GUANGZHOU (Fund China) - This year, quit a part of funds’ performance ranking declines compared to last year due to the fund split. Some fund slided obviously. Experts say that is because before the fund split, the fund scale generally is not large, and the fund performance is quit good, but once split, the fund rapidly expands, bringing a severe test for the fund managers to manipulate.

The domestic first open-end fund,Hua’an innovation fund, splits today and the net value per share retures to 1 yuan. In addition, the fund carries out a limited continual marketing today. The gross fund scale ceiling will be 15 billion. And there are more than 10 banks as its underwriters at present including the Bank of Communications, ICBC,CCB,BOC, the Postal Saving Bank, China Merchants Bank, China Everbright Bank, Shenzhen Development Bank, Bank of Shanghai,etc..

Fund split with different performance

Statistics show that quit a part of the funds’ performance rankings declines compared with last year due to the fund split including some fund slided obviously. The experts said the keypoint is that the fund scale is not big before fund split, but once it splited, the scale extend rapidly, it is really a severe test for the fund managers. Because a fund with 1 billion yuan or with 10 billion yuan is different in handling. Meanwhile, it needs time for the new investment injection as the rapidly expanding scale in the fund split. Thus the fund net value growth will be effected by a low proportion of shares held over a period of time.

But then, a part of fund splited in May gain a good performance. The main reason is the big slump in 30th May offered a rare opportunity for fund opening transaction. The fund will grow quickly within a low scratch line. From the the split funds’ performance in the first 3 quarters this year, it should be clearly pointed out an investment Misunderstanding, not every split fund is good and not every low-net value fund can grow quickly

Buying Split fund as occasion serves

Although a majority of split funds’ ranking slips, a small part split funds increased at last. Obviously, the speculation in split funds needs choosing a good occasion.

The overall ranking of the split funds slips in the first three quarters of this year.The market is under a bullish movementin in the first three quarter, but the fund splits in the uptrend. Thus the funds cannot complete the opening transaction quickly even holding a large amounts of cash and with a scale expanded quickly. In such a way, it has an impact on the fund net value rapid growth. So it is better for the investors to choose the high proprotion holding fund in a bullish market. And the investors can enjoys the benefit bronght by the net value growth largely. It is really not cost-efficient to choose the low net value and split fund blindly.

However, once the market adjustment appeared, the lower proportaion holding fund with a big amount of cash will evade the risk efficiently.

For example, the funds splited in May this year and open a position at the high quality stocks in the low level, making a advantage to performance. And it fully shows that it will be better to choose the split fund or the new fund in a market adjustment or a bearish market.

Overall, the market adjusts significantly around 6000 point recently and if the adjustment goes on ,it will bring a un- neglected risk.

But for the split fund. The advantage appear out. Herefore, it is very important for the investors to speculate in the right fund at the right occasion.

Copyright Fund China 2008.

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