One of the misunderstandings: only look at the discount premium rate of sub-funds
The discount premium rate is an important indicator of graded funds, but it is meaningless to talk about the discount premium rate in general. There are three kinds of discount and premium rates, which have different meanings to investment: except for two types of sub-funds that can be traded on the market, they have their own discount and premium rates, and there is also an overall discount and premium rate after the two types of shares are merged into the parent fund.
for arbitrage, the overall discount premium rate is meaningful. However, many people who have little knowledge of graded funds see the high premium rate of B share, so they take it for granted that they can arbitrage and flock to it. Indeed, the continuous rise of B share will generally lead to the emergence of arbitrage opportunities, but this arbitrage opportunity can not be seen simply from B share. Under the action of pairing conversion mechanism, this premium rate of A and B shares is a seesaw effect. Generally speaking, one share is discounted and the other share is bound to be premium, and vice versa. As for the discount premium rate of the two types of shares, A determines B. Therefore, if A is discounted, B will have a reasonable premium rate at any time. Therefore, it is impossible to see whether there is an arbitrage opportunity simply from the premium rate of B. The emergence of arbitrage opportunities depends on whether there is an overall premium rate, that is, the market value of a certain proportion of A and B shares is compared with the net value of the merged parent fund. If this market is greater than the net value, it is a premium, and vice versa. The former generates premium arbitrage opportunities, while the latter generates discount arbitrage opportunities.
the operation process of premium arbitrage is as follows: firstly, the parent fund shares are purchased in the primary market, and the fund shares will be received on the third trading day, and then split into two sub-shares, A and B, which can be sold on the fourth trading day, and the arbitrage process is completed; The operation process of discount arbitrage is: buy A and B shares at the same time in the secondary market according to the proportion agreed in the fund contract, and then merge them into the parent fund, which can be redeemed on the third trading day, and the arbitrage process is completed.
Myth # 2: Talking about the investment value of share A in general
It is not meaningful to look at the transaction price and agreed rate of return of share A only. What is meaningful is the "implied rate of return" indicator, that is, the actual rate of return after buying at the current price. At present, some funds have an implied rate of return as high as 7%, far exceeding the market interest rate level. Whether you can buy it at this time may not depend on what type of A it is. Different A shares, their investment value is very different, even two worlds of ice and fire.
There are three types of Class A shares of graded funds: semi-closed products that cannot be listed, products that can be listed for a limited period, and products that can be listed permanently.
Semi-closed products are similar to bank wealth management products with the same term, and they are opened for redemption every six months or three months. The only criterion to judge whether their value is worth buying is whether their agreed rate of return can exceed comparable bank wealth management. At present, the yield of bank wealth management products is high, and the A share with an agreed yield of about 4~5% is definitely "not worth having".
The second A share is the closest to ordinary bonds: it has a fixed term, obtains a fixed agreed income, and repays the principal and interest at maturity. The investment value of this kind of fund depends on its implied rate of return. Generally speaking, the implied rate of return of such funds has obvious advantages compared with bonds with the same remaining maturity. However, sustainable products with the same high implied rate of return are more complicated and have different meanings for different investors, so they cannot be generalized.
Misunderstanding 3: Don't be fooled by the high return of Perpetual A
Perpetual operation is the mainstream operation mode of share A of stock funds. At present, there are many funds of this type with an implied return rate of over 6.9%, such as the data as of last Friday (August 8), Thailand Securities Medical Health A, Shenwan Lingxin Securities Environmental Protection A, Fuguo Growth Enterprise Market A, Shenwan Lingxin Securities Industry A, and Jianxin CCTV Finance 5A.
with such a high yield, can you buy it right away? Wait a minute, we must understand the pricing principle of this type of fund. This type of fund has no fixed term, and there is no theory that the principal will be repaid at maturity. The annual income is only annual dividend, that is, it is converted regularly. Therefore, according to the discounted cash flow method principle of bond pricing, only by long-term holding can this dividend be discounted to such a high rate of return every year. The perpetual A share is only suitable for holding long-term funds, such as insurance funds and pension funds. For ordinary people, there will also be funds that have not been used for a long time, such as education funds for children. Instead of buying return-type and dividend-paying insurance products, it is better to buy sustainable A.
generally speaking, if you buy a perpetual A in the secondary market and hold it for a fixed discount, its holding period yield will not reach its implied yield level. This principle is just like holding a long-term bond with a short time interval (such as a remaining maturity of 1 years), its holding period yield will not reach its yield to maturity. However, in the case of short-term undervaluation, perpetual A has special investment opportunities and strategies.
In the near future, the arbitrage opportunities in the graded funds are magnificent, and the arbitrage army has earned a lot of money. The premium arbitrage funds will split the parent fund and sell it, which will not only exert a huge selling pressure on the B share, but also suppress the A share and make it deviate from its normal implied rate of return in a short period of time. Because arbitrage funds are suppressed rather than affected by market interest rates, if the implied rate of return of perpetual A rises sharply in the short term, it is generally a good buying opportunity, and its "profit model" is reflected in the following aspects: First, the rare allocation opportunities of long-term funds with low risk preference, such as pension funds, insurance funds, education funds for children, etc., 7% of the annual income exceeds the absolute rate of return of fixed-income products with high credit rating; The second is to wait for the return of value in the short term to obtain the spread income; Third, it can be held for regular conversion (that is, dividends), and the annualized income of its holding period is also a considerable level.
Myth # 4: The skepticism of "A decides B" is on the rise
Because it can't be redeemed separately according to the net value, the two types of sub-funds of graded funds always trade at a discount or a premium, but how to determine the discount rate of the two has always been a fascinating "puzzle". At present, the market has basically reached the following understanding: because of the bond nature of terminal A, its implied rate of return is restricted by the yield to maturity of long-term credit bonds with the same credit rating, and the implied rate of return determines its discount rate; Due to the arbitrage mechanism caused by the matching conversion clause, the discount premium at the A end determines the discount premium at the B end.
whether "A decides B" or "B decides A" has caused a wide debate in the industry. At present, the dust has basically settled, and most people agree with the logic that A decides B. However, with the popularity of B share market recently, the high premium state of this kind of share has even lasted for a long time, far from the theoretical level. In addition, due to the suppression of arbitrage funds, the discount rate of A share is also affected, which makes people pay attention to the "reverse effect" of B on A. All this makes the skepticism that A decides B rise.
But no matter how the discount rate of B and A fluctuates, it will not affect the basic logic of this graded fund. In fact, under the action of pairing conversion mechanism, the discount rate of A and B has a reasonable level in theory, but this theoretical level is not unexpectedly unchanged. Due to the influence of market expectations, the discount rate of B is often influenced by market sentiment, which is reflected in its leverage level (the leverage level of B share is restricted by the discount rate). Under bullish expectations, B share tends to be highly premium, and the actual leverage will be greater than the theoretical leverage, but the opposite is true under bearish expectations.
The fluctuation of B share discount premium rate does not mean that its reasonable discount premium rate and theoretical leverage are meaningless, but its significance is mainly reflected in arbitrage opportunities. If the premium rate of B share exceeds the theoretical level, there will inevitably be an overall premium, which will lead to the emergence of premium arbitrage opportunities, on the contrary, there will be discount arbitrage opportunities. In addition to providing investors with profit opportunities, another important consequence of arbitrage opportunities is the fund share. Premium arbitrage makes the fund share bigger and bigger, while discount arbitrage makes the share smaller and smaller. The significance of share to fund companies is self-evident, and it is not meaningless to investors. The size of share is directly related to liquidity, which is the lifeline of the market, and the varieties without liquidity are just in the mirror. Therefore, the theoretical discount rate of graded funds is not just a theory.