On February 9 the secondary market price of the Guotou UBS Silver Futures LOF finally broke its streak of limit-down trades and closed up 8.36 percent, but the relief was small change against the damage already done. The fund had plunged to five consecutive daily limit-downs in the secondary market in the preceding trading days and posted a record single-day net asset value (NAV) fall of 31.5 percent on February 2 — the largest daily drop on record for a Chinese public fund.
The product at the centre of the controversy is not a stock or bond fund but a commodity futures LOF (listed open-ended fund) that tracks Shanghai silver futures. Designed to let ordinary investors participate in the silver market through a normal securities account rather than a professional futures account, the LOF opened a route for retail traders to chase a speculative silver rally without the usual institutional safeguards.
That rally was dramatic. From November 24, 2025 to January 29, 2026 the LOF’s secondary market price jumped 283.27 percent. The underlying Shanghai silver futures then reversed violently: between January 30 and February 6 the contract lost 36.78 percent. The international spot silver price fell by more than 30 percent on February 2, but domestic Shanghai silver futures are subject to a ±17 percent daily limit. The rule capped on‑exchange moves and left domestic settlement prices lagging true international values in an extreme session.
Faced with the divergence, Guotou UBS adjusted the LOF’s valuation after the market close on February 2 to reflect the international silver price, and applied the change retrospectively to that day. The adjustment converted an apparent 17 percent paper loss into a 31.5 percent realised NAV fall and immediately crystallised much larger losses for holders. Secondary market trading prices had meanwhile traded at heavy premiums — at one point exceeding 100 percent and still 61.5 percent on February 9 — so many investors were effectively “buying two units of NAV for four units of market price.”
The episode exposes three linked vulnerabilities: a structural pricing mismatch between an internationally priced commodity and a domestically regulated futures contract; the special mechanics of LOFs where market price can diverge sharply from NAV; and the distribution of a high-volatility product to retail clients. When premium compression meets a sharp NAV revaluation, investors face a double whammy of net-asset declines and a narrowing of the gap between what they paid and what the fund is worth.
Guotou UBS has set up a working group and pledged to support investors seeking remedies through settlement, mediation or arbitration. Industry analysts welcomed the firm’s willingness to engage but warned that a retrospective valuation adjustment, even if defensible on fairness grounds, leaves a bitter investor experience and a potential legal and reputational headache for asset managers distributing complex commodity products to retail clients.
The wider implications extend beyond a single fund. Regulators and market operators will need to confront whether trading-hour misalignments, daily price limits and valuation policies create unacceptable risks for retail-facing commodity trackers. Possible responses include clearer suitability rules for commodity LOFs, tighter disclosure about premium/discount dynamics, better investor education, and technical fixes such as cross-market settlement mechanisms or valuation windows that prevent abrupt retroactive NAV changes.
For investors the practical lesson is blunt: commodity-linked instruments that bridge markets with different trading rules are fundamentally different animals from equity ETFs or bond funds. They are better suited to experienced, professional desks that can manage basis risk, margining and time-zone mismatches. For China’s retail-dominated fund scene, this episode will likely cool appetite for speculative, high-premium LOFs and accelerate calls for product-level safeguards and clearer distribution standards.