Capital preservation funds often use fixed proportion portfolio insurance technology (CPPI) to realize capital preservation. The basic idea of this technology is to invest most assets (insurance bottom line) in fixed-income securities to ensure that the principal can be recovered when the capital preservation expires; At the same time, the remaining small amount of funds (safety mat) will be doubled and invested in the stock market to obtain high returns in the stock market. In this way, if the stock market rises, the funds invested in the stock market by CPPI according to the magnification will increase, thus increasing the investment income of the fund; On the contrary, when the stock market falls, the amount of funds invested in the stock market calculated by CPPI will decrease, and the fund will transfer some funds from the stock market to the bond market with less risk, thus avoiding the risk of stock market decline and ensuring that the total assets of the fund are not lower than the predetermined safety bottom line.

In addition to using capital preservation technology in the investment process, capital preservation funds generally have guarantors with good credit. For example, Tiantong Capital Protection Fund, which is about to be issued, takes the powerful and reputable National Development and Investment Corporation as the fund guarantor. If the redeemable amount plus accumulated dividends during the capital preservation period is lower than the investment amount, the guarantor shall guarantee to pay the above difference to the holder; However, if the fund holder does not hold the fund to be redeemed at maturity, this safeguard clause does not apply to the redemption part.

Reasons for purchasing newly issued capital preservation funds

Reason 1: The capital preservation clause of the general capital preservation fund stipulates that if it is redeemed after the maturity date (one capital preservation period), the redemption part will be protected by the capital preservation clause; Redemption before the maturity date will not be guaranteed. The combination insurance technology used by the capital preservation fund needs to ensure that the safety buffer of the fund assets will not be lost at the end of the capital preservation period, and the fixed-income securities investment part needs to have a stable cash inflow to the maximum extent during the capital preservation period. The redemption behavior of investors during this period will affect the stability of cash flow and increase the difficulty of capital preservation. Therefore, the general capital preservation fund will enter a semi-closed state after its establishment, and investors are not encouraged to redeem it during this period; The usual practice is to increase the redemption fee during the insurance period, and there is no guarantee to redeem part of the principal in advance. Limited by the capital preservation clause, investors should subscribe for the newly issued capital preservation fund.

Reason 2: At present, very few capital preservation fund products launched by fund companies can be redeemed before the maturity date. However, after the subscription period, it is not good for investors to buy capital preservation funds with CPPI strategy. For the capital preservation fund of CPPI, during the continuous decline of the stock market, most of the assets have been transferred to the bond market; At this time, although the investor's principal (or security pad) is still guaranteed, the value-added ability of the fund's total assets has been greatly weakened; When the stock market turns up in the future, the capital preservation fund does not have enough risky assets to gain stock market income. Therefore, when the stock market continues to fall, investors may buy capital preservation funds at a price lower than the face value, and their future earnings may be affected.