The premium on SDIC Silver LOF remains persistently high. Recently, the secondary market price of SDIC Silver LOF has surged significantly, attracting speculative capital and deviating sharply from its net asset value (NAV), resulting in an excessive premium. The fund company has repeatedly issued risk warnings, releasing eight such announcements in December alone, alongside multiple temporary trading halts.
SDIC Silver LOF’s premium has remained elevated. Recently, the SDIC Silver Futures Securities Investment Fund (LOF) Class A (ticker: SDIC Silver LOF; code: 161226), managed by SDIC UBS Fund, has drawn market attention due to significant price volatility in the secondary market. Public data shows that SDIC UBS Silver Futures Fund is a commodity futures fund, characterized by high risk and high returns. The fund aims to align its daily NAV growth rate, before fees, with the performance of the Shanghai Futures Exchange’s silver futures benchmark contract, primarily by holding silver futures contracts.
Data reveals that silver prices have surged this year, with the Shanghai Futures Exchange silver futures index doubling year-to-date. Wind data shows that since November 24, SDIC Silver LOF has risen in 15 out of 17 trading days, accumulating gains exceeding 70%. The fund’s year-to-date return has even surpassed 173%. However, as of December 17, the NAV of its over-the-counter (OTC) counterpart, SDIC UBS Silver Futures Fund, recorded a return of only 95.11% year-to-date, indicating a substantial premium for the secondary market-traded SDIC Silver LOF.
SDIC UBS Fund has repeatedly warned investors in its announcements that the secondary market price significantly exceeds the NAV, and盲目投资于高溢价份额可能导致重大损失。In December alone, the fund issued eight premium risk alerts. Additionally, to protect investors, SDIC Silver LOF has implemented multiple temporary trading halts to signal risks. Despite these measures, the premium has not retreated effectively. On December 17, the fund’s secondary market price hit a 10% intraday limit-up, while its NAV rose only 1.78%, further widening the premium. On December 18, after a one-hour trading halt, the price surged again, closing the morning session up 7.76%. By the afternoon, it approached another 10% limit-up, with the premium over NAV exceeding 40%.
The risks of high premiums cannot be ignored. One investor noted that SDIC Silver LOF is one of the few domestic funds tracking silver prices, making it稀缺. With OTC funds imposing purchase limits in Q4, demand for silver exposure has driven investors to the secondary market, pushing prices higher. The fund’s official reason for purchase limits is "protecting existing unitholders’ interests." The OTC SDIC UBS Silver Futures Fund’s assets have soared, reaching RMB 6.64 billion by Q3, doubling from Q2. Subsequent purchase limits capped Class A and C subscriptions at RMB 100 and RMB 1,000, respectively.
SDIC UBS Fund has warned that if the premium persists, it may request additional trading halts from the Shenzhen Stock Exchange to mitigate risks. Notably, whether for ETFs or LOFs, significant deviations between secondary market prices and NAV carry risks of premium contraction. While temporary premiums are common, most dissipate quickly unless tied to cross-border ETFs facing trading constraints. For example, on December 27, 2024, three Hong Kong dividend-focused ETFs跌停 despite a flat HSCEI performance, reflecting speculative excesses that later corrected.
Moreover, secondary market prices are influenced by factors like supply-demand dynamics, systemic risks, and liquidity, beyond NAV fluctuations. Silver’s outlook remains uncertain. GF Futures recently noted that U.S. macro conditions and monetary policy expectations support prices, but COMEX silver’s nearing delivery date may reduce physical demand, potentially cooling bullish sentiment. With silver possibly overbought, volatility risks rise, and regulatory measures could follow. Investors should monitor U.S. data and Fed signals, considering profit-taking or hedging tools like options.