Leveraged funds are generally funds that carry out arbitrage transactions in different investment markets and are a kind of hedge funds. Domestic leveraged funds belong to the leveraged share (also called aggressive share) of graded funds. Share leverage is the leverage ratio when the fund is issued, that is, the ratio of the sum of A share and B share to B share. The specific formula is: share leverage =(A shares +B shares) /B shares.
What are the characteristics of leveraged funds?
Its main feature is to divide the fund products into two types of shares and give different expected annualized expected income distribution. Graded funds are usually divided into two types of shares: low-risk expected annualized expected return end (agreed expected annualized expected return share) and high-risk expected annualized expected return end (leveraged share).
Take a graded fund product Q(Q is called parent fund) as an example, which is divided into A share and B share. Share A agrees on an expected annualized expected rate of return, and the remaining assets of fund Q after deducting the principal of share A and the accrued expected annualized expected return are all classified as share B.. B is the leveraged share, and the loss is limited to the net asset value of B share, which shall be borne by the holder of B share.
When the overall net value of Q drops, the net value of B shares will drop first, and when the overall net value of Q rises, the net value of B shares will also rise first relative to A shares. Generally, share A can get the annualized expected return of the allocation benchmark first, share B can maximize the compensation of the principal of the priority share and the annualized expected return of the benchmark, and share B usually gets some leverage by participating in the distribution of the annualized expected return of the remaining expectations or taking on losses to a greater extent.