With the development of the investment market, many new concepts and investment types have emerged, such as the linked fund we are going to discuss today. So what is the linked fund? What are the three misunderstandings about connecting funds? Next, let's take a look at the content of the linked fund.

what do you mean by linked funds?

Linked fund refers to an ETF that invests most of its raised funds in the target index, closely tracks the performance of the target index, pursues the minimization of tracking deviation and tracking error, and adopts an open operation mode. As an investment way to realize the synchronous growth with the market, index fund has the advantages of index fund.

three misunderstandings of linked funds

misunderstanding 1: linked funds are ETF funds

many investors think that linked funds mostly follow an ETF fund, so they are ETFs. In fact, the investment methods and trading methods of linked funds are different from those of investing in ETFs. Although investors invest in linked funds and ordinary open-end funds, linked fund managers need to purchase and redeem the target ETF fund shares from the primary market or buy and sell the target ETF fund shares from the secondary market through the physical form of constituent stocks.

Myth 2: Linked funds can invest in multiple ETF funds

Some investors also think that ETF Linked Funds are just a FOF, so they can invest in multiple ETFs. In fact, Linked Fund invests more than 9% of its assets in a fixed target ETF. Linked Fund has the characteristics of expected risk and return very similar to its target ETF, more like the shadow fund of the target fund, so it cannot invest in two or more ETF funds at the same time.

Myth 3: Linked funds can be used for arbitrage

Linked funds do not aim at arbitrage, but mainly through purchasing ETF baskets in the primary market, and the participation of the secondary market will be very small. As a passive index fund, the fundamental purpose of linked fund is to minimize tracking error and reduce investment cost. If it participates in arbitrage, it will cause many uncertain factors.

That's all about the meaning of Linked Fund and the three major misunderstandings. I hope it can help you understand the knowledge and help you invest. Warm reminder, financial management is risky and investment needs to be cautious.