First, the risk of bond default.
Since pure debt funds invest in bonds, it is inevitable that they will encounter bond default events. Bond default refers to the failure of the enterprise or institution issuing bonds to repay the principal and interest for various reasons. Then the bonds they issue will become a piece of waste paper, the bond prices in the market will plummet, and the funds that invest in the bonds will naturally suffer losses.
For example, at the beginning of this year, there was a pure debt fund-Zhongrong Fengchun Debt A, which went bad because it invested in 14 Fu Gui Bird's default bonds. The issuer of this bond was investigated by the CSRC and was suspected of some illegal cost incidents. The bond grade dropped from AA to junk, the bond price fell by 87% in the next three months, and the net value of the fund also fell by more than 40%. This is the risk that pure debt funds encounter bond default, and it is also one of the biggest risks of loss.
Second, the risk of capital settlement.
Fund liquidation means that the fund scale is too small or the number of fund holders is too small, so the fund assets can only be liquidated and then dissolved. Part of the reason for the smaller scale of the fund is that the performance of the fund has not improved, and many investors have redeemed the fund; Some funds are redeemed by investors on a large scale because of special events (such as bond default).
In short, a fund with a small fund size is at risk of liquidation. Fund liquidation is equivalent to compulsory redemption of funds. If the holding fund still loses money at the time of liquidation, then the fund liquidation will implement this part of the loss. Even if the market rises afterwards, it has nothing to do with your fund, and you can't come back. This is the liquidation risk of pure debt funds.
Third, the upward risk of market interest rate.
The market interest rate is inversely proportional to the bond price. When the expected yield of the market goes up, the expected yield of the bond I bought has not changed, which means that if I lose money, the bond price will decrease and the fund will lose money. This is the loss risk of pure debt funds encountering the upward market interest rate.
The risks of pure debt funds are mainly the above three categories. Bond default and capital settlement are less likely and less risky. It is common for market interest rates to rise. At this time, the bond market is often difficult, and there may be losses in investing in pure debt funds.