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Throughout history, gold is used to preserve wealth by investors around the world. Owning gold has been regarded as a good hedge against inflation and deflation alike, and a good portfolio diversifier. As a global store of value, gold can also provide financial cover during geopolitical and macroeconomic uncertainty. Since beginning of 2020, gold performed among the best assets in the global panics over the COVID-19 epidemics. After the FED announced the unlimited QE policy, the widespread concerns over the inflation pushed the gold price to a new high level. Thanks to the impact of epidemics and the market worries over the hyperinflation, Gold price rallied 12.41% this year as end of April, simulated accumulated daily 2 times gold price up 23.93%, meanwhile HSI down 12.8%. In the post epidemic time, the Gold price may continue its upward trend among unknown long-term impacts induced by COVID-19, while the easing monetary policy introduced by government of major economies may further push the gold price to grow.1
COMEX Gold future is a highly leveraged instrument that allows investors to control a larger notional value for a relatively small amount of money.2 Gold futures price mainly consists of spot price, storage costs and market expectation. Contango only takes minor part in the gold future price, thus the estimated rolling cost would not deviate the futures price from spot price by a large margin or even drive the future price to negative in extreme cases that happened to oil futures in recent time.
Since the first L&I product listed in 2016, Hong Kong’s L&I market has seen a continuous growth to HKD 8,324 million in size and HKD 1,910 million of average daily turnover as end of April, 2020.3 As a leader in Hong Kong’s L&I market, CSOP has demonstrated a remarkable track record with credibility and success by introducing 7 L&I products in Hong Kong, contributing more than 90% AUM and daily turnover to Hong Kong L&I market.4 Ms. Ding Chen, CEO of CSOP comments “I am very proud of what we have achieved in the past years and we will continue to bring more excellent L&I products to Hong Kong and global investors.” Melody He, Managing Director and Head of Sales and Product Strategy, adds “7299.HK is Hong Kong’s first commodity based L&I product. From the trade disputes to the recent COVID-19 epidemics, investors are facing more uncertainties in future market; we spend a lot of time on figuring out what is the best for investors. I am confident in this product as the Gold Futures Daily (2x) Leveraged Product will be a good diversifier in investors’ portfolio while the market outlook remains uncertain.”
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For further details, including the risk factors, please refer to the respective offering documents.
About CSOP Asset Management Limited
CSOP Asset Management Limited (“CSOP”) was founded in 2008 as the first offshore asset manager set up by a regulated asset management company in China. With a dedicated focus on China investing, CSOP manages public and private funds, as well as providing investment advisory services to Asian and global investors. In addition, CSOP is best known as an ETF leader in Asia. As of 31 Dec 2019, CSOP had US$ 6.3 billion in assets under management.
This material has not been reviewed by the Securities and Futures Commission.
Index Provider Disclaimer
The Product is not sponsored, promoted, sold or supported in any other manner by Solactive AG nor does Solactive AG offer any express or implicit guarantee or assurance either with regard to the results of using the Solactive Gold 1-Day Rolling Futures Index and/or the use of Solactive trade mark or the index price/prices of the Solactive Gold 1-Day Rolling Futures Index at any time or in any other respect. The Solactive Gold 1-Day Rolling Futures Index is calculated and published by Solactive AG. Solactive AG uses its best efforts to ensure that the Solactive Gold 1-Day Rolling Futures Index is calculated correctly. Irrespective of its obligations towards CSOP Asset Management Limited, Solactive AG has no obligation to point out errors in the Solactive Gold 1-Day Rolling Futures Index to third parties including but not limited to investors and/or financial intermediaries of the Product. Neither publication of the Solactive Gold 1-Day Rolling Futures Index by Solactive AG nor the licensing of the Solactive Gold 1-Day Rolling Futures Index or Solactive trade mark for the purpose of use in connection with the Product constitutes a recommendation by Solactive AG to invest capital in the Product nor does it in any way represent an assurance or opinion of Solactive AG with regard to any investment in the Product. Remember, the information in the Prospectus does not constitute tax, legal or investment advice and is not intended as a recommendation for buying or selling securities. The information and opinions contained in the Prospectus have been obtained from public sources believed to be reliable, but no representation or warranty, express or implied, is made that such information is accurate or complete and it should not be relied upon as such. Solactive AG will not be responsible for the consequences of reliance upon any opinion or statement contained therein or for any omission.
1 Data source: Bloomberg and CSOP Asset Management Limited
2 Source: CME Group：https://www.cmegroup.com/trading/why-futures/welcome-to-comex-gold-futures.html
3 Data source: Bloomberg
4 Data source: Bloomberg, 2020/1/1-2020/5/25, Hong Kong local index products (NDX products not included)
IMPORTANT: Investments involve 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 (“KFS”) for further details, including product features and risk factors. Investors should not base on this material alone to make investment decisions. If you are in any doubt about the contents of the Prospectus and KFS, you should consult your stockbroker, bank manager, solicitor, accountant or other financial adviser for independent financial advice.
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-based product which invests directly in the Active Contracts of gold futures traded on the New York Commodity Exchange (COMEX) (“COMEX Gold Futures”) to give the Product 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 investment objective of the Product is to provide investment results that, before fees and expenses, closely correspond to twice (2x) the Daily performance of the Index. The Product does 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 a leveraged return of gold spot price.
Investment in the product is only suitable for sophisticated trade-oriented investors who understand the potential consequences of seeking Daily leveraged results and the associated risks constantly monitor the performance of their holding on a daily basis.
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.
The Manager may, at its discretion make distributions out of capital. The Manager may also, at its discretion, make distributions out of gross income while all or part of the fees and expenses of a Product are charged to/paid out of the capital of the Product, resulting in an increase in distributable income for the payment of distributions by the Product and therefore, the Product may effectively pay distributions out of the capital.
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).
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.
Investment in futures contracts involves specific risks such as high volatility, leverage, rollover and margin risks.
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.
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 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.
Please note that the above listed investment risks are not exhaustive and investors should read the Prospectus in detail before making any investment decision. The material has not been reviewed by the Securities and Futures Commission.
