Is the discount of graded funds good or bad?
The discount of graded funds is triggered by the favorable trend of funds, which is beneficial to investors in theory. The discount of graded funds is specifically such a thing: the B share invested by leverage will increase in net value when the market is good. Because share A, as its financing source, has a fixed interest income and its net worth is limited, the leverage it provides for B becomes smaller. At this time, part of the income will be distributed to investors with B share, so as to reduce the net worth and increase the leverage.
In addition to discounts, graded funds also have discounts, which are triggered by unfavorable market conditions. The main purpose is to protect the interests of stable investors, that is, A-share holders. When the net value of B shares falls to a certain price (0.25 for general equity funds and 0.45 for convertible bonds funds), the net values of the parent fund, A fund and B fund will be adjusted to 1, which needs to be realized through share conversion, and the remaining A shares will be distributed to the holders in the form of the parent fund.