What is the safety buffer of capital preservation fund?
Capital preservation fund is a capital preservation fund that provides a certain proportion of investment principal in a certain period of time. Funds use interest or a very small proportion of assets to engage in high-risk investment, while most assets engage in fixed expected annualized expected return investment, so that no matter how the market of fund investment falls, it will not be lower than the guaranteed price, thus achieving the so-called "guaranteed" effect. Internationally, the capital preservation fund can be divided into two types: guarantee fund and guarantee fund, in which the guarantee fund does not need a third party to provide guarantee.
Generally speaking, a capital preservation fund invests most of its assets in fixed-income bonds, so as to pay the investor's principal when the fund expires, and the remaining assets are about 15%-20% invested in stocks and other tools to improve the return potential.
The role of the capital preservation fund safety pad:
The safety cushion of capital preservation fund is often used in "fixed proportion portfolio insurance strategy", which is the main strategy adopted by domestic capital preservation funds to achieve the purpose of capital preservation, also referred to as CPPI.
CPPI is a capital preservation strategy, which dynamically adjusts the ratio of risk assets to capital preservation assets in the portfolio by comparing the actual net value of the portfolio with the bottom line of the portfolio value, thus taking into account the purpose of capital preservation and appreciation. The specific steps are divided into:
The first step is to set the value of the capital preservation assets that should be held at present, that is, the bottom line of the value of the portfolio, according to the minimum target value (fund principal) at the end of the portfolio period and the reasonable discount rate.
The second step is to calculate the amount by which the real net value of the portfolio exceeds the value bottom line. This value is usually called safety buffer, which is the maximum loss limit that venture capital (such as stock investment) can bear.
The third step is to determine the investment ratio of risk assets according to a certain multiple of the safety buffer, and invest the remaining assets in capital preservation assets (such as bond investment) to ensure the realization of the capital preservation goal and realize the appreciation of the portfolio.
In the investment practice, if the safety mat is not enlarged, the fund can make full use of the safety mat to invest in risky assets, and even if the investment is completely lost, the fund can realize the principal preservation at maturity. Therefore, we can appropriately enlarge the multiple of the safety buffer and increase the investment ratio of risky assets, so as to improve the expected annualized expected return of the fund.
For example, if twice the expected annualized expected return of investment determined by investment bonds is used to invest in stocks, that is, safety buffer amplification 1 times, then if the stock loss is less than 50%, the fund can still achieve the goal of capital preservation. The greater the magnification of the safety cushion, the greater the potential expected annualized expected return of the fund, but it also magnifies the risk. Therefore, the fund manager of the capital preservation fund always finds a suitable balance between the increased risk of stock investment and the expected annualized expected return.