Leverage is a tool that can amplify investment results. Leveraged fund is a kind of hedge fund. Domestic leveraged funds belong to the leverage share of graded funds, which is to add leverage mechanism to the funds to achieve the effect of amplifying expected returns. So, what is a leveraged fund? What are the characteristics and advantages?

What is a leveraged fund?

Leveraged funds are generally funds that carry out arbitrage transactions in different investment markets and are a kind of hedge funds. Its trading scope covers many kinds: foreign exchange, stocks, bonds and financial derivatives.

Domestic leveraged funds belong to the leveraged share of graded funds, that is, the aggressive share. Share leverage is the leverage ratio when the fund is issued, that is, the ratio of the sum of A share and B share to B share. The specific formula is: share leverage =(A shares +B shares) /B shares.

Advantages of leveraged funds

1 The main purpose of leveraged funds is to amplify the expected return effect and help investors get more expected return opportunities with less funds.

2 Leveraged funds in China are mainly embodied in graded funds. On the one hand, the leverage effect can guarantee the safety of the expected return of some funds, on the other hand, it can achieve the purpose of improving the expected return, and at the same time meet the needs of investors for safety and expected return.

Due to the leverage amplification, investors can participate in larger trading markets with less capital, which lowers some trading thresholds, and investors with less capital can also participate. However, it should be noted that while the expected return is amplified, the risk is also amplified simultaneously.