund assets and distributing the realized funds to the original fund share holders. A popular understanding is that the fund company gives up continuing to manage a certain fund, and directly sells the remaining assets to cash out and distributes the money to those who have invested in the fund before. It is also equivalent to compulsory redemption.

The liquidation operation is usually due to the poor performance of the fund or the small scale of assets, and the fund company considers it unnecessary to continue investing after consultation. After being approved by the China Securities Regulatory Commission, the investment fund will be terminated.

How should investors respond?

After the announcement of fund liquidation, there are basically three ways for investors to deal with it. One is to wait for the settlement to get back the cash, the other is to redeem the fund in advance, and the third is to convert it into other fund products.

The suitable scenario for the first operation is that the holding period is not long and the redemption fee needs to be paid in advance; And the final settlement fund income is higher than the deducted liquidation expenses, then you can consider waiting for the liquidation settlement and getting back some cash.

The applicable scenario of the second operation is that when the final settlement fund income is lower than the deducted fund liquidation expenses, or when it is calculated that the recovered funds after deducting the redemption expenses are still higher than the remaining funds after liquidation and settlement, the fund can be redeemed in advance.

The application scenario of the third operation is that the fund company provides other fund products for investors to switch, and investors are willing to continue to invest, so they only need to switch products in a fund company without paying subscription fees, but this is only applicable to open-end funds.