However, it is not comprehensive to measure the quality of a product only by the maximum withdrawal amount of a fund. The maximum withdrawal amount of the fund is influenced by the market environment it has experienced and the investment concept of the fund manager. Retreat is not terrible, what is important is whether the net worth can come back to life after retreat.
Influencing factors of retracement
There are three main ways for private fund managers to control retracement: stock selection, hedging and position control. Choosing stocks with safe margins is the first priority to control retracement. A-share retail investors account for a large proportion, and the overall market sentiment fluctuates violently. Any concept and theme, whether true or false, can be hyped up in a short time as long as it is novel and dazzling, but it often plummets after the hype. The game of delivering packages is undoubtedly a disaster for clumsy investors. Therefore, Danshuiquan, Gaoyi and other institutions advocate reverse investment, pay attention to the margin of safety, conduct in-depth research, and buy ginseng at a radish price, thus avoiding the almost inevitable panic after the war drums stop.
When fund managers firmly believe in the value of their own stocks, once faced with systemic risks, hedging with stock index futures is almost the best way to control risks. In the stock market crash, all kinds of stocks have accumulated sediment, and the use of stock index futures has been restricted. Position control has become the last valve to control the withdrawal of orders.
The sharp withdrawal of the net value of private equity funds cannot be completely attributed to the problems in the risk control system. In an extremely harsh market, private equity funds with selected stocks will suffer more, and they will not increase or decrease their positions according to the ups and downs of the market like trend fund managers, so that their net worth will temporarily drop sharply. However, after the decline, the fund's rebound ability, that is, whether the stock selected by the fund manager is wrongly killed or the fundamentals are poor, determines the future fate of the fund. Although for private equity funds with selected stocks, the massive withdrawal of net worth is a serious injury, but it is not fatal. The real achilles heel is that it suffered a big retracement of selected stocks, but it did not enjoy a big increase in selected stocks.
In short, volatility is not a risk, but choosing the wrong stock is the real risk.