1. When the fund performs well, investors tend to redeem the fund. This is called "adverse selection" by investors.
2. If the fund loses money, many investors will not always redeem it, but insist on redeeming it back to the original and miss the fund with better performance in the same period. In other words, people are reluctant to redeem funds that are still losing money, but are more willing to redeem funds that have made money. It's called. "Avoid losses".
Public Offering of Fund is mostly open, and investors can purchase/redeem according to their own needs. Professional investors will look at long-term performance, volatility and the style of fund managers when making decisions. Generally speaking, the better the performance of the fund, the more recognized by investors, the larger the fund scale and the higher the fund management fee income. Therefore, excellent long-term performance brings a larger fund scale, which helps to motivate fund managers to do better and better.
So, why are the above two abnormal phenomena? Let's take a look at it, and then put forward some suggestions for fund investment of fund companies and individual investors.
When the adverse selection fund performs well, investors tend to redeem it; When the performance gets worse, everyone tends to buy. As shown in the figure below, we selected all the mixed partial stock funds and common stock funds (*** 127) established before 2007, and obtained the relationship between their weighted average return rate and weighted average net subscription rate. It can be clearly seen that in most quarters, the rate of return and the net subscription rate are negatively correlated.
Note: Because the net subscription rate in 2007 is too high (407% in the third quarter of 2007), it is difficult to see the data in other years. We excluded some large net subscription rates in 2007 and began to observe the data after 2008.
Why? Investors do not believe that the fund's good performance can be sustained.
I believe everyone feels the same way. When a fund rises well in half a year or a few months, many people will worry that it will fall later. Due to the volatility of the A-share market, investors often "ride a roller coaster" and always feel that they will not be "bull" all the time. If they go up for a while, they will inevitably fall. Moreover, the industries and hotspots in the A-share market rotate rapidly, and the style of the fund will not always fit the market, and it may lead or lag in stages. Therefore, most investors don't believe that foundations with good performance in the past will continue to perform well in the future, and they will choose to "leave their burdens for safety" to avoid risks.
What is the real situation? No matter how awesome a fund manager is, his short-term performance may be a little weak, but this does not affect that he may still bring you considerable benefits in the long run.
I want to remind everyone that "I don't believe the good performance of the fund can last". How long does the "future" in this sentence mean? In many people's minds, it may mean next month and next quarter. If the performance of the fund is slightly weak in about half a year, most investors may feel that "it has been watched for a long time and given the fund enough time to adjust". We can fully understand this idea, but we still need to point out that it is not rational enough.
Take our company Cao Mingchang as an example. By the end of 20 18, the annualized rate of return of Cao Mingchang's historical geometry reached 13%. (Wind) However, judging from his public investment experience in the past 13 years, there are often periods when he underperforms his peers and the market. For example, he once underperformed his peers for five consecutive quarters and once ranked10% in a single quarter (2008q2, Q3, 20 13Q2, 2065). However, if we extend the time a little and look at his performance in different market styles, we will find that Cao Mingchang can rank in front of the market for nearly 65% of the time. It can be seen that if you choose a long-distance running fund manager with strong comprehensive strength, it often does not affect that he may eventually create excess returns for you.
Source: Wind, China Europe Fund, as of 20 19Q2.
Note: similar funds are classified into three types of wind in the same period.
Loss avoidance in stock investment, all of us are more inclined to sell profitable stocks than to sell losses, and so is fund investment. People are reluctant to redeem funds that are still losing money, but are more willing to redeem funds that have made money.
In the table below, we have screened out 16 new funds issued in different time periods. They have the same feature: after their establishment, their net value did not rise immediately, but hovered below 1 and then returned to 1. It can be found that in the net value,
Changes of redemption rate before and after the return of fund net value 1
Source: Wind, prepared by China-Europe Fund, as of July 20 19.
Author: China Europe Fund
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