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recently, china life security fund has disclosed announcements several times that the secondary market trading price of its china life security strategy selected flexible allocation hybrid securities investment fund (lof) (hereinafter referred to as "china life lof") is significantly higher than the reference net value of fund shares, with a large premium. "investors are hereby reminded to pay attention to the premium risk of secondary market trading prices. if investors invest blindly, they may suffer heavy losses." the announcement stated.

according to wind data, the secondary market premium rates of china life select lof were 10.05% and 10.86% on september 3 and 4 respectively. on september 4, the fund's on-market shares were once pulled to the daily limit by more than 5,000 yuan of funds. although it finally closed with a 0.33% increase, the fund's full-day trading volume was only 20,000 yuan amid the ups and downs.

judging from the types of announcements disclosed, in addition to commodity funds that frequently experience premiums, lof funds with obvious premiums are mostly products with smaller shares. small transactions may have a huge impact on secondary market prices, while discounted funds are mostly open shares of closed-end funds with low liquidity.

the price can reach the daily limit with more than 5,000 yuan

on the morning of september 3, the fund company disclosed an announcement on the suspension of subscription and regular fixed-amount investment business of china life select lof: "in order to ensure the smooth operation of the fund and protect the interests of fund holders, the fund manager decided to suspend the subscription and regular fixed-amount investment business of the fund from september 3."

however, transactions in the secondary market have not stopped. according to wind data, the secondary market premium rates of china life select lof were 10.05% and 10.86% on september 3 and 4, respectively.

judging from the market conditions, the fund "capped" more than an hour after opening on september 3, and the total trading volume for the day was only 140,000 yuan, which was the day with the largest trading volume in many months; the next day, the fund hit the daily limit again, but did not hit the limit and immediately fell. after closing with a 0.33% increase, the fund's total trading volume for the day was only 20,000 yuan amidst the ups and downs. in the process of hitting the daily limit, only 36 transactions were completed, and the cumulative amount was only 5,400 yuan based on the average price of 1.5 yuan.

after the high premium, the fund company warned of the risk: this fund is a listed open-end fund. investors can trade this fund in the secondary market and redeem this fund. in addition to the risk of changes in the net value of fund shares, the trading price of this fund in the secondary market will also be affected by other factors such as market supply and demand, systemic risk, liquidity risk, etc., which may cause investors to face losses.

from the performance point of view, the fund has fallen since its net value reached a historical high at the end of 2021, and the retracement was as high as 50%. after yan kun was hired as the fund manager of the fund at the end of last year, he made a major adjustment to the investment style of artificial intelligence. as of the end of the second quarter of this year, china shipbuilding, china heavy industry, china shipbuilding defense, china power and cosco shipping holdings were among the top ten holdings of the fund. with a relatively stable heavy holding style, the fund fell by about 6% this year, significantly outperforming similar funds. the fund manager stated in the semi-annual report: in the first half of 2024, the fund's investment strategy will continue the ideas of the first quarter as a whole, maintaining a high stock position and a high concentration, with shipbuilding and ai as the main industries. in the first half of 2024, global new shipbuilding prices continued to rise, and the ai ​​capital expenditures of global technology giants continued to increase, and the industry logic of shipbuilding and ai was strengthened.

the main reason is that the scale is too small

why is there such a change? some industry insiders analyzed that the trading of smaller lof products in the secondary market is extremely inactive and the trading volume is small, so the price is very easy to form. even a transaction of thousands of yuan can open the price limit, causing a great impact on the secondary market price.

as of the end of the second quarter, the scale of china life security strategy selected mixed fund was approximately 192 million yuan, but there were only 1.21 million shares in circulation on the market. the transaction volume of 140,000 yuan on september 3 meant an 8.02% turnover rate for this lof.

"financial products with active trading usually rarely experience large discounts or premiums, and the extreme prices of small-scale lof products are not representative and have little impact on investors," the person said.

a similar situation also occurred on the morning of september 4, when cathay fund issued an announcement stating that the secondary market trading price of cathay industry rotation stocks (fof-lof) had fluctuated sharply recently. as of september 3, the fund's closing price in the secondary market was 0.785 yuan, with a premium rate of 10.55%. the fund had less than 40 million shares.

just last may, a self-media "big v" released an "etf plan" that mentioned a certain fund's on-exchange shares. soon after the article was released, the on-exchange shares that were "promoted" quickly received large orders and instantly approached the daily limit. at that time, the fund's on-exchange circulation was only 180 million yuan, and the average daily trading volume in the past was around 1 million yuan. the liquidity was relatively small, which also made it possible for smaller funds to have a greater impact on the on-exchange fund.

both discount and premium

in terms of the premium and discount range (reits funds are not included in the statistics), in terms of premium, the current premium rate of e fund crude oil a rmb is the highest, reaching 9.93%. the fund has disclosed dozens of premium risk warnings this year. in addition, the premium ranges of e fund s&p information technology a rmb and hua xia industry allocation are 7.23% and 6.6% respectively.

as for the discount, the funds corresponding to the lofs with larger "discounts" are mostly closed-end products. for example, the southern science and technology innovation board 3-year fixed-term opening, penghua selected returns 3-year fixed-term opening, huaxia xiangyang 2-year fixed-term opening and bosera science and technology innovation board 3-year fixed-term opening all have a discount of more than 3%.

a fund manager in charge of lof funds said that the small number of lof products on the market is related to the fund sales method. for example, some funds with a closed period will be sold both on and off the market when the product is issued in order to take into account the liquidity of holders.

regarding the frequent occurrence of lof fund premium and discount behaviors, some public fund observers believe that fund companies can adopt a multi-pronged approach and choose and respond to the different situations of the funds. for example, risk warnings can be issued when unreasonable premium and discount occur in trading products; lofs with inactive secondary market transactions can be delisted, which is also a reasonable choice to be responsible to investors and save listing costs for the company; and disposing of old funds that are too small and lack competitiveness through liquidation and other means to release company resources has also become the choice of more and more fund companies.