| Summary: | 碩士 === 國立交通大學 === 企業管理碩士學程 === 96 === The Taiwan’s industry of mutual fund has boomed since the year 2000. Due to the special features and incentives of bond fund, its scope reaches the peak in May 2004 with the amount of 2.4 trillion NTD. There’s reason behind the fast growth of bond fund. In the past, bond fund is an unique product that combines the advantage of monetary fund’s high liquidity and higher return rate than saving deposit. In addition, there isn’t dividend distribution and taxation. All these factors made it an irresistible product. Nevertheless, as the market’s interest rate increase, the over-investment of structure notes and the problems of splitting the notes and manipulating the net value of funds, leads to the Union Security Investment Trust incident in July 12, 2004. This incident made the market emphasize more on the issue regarding structure notes.
In 1994, America also suffered from the sudden growth of interest rate due to over-investment of structure notes by MMF (Monetary Market Funds). We can learn from their process of overcoming the failure. Since the bond fund under Security Investment Trust holds higher levels of inverse floating interest structure notes, they are exposed to great amount of market risk when interest became high. The first step to handle it is to instantly increase liquidity. But we still need to solve it fundamentally. There should be a complete evaluation system and reasonable split-off policy. And finally review what improvements have been done, and plan the future measures accordingly.
History can’t be forgotten, lessons need to be learned. The Union Security Investment Trust incident evokes the bond fund redemption crisis. This incident gave the industry and investors a timely sharp warning. The regulators tried to adjust the development of bond fund into the correct path. According to investors, knowing comprehensively the ROI and risk exposure of the purchased product will help them on capital allocation. The Security Investment Trust absorbed all the loss of the crisis, revealing the industry’s basic credibility and their spirit. Even though the transforming process is hard, but it made a major leap for the wealth management.
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