as we know, the parent fund is composed of Class A shares and Class B shares. Under the matching conversion mechanism, the overall discount rate of graded funds hovers around %. When downward conversion occurs, because A share is a discount transaction, it enjoys the benefits brought by narrowing the discount. So where does the profit of share A come from? Naturally, it is borne by B share. To make a simple analogy, the parent fund is a cake, and A and B are equivalent to a cake being cut into two pieces. The bigger a is cut, the less is left for B.

In addition, since most of the parent funds track the performance of an index, such as mobile Internet, Growth Enterprise Market, Belt and Road Index, etc. However, the leverage ratio of share B is very large before the trigger discount, so share B not only bears but also magnifies the loss of index decline several times. Similarly, taking the cake as an example, when the whole cake becomes smaller, and it is agreed that A will not be affected by the size of the cake, the result can only be less and less for B.

the third risk factor that B shares face when they are discounted is the overall premium rate of the parent fund. The overall premium rate of some funds is very high before the discount. For example, the overall premium rate of Internet grading and reorganization grading is as high as 1% or more. After the discount, the overall discount premium returns to % due to the unloading of the graded B lever. This part of the premium attenuation should also be borne by the B share investors.

To sum up briefly: after the discount is triggered, the loss of share B comes from three aspects:

(1) the profit of share A;

(2) With the decline of the parent fund, the leverage of share B further amplified the loss;

(3) The overall premium of the parent fund has dropped.

after the discount is triggered by the graded fund, the second trading day is the conversion base date. On this day, the parent fund suspended the application for redemption, but the A and B shares continued to trade in the market (the opening was suspended for one hour). Generally speaking, the holder of share B will sell it on the same day, so the share B will fall. Special reminder, at this time, regardless of whether the index of the parent fund has risen sharply, investors must not blindly take over and grab the index rebound!

Recently, the market is fluctuating, and some graded funds are facing the risk of triggering a discount. In this regard, fund managers and exchanges will make corresponding risk disclosures in time to remind B share investors to pay close attention!

Generally speaking, in the vicinity of the discount point, investment grade B should avoid three kinds of varieties: (1) varieties with excessively high overall premium of the parent fund; (2) Varieties with discounted A share and excessively high B share premium; (3) Varieties with short-term downside risks of the parent fund.

after knowing which grades can't be touched, how should we rationally invest in Grade B?

first, select the parent fund and judge whether the underlying index of the parent fund has investment opportunities. In addition, if investors expect the market to rise sharply, they can participate in the B share of the grading with greater index elasticity.

second, look at the leverage ratio of share b. Lever is a double-edged sword. The greater the leverage gain when the index rises, the greater the loss when the index falls.

Third, pay attention to the overall premium rate of graded funds. As I have said before, investors should avoid the varieties whose overall premium of the parent fund is too high. If we are really optimistic about the performance of the underlying index and are worried about the high overall premium of the parent fund, we suggest not to buy the B share directly through the secondary market, but to purchase the parent fund and sell the A share to hold the B share after the on-site split.

As mentioned at the beginning of the first article, domestic graded funds have gone through eight years of development. In the first half of this year, graded funds ushered in a blowout development. Although there are a large number of graded fund products, the product structure is basically the same except for the different tracking indexes. The product structure of the third-generation graded fund, represented by Yin Hua SZSE 1 graded fund, has become the mainstream of the current market. Compared with traditional stock funds, the structure of graded funds is relatively complicated. Investors need to pay attention to the underlying index, net value of parent fund and sub-share, price, discount rate, agreed rate of return, leverage level, conversion arrangement and other indicators when choosing graded fund products. Only by understanding the graded fund can we make good use of it and bring benefits to investors.