The investment strategy of the Southern Crude Oil Fund is to use the FOF method to passively track crude oil prices by investing in overseas market crude oil ETFs.

The adoption of this model is mainly based on the current management methods of QDII funds. Funds cannot yet directly invest in derivatives related to physical commodities.

Overseas market crude oil ETFs mainly track the crude oil prices of WTI (West Texas Intermediate (Crude Oil), U.S. West Texas Light Crude Oil) and BRENT (Brent Crude Oil). In terms of operation methods, they mostly invest in these two categories.

Futures contracts of commodities and swap positions before delivery.

The investment portfolio of the Southern Crude Oil Fund only selects ETFs that track overseas crude oil prices, so it is more closely related to oil prices.

By backtesting crude oil price data over the past five years, the annualized error of the Southern Crude Oil Fund's tracking benchmark is 5.8%, and the correlation coefficient with crude oil prices reaches 98.1%.

The Southern Crude Oil Fund is a QDII fund that realizes overseas investment of assets by converting the raised RMB funds into US dollars at the bank.

In addition to keeping a close eye on oil prices and U.S. dollar assets, the Southern Crude Oil Fund also helps entities to hedge crude oil costs.

In an environment of low oil prices, refinery profits are generally better; as oil prices recover in the future, local refineries and other entities will once again face problems such as the decline in refining gross profits caused by the increase in crude oil costs and the narrowing of chemical product price spreads.