The investment strategy of Southern Crude Oil Fund is to passively track crude oil prices by investing in overseas crude oil ETFs. The adoption of this model is mainly based on the current management mode of QDII funds, and it is impossible to directly invest in derivatives related to physical objects. In overseas markets, crude oil ETFs mainly track the prices of WTI (West Texas Intermediate (crude oil)) and Brent (Brent crude oil), and most of them use futures contracts to invest in these two commodities and change positions before delivery.

The investment portfolio of Southern Crude Oil Fund only chooses ETFs that track crude oil prices overseas, so it is more closely related to oil prices. Through the back measurement of crude oil price data in recent five years, the annualized error of the tracking benchmark of Southern Crude Oil Fund is 5.8%, and the correlation coefficient with crude oil price reaches 98. 1%.

Southern crude oil fund belongs to QDII fund, which realizes the overseas investment of assets by converting the raised RMB funds into US dollars in the bank.

In addition to keeping a close eye on the two characteristics of oil price and dollar assets, Southern Crude Oil Fund also helps entities hedge the cost of crude oil. In the environment of low oil price, the profitability of refineries is generally good; In the future, with the recovery of oil prices, local refineries and other main bodies will face problems such as the decline of refining gross profit and the narrowing of the price difference of chemical products caused by the rising cost of crude oil.