How does an open fund work?

The operation of open-ended funds mainly includes the following aspects:

 

(1) Initiation and establishment of the Fund. An open-ended fund is initiated by a fund management company approved by the China Securities Regulatory Commission. To apply for an open-ended fund, the fund manager must first prepare and report relevant legal documents, such as the application report, fund contract, fund custody agreement, fund prospectus, sales agreement, and registration agreement for the establishment of an open-ended fund. After receiving the documents, the China Securities Regulatory Commission will review the integrity and accuracy of the fund manager qualification, fund custodian qualification, hosting agreement, prospectus and reporting materials. If the documents comply with the relevant standards, it will approve the fund manager to sell the fund. Fund managers can sell funds through direct sales and consignment. According to the "Open Securities Investment Fund pilot measures", the Fund can be established only when the net sales of more than 0.2 billion yuan within three months from the date of approval.

(2) Marketing. Fund Management Companies can sell funds through two channels: one is consignment. The Agency is usually a securities company, a commercial bank, or other institution approved by the regulatory authority. Second, it is sold by the fund management company. Overseas, fund management companies with large scales have specialized and high-quality marketing teams dedicated to marketing, Investment Consulting, publicity and education to attract investors, it also provides investors with various types of investment and information services.

(3) The purchase or redemption of the Fund. Investors open fund accounts at fund management companies or selected fund agencies.ProgramApply to purchase or redeem funds. The process for investors to purchase a fund unit is called purchase. investors sell the Fund Unit they hold to the fund and withdraw the cash, that is, the fund buys back the Fund Unit at the investor's request, which is called Redemption.

(4) Registration of fund sales. After an investor buys a fund unit, the registration institution registers it in its fund account, indicating the increase of the Fund Unit it holds. After an investor sells a Fund to the fund unit, the Fund is obtained and registered with the Registrar in the fund account, indicating the decrease in the Fund Unit held by the investor. A fund registrar can be a fund management company or a commercial bank or other institution entrusted by a fund management company.

(5) investment management. Fund Management Companies should conduct fund investment and management according to the requirements of the announced fund contract, such as investing in the stock market and bond market according to a certain proportion of investment or the industry, which is a key link in the operation of open-end funds, determines the operating performance of the Fund.

(6) Information Disclosure of the Fund. Although open-ended Funds share similar information disclosure methods with closed-end funds, they release quarterly portfolio announcements, interim reports, and annual reports on schedule, they are more transparent and more frequent than closed-end funds, this makes it easier for investors to learn about the operation of the fund in a timely manner. For example, an open-ended fund should publish the net worth of the unit fund of the previous working day every day, so that investors can learn about the performance of the Fund in a timely manner.

(7) income, cost, and income distribution. During the operation of the fund, the issue of income, expenses, and income distribution will inevitably occur. The fund contract will clearly define the fund income and Expense accrual standards and income distribution methods. Fund income includes dividends, interest, stock price difference, and other income. The Fund is entrusted to experts for investment management and operations. Therefore, from establishment to termination, you must pay a certain amount of money. The fees paid by the Fund mainly include the management fee paid to the fund management company, the custody fee paid to the custodian, the fee paid to the CPA and lawyers, the fee incurred when the fund is set up, and other fees. After the fund income is deducted from the fund fee, it is the net income of the Fund. Open-end funds generally distribute earnings in the form of cash, but investors can choose to automatically convert the allocated cash into fund units, that is, dividend re-investment.