Recently, I paid attention to a brand-new fund: reverse fund. Many investors have never heard of it. So what is a reverse fund? The design principle of reverse fund is to move against the market. It uses derivatives such as stock index futures and options to try to make money by short selling stocks and stock index exchanges in the process of market decline.

Reverse ETF, also known as "bear market ETF" or "short selling ETF", is a bearish ETF built by fund management companies using futures, options, swaps and other financial derivatives, with the goal of making profits when the market falls. The common leverage ratio is 2: 1 or 3: 1. If the value fluctuation of ETF fund is more than twice that of the underlying index (excluding twice), we call it leveraged and reverse trading index fund.

Investment target of reverse ETF fund

Reverse ETF usually pursues a certain reverse multiple of the daily price performance of the fund before the investment results of each trading day reach the target index, such as, -2 times or even -3 times, but usually does not pursue more than one trading day to achieve the above goals. This means that the return on investment in more than one trading day will be the comprehensive result of the return on investment in each trading day, which is different from the return on the target index in the same period.

Reverse ETF fund investment object

Unlike leveraged ETFs, reverse ETFs do not invest in target index portfolios. ETF fund network statistics mainly invest in: financial derivatives, including stock index futures, futures options, swap contracts, forward contracts and so on. Financial instruments such as margin financing and repurchase; Treasury bonds, bonds and money market instruments. For assets other than financial derivatives, reverse ETF can invest them in treasury bonds, corporate bonds with high credit rating and money market instruments with maturity within one year, so as to improve the expected annualized expected return of the fund and offset the expenses.

Investment strategy of reverse ETF fund

In order to achieve the investment goal, fund managers usually use quantitative methods to invest to determine the type, quantity and composition of investment positions. Fund managers are not influenced by their own views on market trends and securities prices when investing. Regardless of market trends and trends, they always maintain full investment and do not hold defensive positions when the market falls.