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

⭐ First, clarify:
Whether it's a Level 1 bond fund, Level 2 bond fund, or pure bond fund, they all belong to bond funds, requiring at least 80% of the portfolio to be invested in bonds. They are all considered medium to low risk, and based solely on their names, it is impossible to distinguish what type of bond fund they are.
1️⃣ Level 1 bond fund:
A bond 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 the underlying stock, making it more volatile than ordinary bonds.
2️⃣ Level 2 bond fund:
A bond 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 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 funds, with their main differences lying in investment strategies and scopes. Here’s 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 like stocks, so their returns are usually 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 also 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 bonds) based on investment strategies. Pure bond funds have low risk and are suitable for conservative investors.

In summary, Level 1 bond funds and pure bond funds both focus on the bond market, with minimal differences in their investment strategies, mainly 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 which category a bond fund belongs to❓
✅ Check the [fund contract] or [fund product summary]

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

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

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

According to public data, there are currently 2856 operating bond 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 funds

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

The main difference between A class and C class shares of bond 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 Return 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's A class and C class shares do not charge a subscription fee but charge different sales service fees. At the same time, both have the same redemption fee, 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 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 share 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 contains the word "wealth management" in the fund name.

Of course, there are also those that previously contained the words "wealth management" in the fund name but later removed them, 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. Both share classes do not charge a subscription fee but have different redemption fees.

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

This classification mainly has four situations:

1. Based on the original A class and C class shares, B class shares are newly added, and B shares maintain the same structure as 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 addition to 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, similar to 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 rather on the difference in front-end subscription fees and back-end subscription fees. For example, Fuguo Optimized Enhancement, as shown in the following image:

2. Based on the original A class and C class shares, B class shares are newly added, and B shares maintain the same structure as C shares.

For example, Bosera Seasonal Enjoy Three Months, its B class shares differ from C class shares in the 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 contain the word "wealth management" in their names.

For example, ICBC Credit Suisse 14-Day Wealth Management, its 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. Divided into A class, B class, and C class based on different sales channels, with the same fees for all three.

Currently, only Zhaoshang Zhaoli 1 Month falls into this classification form.

4. A class and B class shares of bond funds

A and B classes refer to the same fund adopting front-end subscription fees and back-end subscription fees, which do not affect the calculation of net value, thus can be collectively referred to as A and B classes.

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 funds

Currently, there are only 4 funds operating A class, B class, and E class shares, all of which are bond funds leaning towards medium to short-term wealth management. These are based on the A class and B class shares distinguished by scale, with E class shares added to meet specific 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 the same as for 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 funds

This classification mainly has three situations:

1. Derived from the original A class and C class, with D class shares 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 were added to meet specific channel needs, and D class shares have the same fee structure as C class shares, as shown in the following image:

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

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

3. Derived from the original A class and C class, with D class shares having a fee structure similar to A class shares, but different charging standards.

For example, Zhaoshang Tianyu Pure Bond, its D class shares have the same fee structure as A class shares, and the subscription fee standards are also the same, but the redemption fee standards differ (as shown in the image), 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 situations mentioned above, using different letters to represent them, and will not be elaborated further.

7. H class and R class shares of bond funds

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

Of course, in addition to those mentioned above, 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, is essentially the same as the mainstream classification of A class shares and C class shares. No further detailed discussion will be provided.

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