"The worst thing about buying funds may not be continuous losses, but rather when you're determined to tough it out, the product disappears," investor Xiao Tang told reporters from Yicai. He held a fund that no longer had a chance to break even because the product had been liquidated recently, thus he was passively "released."
Entering the second half of the year, the pace of fund liquidations has noticeably accelerated. Wind data shows that since September, 29 funds have officially been liquidated, a 52% increase year-on-year, and this number has set a new high in the past six years. In the past quarter, nearly a hundred products have "curtained off." At the same time, there are thousands of products with a scale of less than 50 million yuan.
According to an incomplete survey by Yicai, more than 80 funds have issued liquidation warnings in the past month. If the performance and product operation fail to attract investors, these products may only be a matter of time before being liquidated. In the view of industry insiders, the fund liquidation system is very beneficial to the healthy development of the industry, but for individual investors, the liquidation of the funds they hold undoubtedly affects the investment experience. If the fund's net value has already fallen, they may also face a loss of principal.
Over 200 funds "curtain off"
Before the National Day holiday, several more funds joined the ranks of liquidation and exit. On September 24, Jing Shun Great Wall Outstanding Growth issued an announcement stating that the last day of operation for the fund was set for September 23, and it entered the liquidation process on the 24th. The reason for the fund's liquidation was that the fund's net asset value had been below 50 million yuan for 50 consecutive working days, thus triggering the termination situation agreed in the "Fund Contract."
Wind data shows that Jing Shun Great Wall Outstanding Growth was established on February 1 of this year and has been operating for only a little over seven months. As of September 23, the cumulative return of Jing Shun Great Wall Outstanding Growth A since its establishment was -1.22%. In terms of scale, the fund's first issuance raised 553 million yuan, and historical announcements showed that as of May 13, the fund's net asset value had been below 50 million yuan for 30 consecutive working days.
In other words, Jing Shun Great Wall Outstanding Growth, on March 26, that is, after operating for more than a month, the fund's scale had already decreased by more than 500 million yuan, with a shrinkage of more than 90%. Subsequently, the fund's scale briefly rebounded, and the fund's scale at the end of the second quarter was 90.5913 million yuan. Since August, Jing Shun Great Wall Outstanding Growth has successively issued three liquidation warning announcements and officially exited.
On the same day, Huafu National Tide Selection, Huaxia Bo Rui One-Year Hold, and Huabao An Yue One-Year Hold and other products also entered liquidation. As of the end of the second quarter, the fund scales of the above three funds were 15.3816 million yuan, 9.84 million yuan, and 50.0545 million yuan, respectively.
Among them, Huabao An Yue One-Year Hold was also liquidated for the same reason of "the fund's net asset value has been below 50 million yuan for 50 consecutive working days." The situations of Huafu National Tide Selection and Huaxia Bo Rui One-Year Hold are different. Announcements show that both were initiated funds established on September 23, 2021, and triggered the termination situation and exited due to not reaching a net asset value of 200 million yuan after the contract became effective for three years.
Including these products, since September, 29 products (only counting initial funds, the same below) have pressed the "termination button." Although September has not yet ended, this number has increased by more than half compared to last September (19), and at the same time, it has set a new high in the past six years.First Financial Daily reporters have observed that the pace of fund liquidations has noticeably accelerated in the second half of the year. In the first six months of this year, a total of 111 products were liquidated, with the highest number being 25 in June. In July and August, the number of liquidated funds were 27 and 41, respectively, and with 29 since September, the number of liquidations in these three months has nearly reached a hundred.
Currently, the number of funds liquidated this year has already surpassed the round number of 200. Wind data shows that, as of September 25th, based on the fund's maturity date, a total of 208 funds (only counting initial funds, same below) have exited the capital market this year. Among them, equity products related to the A-share market (including equity and hybrid funds) account for more than three-quarters.
Under performance pressure, scale is "hard to grow"
In the view of industry insiders, if we delve into the reasons for liquidation, bond funds may be due to institutional capital having other demands and exiting; while for equity funds, poor performance is the main reason for being abandoned by investors. However, a volatile market also increases the risk of "mini funds" being liquidated. Looking at the types of liquidation, 156 products had to leave due to "triggering contract termination clauses."
Against the backdrop of a market that has been in a trough in recent years, the performance pressure on the public fund industry has increased. Some products with poor performance face dual pressures of a decline in net value per unit and investor redemptions, and at the same time, they struggle to attract new funds. Eventually, they have to choose liquidation due to continuous scale reduction.
Taking the 21 equity funds that were "forced" to leave in September as an example, only 4 of these products had a positive return for the year, with the best performance being Taikang Jingqi Industry A with a return of 3.84% for the year, and the worst being BOC Securities Advantage Growth A with a loss of 34.55% for the year.
Looking at the "life" of these products, most were established at the peak between 2021 and 2022. Over a two to three-year decline, their net values also fell, even becoming "30-cent funds" and "40-cent funds". According to First Financial Daily statistics, within the aforementioned range, 9 products have a discounted net value per unit below 0.7 yuan, in other words, these products have lost more than 30% since their establishment.
Among them, the lowest discounted net value per unit is Huaan Guozheng Biomedical Pharmaceutical Linked A and Huaan Zhongzheng Photovoltaic Industry Linked A, with the latest discounted net value per unit at 0.38 yuan and 0.39 yuan, respectively. Both of these products were established in September 2021, with cumulative losses of 62.1% and 60.69% since their establishment.
In addition to the impact of poor performance, changes in investor behavior patterns are also one of the important reasons for redemptions. First Financial Daily learned from the industry that compared to the past "not redeeming when deeply trapped, only leaving when there is a slight increase," some investors choose to flee from the equity market at any cost. And from the data, the redemption speed of these liquidated funds also accelerated in the first half of the year.
It is worth noting that among them, there are several products that are sponsor-initiated funds, that is, regardless of the minimum establishment threshold of 200 valid subscribing households and a fundraising scale of 200 million yuan, but after 3 years, if they do not reach 200 million yuan, they will enter liquidation. These products, after being established at the peak, face下滑叠加投资者赎回下滑叠加投资者赎回, making it quite difficult to pass the scale test.Wind data indicates that in the first quarter of this year, the combined share count of the aforementioned 21 equity funds decreased by 12.4432 million shares, among which Huanan Guozheng Biomedical Connect A was subscribed to an additional 14.6913 million shares; in the second quarter, the net redemption of fund shares reached 117 million shares, with Dongcai Innovative Medical Six Months Fixed Open reducing by nearly 40 million shares (39.6504 million shares).
Liquidation does not mean money "disappears"
What does fund liquidation imply? A fund industry analyst stated that fund liquidation does not mean that investors' money will vanish. It will distribute the post-liquidation asset returns or remaining assets to investors based on the proportion of the fund shares they hold.
"However, if the net value of the fund has already declined, investors may still face a loss of principal," the analyst noted. In his view, the size of the fund is influenced by cash flows and performance. Many small-scale funds, unable to attract sufficient investor interest or underperforming, trigger early warnings for fund liquidation.
Industry insiders interviewed shared similar perspectives. A fund industry professional from South China, in conversation with First Financial Daily, stated that public funds, as a type of mass financial product, if they have few holders and a small scale, it indicates that the product is not recognized by the market, and its value is questionable. "Especially in today's market, products with mediocre performance and no reputation are hard to promote," he said.
However, the South China fund professional also noted that after a round of spontaneous liquidations, companies would be more cautious about liquidating products. "If it's a rare or special niche product, the company might be willing to preserve it because it might be difficult to apply for later. This still depends on the understanding and positioning of the product."
"Liquidation operations are part of the normal process of survival of the fittest. It is undeniable that the phenomenon of equity fund liquidations is highly positively correlated with market conditions, but the normalization of liquidation mechanisms helps fund companies to concentrate resources on the operation of high-quality products," said Fang Ke (a pseudonym), who works at a medium to large fund company.
Fang Ke stated that "mini" products with small scales contribute relatively little to the profit margins of fund companies and have relatively high maintenance costs. Therefore, fund companies liquidating such products is beneficial for optimizing resource allocation and improving operational efficiency.
In fact, in the market conditions of low-level fluctuations, a large number of fund products are facing survival tests. Wind data shows that as of the end of the second quarter of this year, there are 1,617 equity products with a total scale below 60 million yuan, and 1,258 are struggling below the "red line" of 50 million yuan in scale, with liquidation pressure being omnipresent.
According to incomplete statistics from First Financial Daily, as of September 25th, in the past month, 84 funds have issued cautionary announcements regarding "fund net asset value continuously below 50 million yuan" and "possible triggering of fund contract termination circumstances." If these products fail to seize market opportunities and achieve effective scale growth, they also face the embarrassment of being on the brink of liquidation.So, for investors, how can they avoid liquidated funds? "In fact, for investors, there are more than ten thousand ongoing fund products in the industry, and the degree of homogenization of products far exceeds the demand of investors. Funds with too small a scale can withdraw early and choose new products again." The aforementioned fund industry analyst believes that it is recommended for investors to choose funds with relatively larger scales and pay attention to the dynamic changes in fund scales from time to time.