IMPORTANT: Investment involves risks. Investment value may rise or fall. Past performance information presented is not indicative of future performance. Investors should refer to the Prospectus and the Product Key Facts Statement for further details, including product features and risk factors. Investors should not base on this website alone to make investment decisions.
CSOP Gold Futures Daily (2x) Leveraged Product (the “Product”) is a sub-fund of CSOP Leveraged and Inverse Series II, an umbrella unit trust established under Hong Kong law. Units of the Product (the “Units”) are traded in HKD on The Stock Exchange of Hong Kong Limited (the “SEHK”) like stocks. It is a futures and swap based product with an objective to provide investment results that, before fees and expenses, closely correspond to twice (2x) the Daily performance of the Solactive Gold 1-Day Rolling Futures Index (the “Index”). It is denominated in USD. Creations and redemptions are in USD only.
CSOP Gold Futures Daily (-1x) Inverse Product (the “Product”) is a sub-fund of CSOP Leveraged and Inverse Series II, an umbrella unit trust established under Hong Kong law. Units of the Product (the “Units”) are traded in HKD on The Stock Exchange of Hong Kong Limited (the “SEHK”) like stocks. It is a futures and swap based product with an objective to provide investment results that, before fees and expenses, closely correspond to the inverse (-1x) of the Daily performance of the Solactive Gold 1-Day Rolling Futures Index (the “Index”). It is denominated in USD. Creations and redemptions are in USD only.
Please note that the above listed investment risks are not exhaustive and investors should read the Prospectus and the Product Key Facts Statement in detail before making any investment decision.
CSOP Gold Futures Daily (2x) Leveraged Product (the “Product”) is a sub-fund of CSOP Leveraged and Inverse Series II, an umbrella unit trust established under Hong Kong law. Units of the Product (the “Units”) are traded in HKD on The Stock Exchange of Hong Kong Limited (the “SEHK”) like stocks. It is a futures and swap based product with an objective to provide investment results that, before fees and expenses, closely correspond to twice (2x) the Daily performance of the Solactive Gold 1-Day Rolling Futures Index (the “Index”). It is denominated in USD. Creations and redemptions are in USD only.
- The Index consists of only gold futures whose price movements may deviate significantly from the gold spot price. The Product does not seek to deliver a leveraged return of gold spot price.
- The Product is a derivative product and is not suitable for all investors. There is no guarantee of the repayment of principal. Therefore your investment in the Product may suffer substantial or total losses.
- The Product will utilise leverage to achieve a Daily return equivalent to twice (2x) the return of the Index. Both gains and losses will be magnified. The risk of loss resulting from an investment in the Product in certain circumstances including a bear market will be substantially more than a fund that does not employ leverage.
- The Product is a leveraged product investing directly in COMEX Gold Futures. The Product is the first product tracking the leveraged performance of a single commodity futures index in Hong Kong. The novelty of such a leveraged product makes the Product riskier than traditional exchange traded funds or products tracking the leveraged or inverse performance of equity indices.
- The Product is not intended for holding longer than one day as the performance of the Product over a period longer than one day will very likely differ in amount and possibly direction from the leveraged performance of the Index over that same period (e.g. the loss may be more than twice the fall in the Index).
- The effect of compounding becomes more pronounced on the Product’s performance as the Index experiences volatility. With higher Index volatility, the deviation of the Product’s performance from the leveraged performance of the Index will increase, and the performance of the Product will generally be adversely affected.
- As a result of Daily rebalancing, the Index’s volatility and the effects of compounding of each day’s return over time, it is even possible that the Product will lose money over time while the Index’s performance increases or is flat.
- There is no assurance that the Product can rebalance its portfolio on a Daily basis to achieve its investment objective. Market disruption, regulatory restrictions or extreme market volatility may adversely affect the Product’s ability to rebalance its portfolio.
- The rebalancing activities of the Product typically take place near the end of trading of the underlying futures market to minimise tracking difference. As a result, the Product may be more exposed to the market conditions during a shorter interval and may be more subject to liquidity risk.
- The Product is normally rebalanced at the end of trading of the COMEX Gold Futures on a Business Day. As such, return for investors that invest for period less than a full trading day will generally be greater than or less than two times (2x) leveraged investment exposure to the Index, depending upon the movement of the Index from the end of one trading day until the time of purchase.
- Daily rebalancing of Product’s holdings causes a higher level of portfolio transactions than compared to the conventional exchange traded funds. High levels of transactions increase brokerage and other transaction costs.
- Investment in futures contracts involves specific risks such as high volatility, leverage, rollover and margin risks.
- A “roll” occurs when an existing COMEX Gold Futures is about to expire and is replaced with another COMEX Gold Futures with a later expiration date. The value of the Product’s portfolio (and so the NAV per Unit) may be adversely affected by the cost of rolling positions forward as the COMEX Gold Futures approach expiry as the market for these COMEX Gold Futures is in contango.
- An extremely high degree of leverage is typical of a futures trading account. As a result, a relatively small price movement in a COMEX Gold Futures may result in a proportionally high impact and substantial losses to the Product, having a material adverse effect on the NAV. A futures transaction may result in significant losses in excess of the amount invested.
- Regarding the Product’s futures positions, relevant parties (such as clearing brokers, execution brokers, participating dealers and stock exchanges) may impose certain mandatory measures for risk management purpose under extreme market circumstances. These measures may include limiting the size and number of the Product’s futures positions and/or mandatory liquidation of part or all of the Product’s futures positions without advance notice to the Manager. In response to such mandatory measures, the Manager may have to take corresponding actions in the best interest of the Product’s Unitholders and in accordance with the Product’s constitutive documents, including suspension of creation of the Product’s units and/or secondary market trading, implementing alternative investment and/or hedging strategies and termination of the Product. These corresponding actions may have an adverse impact on the operation, secondary market trading, index-tracking ability and the NAV of the Product. While the Manager will endeavour to provide advance notice to investors regarding these actions to the extent possible, such advance notice may not be possible in some circumstances.
- If the price of the COMEX Gold Futures included in the Product’s portfolio hit certain price limits, depending on the time of the day and the limit being reached, the trading of the COMEX Gold Futures may be limited within the set price limits, suspended for a short period of time, or suspended for the remainder of the trading day. This may affect the Product’s tracking of twice (2x) the Daily performance of the Index, and, if a trading halt takes place near the end of a trading day, may result in imperfect Daily rebalancing.
- COMEX Gold Futures has an active limit of 3,000 net futures equivalent contracts that becomes effective at the close of trading on the business day prior to the First Notice Day (as defined in the Prospectus) of the delivery month. Accordingly, if the position held or controlled by the Manager reaches the relevant position limit or if the NAV of the Product grows significantly, the above restriction may prevent creations of Units due to the inability of the Product to acquire further COMEX Gold Futures. This may cause a divergence between the trading price of a Unit on the SEHK and the NAV per Unit. The investment exposure could also deviate from the target exposure which adds tracking error to the Product. The position limit may have adverse impact to the Product and may cause substantial loss to the Product.
- The investments of the Product are concentrated in single active COMEX Gold Futures generally. This may result in large concentration risk. The value of the Product may be more volatile than that of a fund having a more diverse portfolio of investments and a product which holds futures contracts with different expiring months. The value of the Product may be more susceptible to adverse conditions in the gold market.
- There is no guarantee that the gold price, and the prices of COMEX Gold Futures will appreciate. The Product may experience greater volatility and may be adversely affected by the performance of industries and sectors or events related to gold and to its production and sale.
- As the Index is based upon active COMEX Gold Futures but not on physical gold, the performance of the Index may substantially differ from the current market or spot price performance of gold. Accordingly, the Product may underperform twice (2x) the Daily performance of the spot price of gold bullion.
- The Manager seeks to mitigate the counterparty risks by fully collateralising all counterparty exposures. There is a risk that the value of the collateral may be substantially lower than the amount secured and so the Product may suffer significant losses. Any loss would result in a reduction in the NAV of the Product and impair the ability of the Product to achieve its investment objective.
- The Product may suffer significant losses if the counterparty fails to perform its obligations under the swap. The value of the collateral assets may be affected by market events and may diverge substantially from the inverse performance of the Index, which may cause the Product's exposure to the swap counterparty to be under-collateralised and therefore result in significant losses.
- The Product will bear the swap fees, which are subject to the discussion and consensus between the Manager and the Swap Counterparty based on the actual market circumstances on a case-by-case basis. The current swap fees are a best estimate only and may deviate from the actual market conditions. In extreme market conditions and exceptional circumstances, the Swap Counterparty’s costs of financing the underlying hedge may increase significantly and in return increase the swap fees.
- Payment of distributions out of capital or effectively out of capital amounts to a return or withdrawal of part of an investor’s original investment or from any capital gains attributable to that original investment and may result in an immediate reduction in the NAV per Unit.
- The Product is not “actively managed” and under normal market circumstances, the Manager will not adopt any temporary defensive position when the Index moves in an unfavourable direction. In such circumstances, Units of the Product will also decrease in value. Under extreme market circumstances, the Manager will adopt temporary defensive position for protection of the Product.
- The trading price of the Units on the SEHK is driven by market factors such as the demand and supply of the Units. Units may trade at a substantial premium or discount to the NAV.
- As investors will pay certain charges (e.g. trading fees and brokerage fees) to buy or sell Units on the SEHK, investors may pay more than the NAV per Unit when buying Units on the SEHK, and may receive less than the NAV per Unit when selling Units on the SEHK.
- The COMEX and the SEHK have different trading hours. The trading hours of COMEX are from 5:00 p.m. to 4:00 p.m. Central Time from Sunday to Friday with a 60-minute break each day at 4:00 p.m. Central Time while the trading hours of SEHK are from 9:30 a.m. to 4:00 p.m. (Hong Kong time) from Monday to Friday with a 60-minute break each day at 12:00 noon (Hong Kong time). As the COMEX may be open when Units in the Product are not traded and priced on SEHK, the value of the COMEX Gold Futures in the Product’s portfolio may change at times when investors will not be able to purchase or sell the Product’s Units. Difference in trading times between the COMEX and the SEHK may increase the level of premium/discount of the Unit price to its Net Asset Value.
- Although the Manager will use its best endeavours to put in place arrangements so that at least one market maker will maintain a market for the Units and gives not less than three months’ notice prior to termination of the market making arrangement, liquidity in the market for the Units may be adversely affected if there is only one market maker for the Units. There is also no guarantee that any market making activity will be effective.
- The Product may be subject to tracking error risk, which is the risk that its performance may not track that of the Daily leveraged performance of the Index exactly. This tracking error may result from the investment strategy used, high portfolio turnover, liquidity of the market and fees and expenses and the correlation between the performance of the Product and the two times (2x) Daily performance of the Index may be reduced. The Manager will monitor and seek to manage such risk in minimising tracking error. There can be no assurance of exact or identical replication of the leveraged performance of the Index at any time, including an intra-day basis.
- Prices of the Product may be more volatile than conventional ETFs because of the daily rebalancing activities and the leverage effect.
- The Product may be terminated early under certain circumstances, for example, where there is no market maker, the Index is no longer available for benchmarking or if the size of the Product falls below USD10 million. Investors may not be able to recover their investments and suffer a loss when the Product is terminated.
- Investors should note that all Units will receive distributions in the Base Currency (USD) only. In the event that the relevant Unitholder has no USD account, the Unitholder may have to bear the fees and charges associated with the conversion of such distribution from USD to HKD or any other currency. The Unitholder may also have to bear bank or financial institution fees and charges associated with the handling of the distribution payment. Unitholders are advised to check with their brokers regarding arrangements for distributions.
CSOP Gold Futures Daily (-1x) Inverse Product (the “Product”) is a sub-fund of CSOP Leveraged and Inverse Series II, an umbrella unit trust established under Hong Kong law. Units of the Product (the “Units”) are traded in HKD on The Stock Exchange of Hong Kong Limited (the “SEHK”) like stocks. It is a futures and swap based product with an objective to provide investment results that, before fees and expenses, closely correspond to the inverse (-1x) of the Daily performance of the Solactive Gold 1-Day Rolling Futures Index (the “Index”). It is denominated in USD. Creations and redemptions are in USD only.
- The Index consists of only gold futures whose price movements may deviate significantly from the gold spot price. The Product does not seek to deliver an inverse return of gold spot price.
- The Product is a futures and swap-based inverse product investing directly in COMEX Gold Futures. Although there have been commodities exchange traded funds, futures- and swap-based exchange traded funds and leveraged and inverse products in Hong Kong, the Product will be one of the first inverse products tracking a single commodity futures index (such as the Index) in Hong Kong. The novelty and untested nature of such an inverse product makes the Product riskier than traditional exchange traded funds investing in equity securities or non-leveraged / inverse futures or swaps funds.
- The Product is a derivative product and is not suitable for all investors. There is no guarantee of the repayment of principal. Therefore, your investment in the Product may suffer substantial or total losses.
- The Product tracks the inverse performance of the Index on a Daily basis. Where the performance of the Index is positive, it could have a negative effect on the performance of the Product. Unitholders could, in certain circumstances including a bull market, face minimal or no returns, or may even suffer a complete loss, on such investments.
- The Product is not intended for holding longer than one day as the performance of the Product over a period longer than one day will very likely differ in amount and possibly direction from the inverse performance of the Index over that same period (e.g. the loss may be more than -1 times the increase in the Index).
- The effect of compounding becomes more pronounced on the Product’s performance as the Index experiences volatility. With higher Index volatility, the deviation of the Product’s performance from the inverse performance of the Index will increase, and the performance of the Product will generally be adversely affected.
- As a result of Daily rebalancing, the Index’s volatility and the effects of compounding of each day’s return over time, it is even possible that the Product will lose money over time while the Index’s performance falls or is flat.
- Investing in the Product is different from taking a short position. Because of rebalancing, the return profile of the Product is not the same as that of a short position. In a volatile market with frequent directional swings, the performance of the Product may deviate from a short position.
- Risk investment outcome of the Product is the opposite of conventional investment funds. If the value of the Index increases for extended periods, the Product will likely to lose most or all of its value.
- There is no assurance that the Product can rebalance its portfolio on a Daily basis to achieve its investment objective. Market disruption, regulatory restrictions or extreme market volatility may adversely affect the Product’s ability to rebalance its portfolio.
- The rebalancing activities of the Product typically take place near the end of trading of the underlying futures market to minimise tracking difference. As a result, the Product may be more exposed to the market conditions during a shorter interval and may be more subject to liquidity risk.
- The Product is normally rebalanced at the end of trading of the COMEX Gold Futures on a Business Day. As such, return for investors that invest for period less than a full trading day will generally be greater than or less than the inverse investment exposure to the Index, depending upon the movement of the Index from the end of one trading day until the time of purchase.
- Daily rebalancing of Product’s holdings causes a higher level of portfolio transactions than compared to the conventional exchange traded funds. High levels of transactions increase brokerage and other transaction costs.
- Investment in futures contracts involves specific risks such as high volatility, leverage, rollover and margin risks.
- A “roll” occurs when an existing COMEX Gold Futures is about to expire and is replaced with another COMEX Gold Futures with a later expiration date. The value of the Product’s portfolio (and so the NAV per Unit) may be adversely affected by the cost of rolling positions forward as the COMEX Gold Futures approach expiry as the market for these COMEX Gold Futures is in backwardation.
- An extremely high degree of leverage is typical of a futures trading account. As a result, a relatively small price movement in a COMEX Gold Futures may result in a proportionally high impact and substantial losses to the Product, having a material adverse effect on the NAV. A futures transaction may result in significant losses in excess of the amount invested.
- Regarding the Product’s futures positions, relevant parties (such as clearing brokers, execution brokers, participating dealers and stock exchanges) may impose certain mandatory measures for risk management purpose under extreme market circumstances. These measures may include limiting the size and number of the Product’s futures positions and/or mandatory liquidation of part or all of the Product’s futures positions without advance notice to the Manager. In response to such mandatory measures, the Manager may have to take corresponding actions in the best interest of the Product’s Unitholders and in accordance with the Product’s constitutive documents, including suspension of creation of the Product’s units and/or secondary market trading, implementing alternative investment and/or hedging strategies and termination of the Product. These corresponding actions may have an adverse impact on the operation, secondary market trading, index-tracking ability and the NAV of the Product. While the Manager will endeavour to provide advance notice to investors regarding these actions to the extent possible, such advance notice may not be possible in some circumstances. Currently, the Manager intends to appoint two clearing brokers for the Product. The Manager will appoint more than one clearing brokers to minimise the foregoing risk in respect of the clearing brokers and will closely monitor the market and the credit events of the clearing brokers.
- If the price of the COMEX Gold Futures included in the Product’s portfolio hit certain price limits, depending on the time of the day and the limit being reached, the trading of the COMEX Gold Futures may be limited within the set price limits, suspended for a short period of time, or suspended for the remainder of the trading day. This may affect the Product’s tracking of the inverse of the Daily performance of the Index, and, if a trading halt takes place near the end of a trading day, may result in imperfect Daily rebalancing.
- COMEX Gold Futures has position limits for gold futures of 6,000 contracts in the active month (single month) that become effective at the close of trading on the business day prior to the First Notice Day (as defined in the Prospectus) of the delivery month. Accordingly, if the position held or controlled by the Manager reaches the relevant position limit or if the NAV of the Product grows significantly, the above restriction may prevent creations of Units due to the inability of the Product to acquire further COMEX Gold Futures. This may cause a divergence between the trading price of a Unit on the SEHK and the NAV per Unit. The investment exposure could also deviate from the target exposure which adds tracking error to the Product. The position limit may have adverse impact to the Product and may cause substantial loss to the Product.
- The investments of the Product are concentrated in single active COMEX Gold Futures generally. This may result in large concentration risk. The value of the Product may be more volatile than that of a fund having a more diverse portfolio of investments and a product which holds futures contracts with different expiring months. The value of the Product may be more susceptible to adverse conditions in the gold market. The Product may experience greater volatility and may be adversely affected by the performance of industries and sectors or events related to gold and to its production and sale.
- As the Index is based upon active COMEX Gold Futures but not on physical gold, the performance of the Index may substantially differ from the current market or spot price performance of gold. Accordingly, the Product may underperform the -1x inverse Daily performance of the spot price of gold bullion.
- The Manager seeks to mitigate the counterparty risks by fully collateralising all counterparty exposures. There is a risk that the value of the collateral may be substantially lower than the amount secured and so the Product may suffer significant losses. Any loss would result in a reduction in the NAV of the Product and impair the ability of the Product to achieve its investment objective.
- The Product may suffer significant losses if the counterparty fails to perform its obligations under the swap. The value of the collateral assets may be affected by market events and may diverge substantially from the inverse performance of the Index, which may cause the Product's exposure to the swap counterparty to be under-collateralised and therefore result in significant losses.
- The Product will bear the swap fees, which are subject to the discussion and consensus between the Manager and the Swap Counterparty based on the actual market circumstances on a case-by-case basis. The current swap fees are a best estimate only and may deviate from the actual market conditions. In extreme market conditions and exceptional circumstances, the Swap Counterparty’s costs of financing the underlying hedge may increase significantly and in return increase the swap fees.
- Payment of distributions out of capital or effectively out of capital amounts to a return or withdrawal of part of an investor’s original investment or from any capital gains attributable to that original investment and may result in an immediate reduction in the NAV per Unit.
- The Product is not “actively managed” and under normal market circumstances, the Manager will not adopt any temporary defensive position when the Index moves in an unfavourable direction. In such circumstances, Units of the Product will also decrease in value. Under extreme market circumstances, the Manager will adopt temporary defensive position for protection of the Product.
- The trading price of the Units on the SEHK is driven by market factors such as the demand and supply of the Units. Units may trade at a substantial premium or discount to the NAV.
- As investors will pay certain charges (e.g. trading fees and brokerage fees) to buy or sell Units on the SEHK, investors may pay more than the NAV per Unit when buying Units on the SEHK, and may receive less than the NAV per Unit when selling Units on the SEHK.
- The COMEX and the SEHK have different trading hours. The trading hours of COMEX are from 5:00 p.m. to 4:00 p.m. Central Time from Sunday to Friday with a 60-minute break each day at 4:00 p.m. Central Time while the trading hours of SEHK are from 9:30 a.m. to 4:00 p.m. (Hong Kong time) from Monday to Friday with a 60-minute break each day at 12:00 noon (Hong Kong time). As the COMEX may be open when Units in the Product are not traded and priced on SEHK, the value of the COMEX Gold Futures in the Product’s portfolio may change at times when investors will not be able to purchase or sell the Product’s Units. Difference in trading times between the COMEX and the SEHK may increase the level of premium/discount of the Unit price to its NAV.
- Although the Manager will use its best endeavours to put in place arrangements so that at least one market maker will maintain a market for the Units and gives not less than three months’ notice prior to termination of the market making arrangement, liquidity in the market for the Units may be adversely affected if there is only one market maker for the Units. There is also no guarantee that any market making activity will be effective.
- The Product may be subject to tracking error risk, which is the risk that its performance may not track that of the Daily inverse performance of the Index exactly. This tracking error may result from the investment strategy used, high portfolio turnover, liquidity of the market and fees and expenses and the correlation between the performance of the Product and the -1x inverse Daily performance of the Index may be reduced. The Manager will monitor and seek to manage such risk in minimising tracking error. There can be no assurance of exact or identical replication of the inverse performance of the Index at any time, including an intra-day basis.
- Prices of the Product may be more volatile than conventional ETFs because of the daily rebalancing activities.
- The Product may be terminated early under certain circumstances, for example, where there is no market maker, the Index is no longer available for benchmarking or if the size of the Product falls below USD10 million. Investors may not be able to recover their investments and suffer a loss when the Product is terminated.
- Investors should note that all Units will receive distributions in the Base Currency (USD) only. In the event that the relevant Unitholder has no USD account, the Unitholder may have to bear the fees and charges associated with the conversion of such distribution from USD to HKD or any other currency. The Unitholder may also have to bear bank or financial institution fees and charges associated with the handling of the distribution payment. Unitholders are advised to check with their brokers regarding arrangements for distributions.
Please note that the above listed investment risks are not exhaustive and investors should read the Prospectus and the Product Key Facts Statement in detail before making any investment decision.
| CSOP Gold Futures Daily (2x) Leveraged Product | Product Name | CSOP Gold Futures Daily (-1x) Inverse Product |
| CSOP Asset Management Limited | Fund Manager | CSOP Asset Management Limited |
| 7299 | Stock Code | 7374 |
| 5 June 2020 | Listing Date | 20 October 2021 |
| Hong Kong Stock Exchange - Main Board | Exchange | Hong Kong Stock Exchange - Main Board |
| USD | Base Currency | USD |
| HKD | Trading Currency | HKD |
| 100 Units | Trading Lot Size | 100 Units |
| ~ HKD 750 | Minimum Investment^ | ~ HKD 780 |
| 1.50% | Management Fee | 1.60% |
| LEARN MORE | Product Details | LEARN MORE |
| Product Name | CSOP Gold Futures Daily (2x) Leveraged Product |
| Fund Manager | CSOP Asset Management Limited |
| Stock Code | 7299 |
| Listing Date | 5 June 2020 |
| Exchange | Hong Kong Stock Exchange – Main Board |
| Base Currency | USD |
| Trading Currency | HKD |
| Trading Lot Size | 100 Units |
| Minimum Investment^ | ~ HKD 750 |
| Management Fee | 1.50% |
| Product Details | LEARN MORE |
|
|
| Product Name | CSOP Gold Futures Daily (-1x) Inverse Product |
| Fund Manager | CSOP Asset Management Limited |
| Stock Code | 7374 |
| Listing Date | 20 October 2021 |
| Exchange | Hong Kong Stock Exchange - Main Board |
| Base Currency | USD |
| Trading Currency | HKD |
| Trading Lot Size | 100 Units |
| Minimum Investment^ | ~ HKD 780 |
| Management Fee | 1.60% |
| Product Details | LEARN MORE |
|
|
Data as of 19th October 2021.
What is CSOP Gold Futures Daily (2x) Leveraged Product?
A futures and swap based product with an objective to provide investment results that, before fees and expenses, closely correspond to twice (2x) the Daily performance of the Solactive Gold 1-Day Rolling Futures Index (the “Index”). The Product does not seek to achieve its stated investment objective over a period greater than one day. The Index consists of only gold futures whose price movements may deviate significantly from the gold spot price. The Product does not seek to deliver a leveraged return of gold spot price.
NAV1* =
No more than 20% will
will be used as margin to acquire
gold futures traded on the New York
Commodity Exchange (COMEX)
(“COMEX Gold Futures”)
will be used as margin to acquire
gold futures traded on the New York
Commodity Exchange (COMEX)
(“COMEX Gold Futures”)
+
No more than 20%
from time to time
will be used as
Initial Amount by way of
cash to acquire the Swaps
from time to time
will be used as
Initial Amount by way of
cash to acquire the Swaps
+
Not less than 60% USD
and other USD denominated
investment products
and other USD denominated
investment products
1 The investment strategy of the Product is subject to the investment and borrowing restrictions set out in Part 1 of the Product’s Prospectus.
* Under exceptional circumstances (e.g. increased margin requirement by the exchange in extreme market turbulence), the margin requirement may increase substantially and as a result the percentages may vary proportionately. Please refer to the Product’s Prospectus for details.
What is CSOP Gold Futures Daily (-1x) Inverse Product?
A futures and swap based product with an objective to provide investment results that, before fees and expenses, closely inverse (-1x) of the Daily performance of the Index. The Products do not seek to achieve its stated investment objective over a period of time greater than one day. The Index consists of only gold futures whose price movements may deviate significantly from the gold spot price. The Product does not seek to deliver an inverse return of gold spot price.
NAV1* =
The active
COMEX Gold Futures
(No more than 15%
NAV will be used
as margin) *
COMEX Gold Futures
(No more than 15%
NAV will be used
as margin) *
+
Cash (USD) and other
USD denominated
investment products
(Not less than 70%
of NAV under
normal circumstances)*
USD denominated
investment products
(Not less than 70%
of NAV under
normal circumstances)*
+
Swaps
(No more than 15%
NAV will be used
as Initial Amount
by way of cash) *
(No more than 15%
NAV will be used
as Initial Amount
by way of cash) *
Source: Bloomberg, CSOP research
1 The investment strategy of the Product is subject to the investment and borrowing restrictions set out in Part 1 of the Product’s Prospectus.
* Pleas note that under exceptional circumstances (e.g. increased margin requirement by the exchange or increased Initial Amount requirement by the Swap Counterparty in extreme market turbulence), the margin requirement or the Initial Amount requirement may increase substantially. Please refer to the Product’s Prospectus for details
Difference between physicals gold – backed ETF vs CSOP Gold Futures Daily (2x) Leveraged and CSOP Gold Futures Daily (-1x) Inverse Product
Physically-backed gold ETFs hold physical gold designed to back up the value of shares issued, while CSOP Gold Futures Daily (2x) Leveraged Product use futures and swap to provide exposure without any physical gold holdings, and CSOP Gold Futures Daily (-1x) is intended for the short-term investment tool to hedge the short-term downtrend of gold price in the time of a stronger USD and high yield environment.
Difference between gold spot price & futures price
Unlike Oil futures, the gold futures price only slightly deviates from gold spot price. The reasons are
Physically-backed gold ETFs hold physical gold designed to back up the value of shares issued, while CSOP Gold Futures Daily (2x) Leveraged Product use futures and swap to provide exposure without any physical gold holdings, and CSOP Gold Futures Daily (-1x) is intended for the short-term investment tool to hedge the short-term downtrend of gold price in the time of a stronger USD and high yield environment.
| Physical gold – backed ETF | CSOP Gold Futures Daily (2x) Leveraged Product | CSOP Gold Futures Daily (-1x) Inverse Product | |
|---|---|---|---|
| Underlying assets | Physical gold | COMEX Gold Futures + one or more partially-funded Swaps + cash (USD) + other USD denominated investment products, such as deposits with banks in Hong Kong and USD denominated short-term investment-grade bonds (i.e. maturity less than 3 years) and SFC authorised money market funds in accordance with the requirements of the Code on Unit Trusts and Mutual Funds 2 | COMEX Gold Futures + one or more partially-funded Swaps + cash (USD) + other USD denominated investment products, such as deposits with banks in Hong Kong and USD denominated short-term investment-grade bonds (i.e. maturity less than 3 years) and money market funds in accordance with the requirements of the Code. 2 |
| Performance | Gold spot price | 2x performance of the Index | -1x performance of the Index |
- The spot price of commodity is the actual price for immediate delivery of the commodity
- The futures price can be more or less than the spot price at any given moments as it locks in the cost of a future delivery of the commodity
Unlike Oil futures, the gold futures price only slightly deviates from gold spot price. The reasons are
- gold is precious mental with limit size and easy to store, the costs of carrying gold account for a small part in the price of gold futures
- Besides, the supply and demand of gold is relatively stable thus market expectation on the gold price in future is consistent and stable
- In conclusion, the minimal carrying costs and consistent market expectation will not deviate the gold futures price from the spot price by a large marginal
The below chart shows the historical difference between gold spot price and COMEX Gold Futures price 3
2 Yield in USD from such cash and investment products will be used to meet the Product’s fees and expenses and after deduction of such fees and expenses the remainder will be distributed by the Manager to the Unitholders in USD
3 Bloomberg
The investment objective of the CSOP Gold Futures Daily (2x) Leveraged Product CSOP Gold Futures Daily (-1x) Inverse Product (the “Product”) is to provide investment results that, before fees and expenses, closely correspond to twice (2x) and inverse (-1x) the Daily performance of the Solactive Gold 1-Day Rolling Futures Index (the “Index”). The Index consists of only gold futures whose price movements may deviate significantly from the gold spot price. The Product does not seek to deliver a leveraged or inversed return of gold spot price.
When investing in the CSOP Gold Futures Daily (2x) Leveraged Product, investor should be aware of the contango risk and compounding risk
Contango risk occurs when futures rolling is carried.
In order to closely replicate the gold price performance while minimize the contango cost, the CSOP Gold Futures Daily (2x) Leveraged Product will carry out 5 roll-overs from gold Active Contract to the gold Next Active Contract each calendar year to continuously deliver the gold performance in accordance with the roll schedule elaborated in the Prospectus.
Example:
If a fund holds 1000 gold contracts at $1700 and must roll to the contract of the following period, which is priced at $1800, it will not be able to buy the same number of contracts. Because of that, the exposure to gold will be diminished.
Compounding risk indicates the Product’s performance may not track twice the accumulative Index return over a period greater than 1 Business Day.
The following scenarios illustrate how the Product’s performance may deviate from that of the accumulative Index return (2x) over a longer period of time in various market conditions. All the scenarios are based on a hypothetical $100 investment in the Product4.
Contango risk occurs when futures rolling is carried.
In order to closely replicate the gold price performance while minimize the contango cost, the CSOP Gold Futures Daily (2x) Leveraged Product will carry out 5 roll-overs from gold Active Contract to the gold Next Active Contract each calendar year to continuously deliver the gold performance in accordance with the roll schedule elaborated in the Prospectus.
Example:
If a fund holds 1000 gold contracts at $1700 and must roll to the contract of the following period, which is priced at $1800, it will not be able to buy the same number of contracts. Because of that, the exposure to gold will be diminished.
Compounding risk indicates the Product’s performance may not track twice the accumulative Index return over a period greater than 1 Business Day.
The following scenarios illustrate how the Product’s performance may deviate from that of the accumulative Index return (2x) over a longer period of time in various market conditions. All the scenarios are based on a hypothetical $100 investment in the Product4.
Scenario 1: Upward trending market
In a continuous upward trend, where the Index rises steadily for more than 1 Business Day, the Product’s accumulated loss will be less than -1x the accumulative Index gain.
| Index daily return | Index level | Index accumulative return | Leveraged (2X) product Daily return | Leveraged (2X) product NAV | Leveraged (2X) product accumulative return | 2x of Index accumulative return | Difference | |
|---|---|---|---|---|---|---|---|---|
| Day 0 | 100.00 | 100.00 | ||||||
| Day 1 | 10% | 110.00 | 10% | 20% | 120.00 | 20% | 20% | 0% |
| Day 2 | 10% | 121.00 | 21% | 20% | 144.00 | 44% | 42% | 2% |
| Day 3 | 10% | 133.10 | 33% | 20% | 172.80 | 73% | 66% | 7% |
| Day 4 | 10% | 146.41 | 46% | 20% | 207.36 | 107% | 93% | 15% |
Scenario 2: Downward trending market
In a continuous downward trend, where the Index falls steadily for more than 1 Business Day, the Product’s accumulated loss will be less than twice the accumulative Index loss
| Index daily return | Index level | Index accumulative return | Leveraged (2x) product Daily return | Leveraged (2x) product NAV | Leveraged (2x) product accumulative return | 2x of Index accumulative return | Difference | |
|---|---|---|---|---|---|---|---|---|
| Day 0 | 100.00 | 100.00 | ||||||
| Day 1 | -10% | 90.00 | -10% | -20% | 80.00 | -20% | -20% | 0% |
| Day 2 | -10% | 81.00 | -19% | -20% | 64.00 | -36% | -38% | 2% |
| Day 3 | -10% | 72.90 | -27% | -20% | 51.20 | -49% | -54% | 5% |
| Day 4 | -10% | 65.61 | -34% | -20% | 40.96 | -59% | -69% | 10% |
Scenario 3: Volatile market
In a volatile market, where the Index generally moves downward over a period longer than 1 Business Day but with daily volatility, the Product’s performance may be adversely affected in that the Product’s performance may fall short of twice the accumulative Index return
| Index daily return | Index level | Index accumulative return | Leveraged (2x) product Daily return | Leveraged (2x) product NAV | Leveraged (2x) product accumulative return | 2x of Index accumulative return | Difference | |
|---|---|---|---|---|---|---|---|---|
| Day 0 | 100.00 | 100.00 | ||||||
| Day 1 | 10% | 110.00 | 10% | 20% | 120.00 | 20% | 20% | 0% |
| Day 2 | -10% | 99.00 | -1% | -20% | 96.00 | -4% | -2% | -2% |
| Day 3 | 10% | 108.90 | 9% | 20% | 115.20 | 15% | 18% | -3% |
| Day 4 | -15% | 92.57 | -7% | -30% | 80.64 | -19% | -15% | -4% |
When investing in the CSOP Gold Futures Daily (-1x) Inverse Product, investor should be aware of the contango risk and compounding risk
Contango risk occurs when futures rolling is carried.
In order to closely replicate the gold price performance while minimize the contango cost, the CSOP Gold Futures Daily (-1x) Inverse Product will carry out 5 roll-overs from gold Active Contract to the gold Next Active Contract each calendar year to continuously deliver the gold performance in accordance with the roll schedule elaborated in the Prospectus.
Example:
If a fund holds 1000 gold contracts at $1700 and must roll to the contract of the following period, which is priced at $1800, it will not be able to buy the same number of contracts. Because of that, the exposure to gold will be diminished.
Compounding risk indicates the Product’s performance may not track twice the accumulative Index return over a period greater than 1 Business Day.
The following scenarios illustrate how the Product’s performance may deviate from that of the accumulative Index return (-1x) over a longer period of time in various market conditions. All the scenarios are based on a hypothetical $100 investment in the Product11.
Contango risk occurs when futures rolling is carried.
In order to closely replicate the gold price performance while minimize the contango cost, the CSOP Gold Futures Daily (-1x) Inverse Product will carry out 5 roll-overs from gold Active Contract to the gold Next Active Contract each calendar year to continuously deliver the gold performance in accordance with the roll schedule elaborated in the Prospectus.
Example:
If a fund holds 1000 gold contracts at $1700 and must roll to the contract of the following period, which is priced at $1800, it will not be able to buy the same number of contracts. Because of that, the exposure to gold will be diminished.
Compounding risk indicates the Product’s performance may not track twice the accumulative Index return over a period greater than 1 Business Day.
The following scenarios illustrate how the Product’s performance may deviate from that of the accumulative Index return (-1x) over a longer period of time in various market conditions. All the scenarios are based on a hypothetical $100 investment in the Product11.
Scenario 1: Upward trending market
In a continuous upward trend, where the Index rises steadily for more than 1 Business Day, the Product’s accumulated loss will be less than -1x the accumulative Index gain.
| Index daily return | Index level | Index accumulative return | Inverse (-1X) product Daily return | Inverse product NAV | Inverse product accumulative return | -1x of Index accumulative return | Difference | |
|---|---|---|---|---|---|---|---|---|
| Day 0 | 100.00 | 100.00 | ||||||
| Day 1 | 10% | 110.00 | 10% | -10% | 90.00 | -10% | -10% | 0% |
| Day 2 | 10% | 121.00 | 21% | -10% | 81.00 | -19% | -21% | 2% |
| Day 3 | 10% | 133.10 | 33% | -10% | 72.90 | -27% | -33% | 6% |
| Day 4 | 10% | 146.41 | 46% | -10% | 65.61 | -34% | -46% | 12% |
The chart below further illustrates the difference between (i) the Product’s performance; (ii) -1x the accumulative Index return and (iii) accumulative Index return, in a continuous upward market trend over a period greater than 1 Business Day.
Scenario 2: Downward trending market
In a continuous downward trend, where the Index falls steadily for more than 1 Business Day, the Product’s accumulated gains will be greater than -1x the accumulative Index return.
| Index daily return | Index level | Index accumulative return | Inverse product Daily return | Inverse product NAV | Inverse product accumulative return | -1x of Index accumulative return | Difference | |
|---|---|---|---|---|---|---|---|---|
| Day 0 | 100.00 | 100.00 | ||||||
| Day 1 | -10% | 90.00 | -10% | 10% | 110.00 | 10% | 10% | 0% |
| Day 2 | -10% | 81.00 | -19% | 10% | 121.00 | 21% | 19% | 2% |
| Day 3 | -10% | 72.90 | -27% | 10% | 133.10 | 33% | 27% | 6% |
| Day 4 | -10% | 65.61 | -34% | 10% | 146.41 | 46% | 34% | 12% |
Scenario 3: Volatile market
In a volatile downward trend, where the Index generally moves downward over a period longer than 1 Business Day but with daily volatility, the Product’s performance may be adversely affected in that the Product’s performance may fall short of -1x the accumulative Index return.
| Index daily return | Index level | Index accumulative return | Inverse product Daily return | Inverse product NAV | Inverse product accumulative return | -1x of Index accumulative return | Difference | |
|---|---|---|---|---|---|---|---|---|
| Day 0 | 100.00 | 100.00 | ||||||
| Day 1 | 10% | 110.00 | 10% | -10% | 90.00 | -10% | -10% | 0% |
| Day 2 | -10% | 99.00 | -1% | 10% | 99.00 | -1% | 1% | -2% |
| Day 3 | 10% | 108.90 | 9% | -10% | 89.10 | -11% | -9% | -2% |
| Day 4 | -15% | 92.57 | -7% | 15% | 102.47 | 2% | 7% | -5% |
The chart below further illustrates the difference between (i) the Product’s performance; (ii) -1x the accumulative Index return and (iii) accumulative Index return, in a volatile upward market trend over a period greater than 1 Business Day.
As illustrated in the graphs and the tables, the accumulative performance of the Product is not equal to twice or inverse the accumulative performance of the Index over a period longer than 1 Business Day.
4 CSOP research