FOF-LOF product liquidity analysis


What is FOF-LOF

For FOF products, it is estimated that many friends are familiar with them. Investing in FOF has certain disadvantages, that is, many have the shortest holding period requirements, short 3 months to 6 months, long-term may take more than 3 years, longer lock-up period basically discouraged a lot of investor.

In order to solve the defect of FOF products, some fund companies have launched FOF-LOF, an innovative product. What is LOF Fund?

The Chinese name of LOF Fund (Listed Open-Ended Fund) is “Listed Open-Ended Fund”. LOF can be bought and sold in the secondary market like stocks (exchange trading), or it can be subscribed and redeemed for funds at specific institutions (over-the-counter trading).

To give a simple example, this LOF is a bit like a second-hand house. Previously, when we subscribed for funds in OTC funds, we gave the money to the fund manager, and the fund manager took the money to open a position, and then you were equivalent to holding a fund share. It is equivalent to giving the down payment to the real estate company, and the real estate company will build the house for you.

This LOF means that other people’s shares are put on the market for trading. The fund shares you buy are equivalent to transferring shares from other investors. You don’t need to give money to fund managers to open positions. It’s a bit like buying a second-hand house. Of course, this is a simple analogy, and there will be some errors in the middle.

LOF funds generally have two characteristics. First, FOF-LOF can be listed and traded. Even in the closed period, investors can sell through the secondary market without “waiting” for the end of the closed period, which significantly increases the asset’s value. fluidity. In addition, because there are two markets, on-site and off-site, LOF funds have arbitrage opportunities at discounts and premiums, which gives investors a little arbitrage opportunity.

Although the product of FOF-LOF is theoretically so good in theory, there may be a problem, that is, in the actual exchange, the liquidity of FOF-LOF trading is not good, and the liquidity is relatively poor, that is, if you hang up the price, It is not necessarily a deal. You have a large amount of pending orders, and you may not be able to sell them completely. Therefore, the liquidity of trading is also what we need to consider.

FOF-LOF products

The following is the liquidity analysis of some FOF-LOF products. For the convenience of comparison, I have added two broad-based index ETFs and one industry index ETF. The interval statistics are the data of the last 3 months from 2022-06-18 to 2022-09-18.

Among them: Turnover rate: The average daily frequency of trading of securities within the specified range. ETF, LOF: [∑(trading volume on a single trading day (shares or shares)/total shares of listed funds in circulation on that day)*100%]/number of trading days in the range;

Interval discount rate: the average discount rate of each trading day within the selected period. Average discount = ∑ Daily discount rate/Actual trading days.

Discount: Discount = closing price – unit net value; discount = closing price – adjusted unit net value;

Due to the inconsistency between the ex-right date of the fund price and the ex-right date of the net value of the fund, one of the above two formulas should be used for the fund discount according to the actual situation. When the fund is in the same period of the net value ex-right date and the price of the ex-right date, the formula is used [1] , formula [2] is used when the fund is within the range between the net value ex-right date and the price ex-right date of the same period; if the net value ex-right date of the first period is earlier than the price ex-right date, the adjusted unit net value is the fund’s net value plus the dividend amount of the current period; If the price ex-right date of the first period is earlier than the net value ex-right date, the adjusted net value of the unit will be the net value of the fund minus the dividend amount of the current period.


From the above data, compared with the broad-based index and sub-industry ETF, the corresponding FOF-LOF liquidity is relatively poor.

For example, for the 6-month subscription of Minsheng Plus Silver Premium, the average daily transaction volume is only over 40,000, which is really a pitiful transaction volume. If you look at the time-sharing transaction, it is basically the heartbeat line, and there are not many transactions. This FOF-LOF liquidity advantage is only on paper.


For the allocation of China Securities Global Funds with relatively good liquidity, it is relatively better. But transactions are not very active. You can see that there has been a big spurt recently, that is, someone placed an order and was directly smashed through, indicating that the depth of the order is not enough.


Judging from the transaction details on 2022-09-19: Sometimes it takes a few minutes to get a single transaction, and the transaction volume is not large. Therefore, the liquidity of this product is also very limited, and the funds that can be accommodated are limited.


Discount rate

Another attraction of FOF-LOF products is the discount rate. Because the underlying assets of FOF-LOF on and off the market are the same fund shares, there may be a certain arbitrage space for the price difference between the two markets.

Discount: Discount = closing price – unit net value;

Assuming that for the active allocation of FOF, the current discount rate is about 7.18%, that is, the current price of secondary market transactions is 7.18% cheaper than the price of OTC funds, which is the same as the arbitrage space for second-hand and new houses.


From the active allocation of FOF, from the discount rate from 2021-12-01 to 2022-09-18, it can be found that the overall discount rate is negative, and the average value of the entire range is about -6.2%.


If you don’t consider holding this FOF-LOF until expiration, but consider selling in the middle, the previous 7.18%, which looks very good. Suppose you buy at a negative discount rate of 7.18% now, and when you sell in the future, assume that the discount rate is negative 6.2%, then through the fluctuation of the discount rate, you actually only earn 1%.

In the case of a negative discount rate overall, this part of the discount rate looks good, but in fact you may not be able to eat all of it.


Although the FOF-LOF product can solve the drawback of the long FOF lock-up period, the FOF-LOF product is less attractive to investors in the secondary market, and the related transactions are not very active, that is, the liquidity in the transaction is relatively low. Difference. Relatively speaking, the most active transaction is Industrial Securities Global’s active allocation of FOF, and the average daily transaction volume is about 1 million. If the amount of funds is relatively large and the scale is relatively large, this kind of liquidity cannot be supported at all. In addition, although some FOF-LOFs have a certain negative premium rate, which seems to be more cost-effective on the surface, it is considered that most of the time it is a negative premium rate. If you do not consider holding maturity, this negative premium rate will make you It may also be impossible to eat, or a small portion, better than nothing.

At this point, the full text is over, thank you for reading.

If you find any mistakes or omissions in my analysis, your corrections and additions are welcome.

The above content is only used as a personal investment analysis record, and only represents personal opinions. The analysis content is based on historical data. Historical performance does not indicate its future performance. It does not serve as a basis for buying and selling, and does not constitute investment advice.


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