I. Reasons for compulsory redemption
In the financial market, due to some special circumstances, forced redemption often occurs. The following are common reasons for forced redemption:
1. Expiration of investment products: after some investment products expire, the funds need to be recovered.
2. Default: If an investor defaults or commits other illegal acts in the process of participating in asset management, the asset management can conduct compulsory redemption.
3. Excessive cost: If the asset manager thinks that the cost of maintaining an asset is too high, he may choose compulsory redemption.
4. Risk control: If the asset manager thinks that the risk of some assets is too high, he may choose compulsory redemption to avoid risk expansion.
5. Policy adjustment: Policy adjustment may trigger compulsory redemption of some investment products.
Two. Investment products related to compulsory redemption
1. combination
Bond is a kind of fixed income securities, which is usually used for financing. Bonds can provide debt financing at lower interest rates than most government bonds. When the bond expires, investors can choose to renew it or redeem it.
2. Spot Bitcoin Exchange Trading Fund
ETF, namely exchange traded fund, is a passive investment fund, which is convenient for investors to establish diversified stock portfolios. The compulsory redemption of ETF is usually based on the provisions in the ETF contract.
3. Funds
Funds are investment companies that manage stocks, bonds and other financial assets. Some funds can usually make investment or compulsory redemption within a certain period of time.
Third, the impact of compulsory redemption.
1. Investors
For investors, forced redemption may lead to losses. For example, if an investment product is forcibly redeemed, investors may be forced to sell stocks or funds at the most unfavorable time, thus suffering financial losses.
2. Market
The impact of forced redemption on the market may be short-term or long-term. If a large number of assets are forcibly redeemed, it may lead to market turmoil or decline. However, if the forced redemption is for some reasonable reasons, it will not have much impact on the market.
Fourth, how to avoid forced redemption?
For investors, the best way to avoid forced redemption is to conduct sufficient investigation and study to understand the risks of products and the potential conditions of forced redemption. At the same time, investors should consider the diversification of assets, which will help reduce the financial losses caused by the forced redemption of some assets.
As an asset manager, the key is to establish perfect risk management and liquidity management rules to avoid the occurrence of forced redemption. In addition, the asset manager should fully remind investors of the conditions and risks of compulsory redemption to ensure that investors have sufficient information transparency when making investment decisions.