On The Open-end Securities Investment Funds

PurposeWith the continuous development of China security market, Open-end funds (OEFs), the new players in investment funds industry, have emerged in the market finally. Compared with closed-end funds (CEFs), OEFs' unique redemption institution can effectively solve the problems caused by CEFs' intrinsic drawbacks, which often damages shareholders' interests in practice. As a result, OEFs are the mainstream of funds all over the world. By means of theoretical and empirical methods, this thesis demonstrates that it is necessary to introduce OEFs to China investment funds industry. After describing the current situation of OEFs as well as their internal risks in China security market, the thesis points out that liquidity risk is the key issue threatening the future development of OEFs in China. Based on the measures adopted by western investment funds companies, particularly by mutual funds companies in U.S., the thesis presents references to China funds management companies, which are feasible to prevent liquidity risk when they operate OEFs.Basic logicThere are four chapters in the thesis. The framework is as below:In chapter 1, from the history of investment funds development, the thesis stresses that, depending on redemption institution, OEFs can offer more reliable protection to shareholders' interests and become the mainstream of funds industry all over the world. In chapter 2, according to Principal-Agent theory, the thesis analyzes the structures and the parties involved in OEFs. Consequently, it draws a conclusion that OEFs are the typical reflection of Principal-Agent relation. Chapter 3 describes current issues caused by CEFs existing in China security market. Then itshows that OEFs are the better alternative type of investment funds in China because of their unique redemption institution. In chapter 4, based on current situation of OEFs in China, the thesis points out that now liquidity risk is the key issue hindering the development of OEFs in China. With references from western investment funds companies, especially relevant experiences from mutual funds companies in America, the thesis presents suggestions feasible to help China funds management companies to build up liquidity risk prevention when they operate OEFs in China security market.Main contents and ideasIn chapter 1, from the perspective of investment funds history, the thesis displays that OEFs are the mainstream because of their unique redemption institution. Firstly, the history of OEFs shows that OEFs are the popular investment instruments all over the world since their redemption institution can guarantee the investors' interests more effectively than CEFs can. Then the thesis emphasizes that it is necessary to develop OEFs in China security market because they will meet both demands of funds industry and security market in China.In chapter 2, the thesis illustrates that OEFs are typical examples of Principal-Agent relation. At first the thesis introduces the rough idea of Principal-Agent theory and its specific explanation of investment funds. Then the thesis analyzes the structures and the parties involved in OEFs. Finally, it draws a conclusion that OEFs are the typical reflection of Principal-Agent relation in funds practice.As an important part of this paper, chapter 3 stresses that OEFs will play more significant roles in China security market. Firstly it describes CEFs' history as well as their current performance in China capital market. Through displaying the issues caused by CEFs' intrinsic drawbacks recently in China capital market, it points out that CEFs havedifficulty in defending investors' interests. Then both from the perspective of routine operation and Principal-Agent relation, it confirms that OEFs can provide a better solution to protect shareholders' interests effectively because of their unique redemption institution. At last, it concludes that OEFs will play decisive roles in China security market.As a creative part of this paper, chapter 4 focuses on the emp...