From: Financial Times by Deng Yan
Compiler: http://www.fundcn.org

Financial innovation ability never seem to unimaginable. Even if it has been frozen years of closed-end funds issue market, this time, are also going through innovative “impact.”

“Financial Times” noted, The China Securities Regulatory Commission was June 26 ratifications to UBS fund companies to disclose the innovative design of closed-end funds. The new design of the product name to the “UBS investment grade stock Variety Fund.”

In short, classification of the Fund is a fund is divided into two very different fund products. 2 Foundation, which has taken the original ordinary closed and open-ended funds entirely different risk-return characteristics.

However, for most investors, this new concept is too strange, too much translation.

“Financial Times” notes that investors have been confused invested UBS fund companies attention, responsible people even told reporters that although This innovative product has been regulatory approval, However, as is product design innovation, So they will further invest time and resources in product promotion and investor education and then set up the sale, to enable investors to fully understand the characteristics of graded products, Rational choice of a good fit their own risk preference characteristics of the Fund “share.”

On investors confusion “Financial Times” interview of the main design to produce innovative products for the person in charge — the trial of UBS fund companies and products business Development Department Director packet Eleme for the detailed analysis behind this product lies the mystery.

What is innovative characteristics

According to the “Financial Times” understanding, Variety gave UBS Equity Fund classification of the main characteristics of the distribution of proceeds through the Fund arrangement, According to the Fund will be divided into shares and the expected yield for the two different risk levels, Variety and Variety priority ahead.

When this fund has been divided into two very different fund products, the two foundations and the original showing ordinary closed, open-end fund has a different risk-return characteristics.

Bao Aili that classification Fund is market segmentation and product breakdown of a practice, Priority share and the pro level is the share of each show more distinctive characteristics and clear customer orientation groups.

In general, the priority share of the proceeds of the cash flow will show relative stability, sustained characteristics, enterprise-class share of priority share benchmark yield the right of priority in the allocation of expropriation, access to a higher proportion of over-distribution of proceeds to increase its investment in the market, thus more revenue sharing fund growth, the excess revenue opportunities.

And the share of priority because of the expropriation of over-allocation of the bulk of the proceeds, it can be a more stable revenue base to protect, but also to a certain extent it may over-involved in the distribution of the proceeds.

Each different charm

Bao Aili According to the briefing, the aggressive fund share advantages : Ruifuji Variety meet the priority in the benchmark share of the distribution of proceeds, the excess from each Variety and Variety aggressive share share by nine priority : a ratio of share Variety share that was ahead of excess proceeds will be a priority share of nine times.

Secondly, the contract funds of the “opening clause” from another direction right holders interests protected. It is in the contract agreed to meet the Fund’s conditions, the General Assembly adopted holders can be converted into an open-end fund. Third, due to over-aggressive share of the distribution of proceeds to the right, so its price addition to the net as a reference, also implied a call option inside. That is the price it should be included in the future income distribution to over-pricing, Therefore, there was no significant discount, or even a premium. In comparison, the priority is to share the advantages, the first year benchmark yield 6.06%, was higher than the corresponding bonds level of interest rates, Moreover priority shares and an aggressive share : a ratio of income distribution and arrangement, As long as the overall income fund assets over 3.03% investors share the priority will be 6.06% pw a benchmark yield. Moreover, the benchmark yield can be traced back, better than the terms of preference shares. Third, the excess revenue sharing. Variety priority in meeting the benchmark share of the distribution of proceeds, the excess from each Variety and Variety priority share by an aggressive share : the ratio of nine share, Variety is given priority access to over-share earnings of 10% of the distribution rights.

Different target groups

In Bao Aili view, the priority target investors share risk preferences lower income investors. These investors want low-risk healthy returns, but not satisfied with the present relatively low and stable rate of return. They hope to be in the general fund performance through hedging mechanism for a steady return. performance of the Fund outstanding share the excess revenue. Enterprise-class investors share the goal of those who hope to use the financing to increase its investment capital, and then proceeds have been oversubscribed, proceeds to a higher risk preferences of investors. These investors risk tolerance and more willing to take risks or to pay a certain price in order to obtain higher returns.

Copyright Fund China 2008.

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