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Teach you to identify: Level 1 bond funds? Level 2 bond funds? Pure bond funds?

⭐ First, clarify:
Whether it is a Level 1 bond fund, a Level 2 bond fund, or a pure bond fund, they all belong to bond-type funds, requiring at least 80% of the position to be invested in bonds. They are all considered medium to low risk, and it is impossible to distinguish what type of bond fund it is just by the name.
1️⃣ Level 1 bond fund:
A bond-type fund that can invest in [convertible bonds] but does not invest in [stocks] is referred to as a Level 1 bond fund.
👏 Extended understanding: Convertible bonds are a special type of bond, formally known as convertible bonds, which can be converted into common stock under agreed conditions. The price of convertible bonds fluctuates with the price of their underlying stock, making it more volatile than ordinary bonds.
2️⃣ Level 2 bond fund:
A bond-type fund that can invest in [stocks], [convertible bonds], and other equity products is referred to as a Level 2 bond fund.

3️⃣ Pure bond fund:
A bond-type fund that strictly prohibits investment in [stocks], [convertible bonds], and other equity products is referred to as a pure bond fund.

Level 1 bond funds, Level 2 bond funds, and pure bond funds are different categories of bond-type funds, with their main differences lying in investment strategies and scopes. Here is a detailed explanation of each fund type:

1. Level 1 bond fund (also known as pure bond fund):
   Primarily invests in long-term and short-term credit bonds, meaning direct investment in bonds. The investment targets of Level 1 bond funds are usually government bonds, corporate bonds, etc., with almost no investment in stocks or other assets. Since these funds mainly invest in fixed-income products, their risk is relatively low, making them suitable for risk-averse investors. Level 1 bond funds are not allowed to participate in investments in non-bond assets such as stocks, so their returns are usually more stable but may also be lower.

2. Level 2 bond fund:
   This type of fund has a broader investment scope compared to Level 1 bond funds. In addition to bonds, Level 2 bond funds can invest a certain proportion in stocks, convertible bonds, and other assets, and may even allocate some investments in the stock market under specific circumstances. Level 2 bond funds typically allocate assets between bonds and stocks, so their returns may be higher than pure bond funds, but they also bear certain risks from stock market fluctuations. Level 2 bond funds are usually suitable for investors interested in both bonds and stocks.

3. Pure bond fund:
   Similar to Level 1 bond funds, pure bond funds focus on bond investments and generally do not involve stocks or other high-risk assets. Pure bond funds can invest in various types of bonds, including government bonds, corporate bonds, etc., but can also invest in bonds of different maturities (such as short-term, medium-term, and long-term) according to their investment strategies. Pure bond funds have lower risks and are suitable for conservative investors.

In summary, Level 1 bond funds and pure bond funds both focus on the bond market, with only minor differences in investment strategies, primarily differing in the names used by fund companies. Level 2 bond funds typically have higher risk and return levels than Level 1 bond funds and pure bond funds because they also moderately invest in stocks and other risk assets.

Which type of fund are you interested in, or do you have more specific questions?

🔅 How do we determine what type of bond fund a particular fund is❓
✅ Check the [fund contract] or [fund product summary]

The classification of bond-type funds is essential! What do A, B, C classes represent? In the last issue, we discussed the share classification of stock-type funds, and in this issue, we will continue to discuss the share classification of bond-type funds. For those who haven't read the previous content, you can read it after this article, at the bottom...

In my traditional impression, the share classification of bond-type funds is relatively simple. However, after organizing and analyzing the data, I found that my previous impression was not accurate. Although the number of bond-type funds is far less than that of stock-type funds, their classification complexity is not inferior to that of stock-type funds, which has refreshed my understanding of the classification of bond-type funds.

Through the updated Cognitive Compound Interest public account, I have learned a lot, and I hope you can have the same feeling.

To emphasize again: Regardless of whether the fund name ends with A, B, or C, they are essentially the same fund. The different letters only represent differences in their sales or operational methods, which may involve different fee arrangements or sales channels, etc.

To thoroughly study the classification of bond-type funds, I reviewed all currently operating bond-type public funds and ultimately wrote this article. This should be the most comprehensive summary of the share classification of bond-type funds available on the market.

According to public data, there are currently 2856 operating bond-type public funds (counting different letters separately), involving 1369 specific funds. The specific classification situation is organized in the table below, with special classifications indicating that there is only one fund in that category, so it is not listed separately.

1. A class and C class shares of bond-type funds

A class and C class shares are the mainstream classifications of bond-type funds. According to the data in the table above, their quantity accounts for 82%. Therefore, understanding this combination of A class and C class shares helps to understand the main classification of bond-type funds.

The main difference between A class and C class shares of bond-type funds lies in the fee structure: A class shares charge a subscription fee but do not charge a sales service fee, while C class shares charge a sales service fee but do not charge a subscription fee.

For example, Baoying Antai Short Bond, its prospectus defines A class and C class shares as shown in the following image, which is also the mainstream definition used by other funds.

It should be noted that although both A class and C class charge a redemption fee, the charging standards may differ.

For example, Anxin Target Yield has significantly different redemption fee standards for A class and C class shares, with C class shares being more favorable for short-term investors, as shown in the following image:

Special case: China Merchants Fund's Zhaoshang Zhaocaitong

This fund does not charge a subscription fee for both A class and C class shares but charges different sales service fees. At the same time, the redemption fees for both are the same, making it clear that C class shares are more cost-effective. As shown in the following image:

2. A class and B class shares of bond-type funds

This classification mainly has two situations:

1. A class and B class shares are actually the usual A class and C class shares, with consistent definitions, just different names.

For example, ICBC Credit Suisse Industry Bond, its A class and B class share definitions are shown in the following image, indicating that A class and B class are essentially the usual A class and C class.

Special case: ICBC Credit Suisse Tianyi

This fund's A class shares do not charge a sales service fee or a subscription fee, while B class shares are consistent with the usual C class definition.

2. A class and B class shares are distinguished not by fee structure but by different participation scales.

For example, Jianxin Zhouying Anxin Wealth Management, this bond fund distinguishes A class and B class shares based on scale and charges different sales service fees. Both classes do not charge subscription or redemption fees. The minimum initial investment for A class shares is 1 yuan, while for B class shares, it is 5 million yuan, as shown in the following image:

This type of bond fund usually includes the word "wealth management" in the fund name.

Of course, there are also those that previously included the term "wealth management" in the fund name but later removed it, such as Bank of China Fund's Zhongyin Huixiang, which was previously named Zhongyin Wealth Management 30 Days.

Special case: Rongtong Tongyuan Short Bond

This fund's A class shares charge a sales service fee, while B class shares do not charge a sales service fee. Both classes do not charge a subscription fee but charge different redemption fees.

3. A class, B class, and C class shares of bond-type funds

This classification mainly has four situations:

1. On the basis of the original A class and C class shares, B class shares are newly added, and the structure of B shares remains consistent with A shares.

For example, Anxin Juli Enhanced, its B class and A class adopt the same fee structure, both charging subscription and redemption fees, meaning B class is an additional share on the basis of A class and C class. As shown in the following image:

At the same time, the difference between B class and A class lies in the minimum initial investment amount, which is different from the second situation in the second part, as shown in the following image:

Additionally, there is a situation where the difference between B class and A class is not based on scale but on the difference between front-end subscription fees and back-end subscription fees. For example, Fuguo Optimized Enhanced, as shown in the following image:

2. On the basis of the original A class and C class shares, B class shares are newly added, and the structure of B shares remains consistent with C shares.

For example, Bosera Seasonal Enjoy Three Months, the difference between its B class and C class shares lies in the different standards for charging sales service fees, as shown in the following image:

3. A class, B class, and C class shares do not charge subscription or redemption fees but charge different sales service fees based on scale requirements.

Funds of this classification often include the word "wealth management" in their names.

For example, ICBC Credit Suisse 14-Day Wealth Management, the minimum initial investment amounts are: A class 10 yuan, B class 5 million yuan, C class 1 yuan, while the sales service fees differ among the three, as shown in the following image:

4. A, B, and C classes are distinguished based on different sales channels, and all three have the same fees.

Currently, only Zhaoshang Zhaoli 1 Month falls under this classification.

4. A class and C class shares of bond-type funds

AB class refers to the same fund adopting both front-end subscription fees and back-end subscription fees, which do not affect the calculation of net value, hence can be collectively referred to as AB class.

For example, Huaxia Bond, its A class charges a front-end subscription fee, B class charges a back-end subscription fee, while C class charges a sales service fee, as shown in the following image:

5. A class, B class, and E class shares of bond-type funds

Currently, there are only 4 funds in the market that operate A class, B class, and E class shares, all of which are bond funds leaning towards medium to short-term wealth management. They are based on the scale distinction of A class and B class shares, with the addition of E class shares to meet the special needs of different channels.

From the product perspective, none charge subscription fees, but all charge sales service fees, which differ. Some charge redemption fees, while others do not.

For example, Dacheng Jing'an Short Bond added E class shares at the beginning of 2016. Currently, the minimum initial investment for E class shares is consistent with A class shares, but the sales service fees differ, as shown in the following image:

6. A class, C class, and D class shares of bond-type funds

This classification mainly has three situations:

1. Derived from the original A class and C class, D class shares are established for specific needs, and the fee structure of D class shares is similar to that of C class.

For example, Dongxing Xingli, its A class and C class share classifications are consistent with traditional classifications, but D class shares are added to meet specific channel needs, and the fee structure of D class shares is consistent with that of C class, as shown in the following image:

2. Derived from the original A class and C class, D class shares are established for large transaction clients.

For example, Zhaoshang Tianhao, the fee structure of the D class shares of this fund is consistent with A class, but the minimum subscription for a single fund account is 10 million, and the minimum additional subscription amount is 10,000, as shown in the following image:

3. Derived from the original A class and C class, and the fee structure of D class shares is similar to that of A class, but the charging standards differ.

For example, Zhaoshang Tianyu Pure Bond, the fee structure of D class shares is consistent with that of A class, and the subscription fee charging standards are also consistent, but the redemption fee charging standards differ (as shown in the image below), indicating that D class is prepared for short-term investors.

The distinctions between A class, C class, and E class as well as A class, C class, and F class are similar to the above situations, using different letters to represent them, and will not be elaborated further.

7. H class and R class shares of bond-type funds

The H class and R class shares of bond-type funds are currently not common, with only 6 funds existing with these two classes, referring to shares established for investors in Hong Kong, sold in the Hong Kong region.

Of course, in addition to the aforementioned, there are also some other letter-represented shares, which are currently not mainstream, and most classifications are actually included in the classifications mentioned above, just that fund companies use different letters to represent them. For example, the classification of A class shares and E class shares, as well as C class shares and E class shares, actually means the same as the mainstream classification of A class shares and C class shares. No further detailed discussion will be made.

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