Analysis And Countermeasures On Redemption Risk Of Open-end Funds In China

Background and purposeCompared to closed-end funds, open-end funds are more advanced. Their mechanisms can ensure interests of investors and encourage managers to raise the achievement of funds. In September 2001, the Hua an Innovation Open-end Fund, the first open-end fund in China, had succeeded offering. Open-end funds have exceeded closed-end funds in the net value and quantity and become the protagonist of Chinese funds industry.But open-end funds face a series of risks with their rapid development. The scale of many open-end funds decrease constantly since establishing. The operation time of open-end funds of our country is relatively short at present and the securities market is still not perfect, these factors will bring about redemption risk. Undoubtedly, redemption risk of open-end funds have influenced the steady and development of funds industry. It is very important to study the redemption risk of open-end funds.Main contents and ideasThe thesis studies the redemption risk of open-end funds, and puts forward the methods of the redemption risk management of open-end funds from the angle of fund managers as well as the external environments. This thesis is composed of five chapters:Chapter one mainly discusses the characteristics of the redemption risk of open-end funds through analysis of the data of open-end funds market in China. Firstly, compared to the western countries, China faces more severe problems in redemption . Moreover, opposite to the overseas open-end funds experience , our country faces"redemption paradox", the redemption and NAV of the open-end funds have a reverse correlation.Chapter two gives a theoretical analysis of the open-end funds redemption risk. The Principal-Agent theory is the rationale of the redemption mechanism. The open-end funds redemption mechanism has simultaneously enlarged the liquidity risk. Externalities theory can explain when the investors try to avoid Externalities from other investors ,they choose to redeem the funds when other people did so . The non-rational behaviors can be explained by the behavioral finance theory. And finally the System flaw may have bad influence of the confidence of investors, cause them to choose redemption.Chapter three carries on the introduction and analysis of the advanced experience and defeat lessons of American mutual funds risk management. American investors adopt the long-term investment strategy, which causes the American mutual funds to be possible to maintain the low liquidity property proportion, allows them to invest in more profit projects. Fund scandal in 2003 in America exposed the management loophole in mutual funds. It provides precious lessons for our country to learn in redemption risk management.Chapter four mainly deduces property and debt management methods for our country's open-end funds to manage the risk .Because redemption behavior is investor's initiative option, the funds are unable to force the investors, therefore the company can only use various methods to control the redemption risk, such as positively forecast of the redemption cash flows, effective disposition of the liquid and non-liquid property, debt management methods, as well as the improvement of service and so on .Chapter five gives suggestions from the angle of exterior environment improvement, including the supervising structure and the structure of funds. Open-end fund is not an isolated thing, it comes under the influence of other correlated financial instruments and securities markets. So a new supervising framework is needed and cooperate government structures of the funds should be improved.Features and contributionsThe thesis is closely related to the development of china securities market and focuses on the redemption risk of open-end funds.1. The thesis emphasizes on practical information as well as theories foundations. The thesis pays attention to the real examples and draws a very meaningful conclusion.2. Comparison is a kind of practical method which can make the hard problem clearer than ever. The thesis draws a conclusion through comparing the redemption risk of open-end funds in different countries.3. The thesis discusses the redemption risk of open-end funds under the background of market development of our country. The open-end funds of our country is produced under the background of the imperfect capital market. The thesis puts forward the effective measures on how to manage the redemption risk of open-end funds with fully consideration of the internal and external environment.