LOF(Listened Open Fund), the full name is "listed open-end fund". LOF can be traded in the secondary market, and can also be purchased and redeemed by fund companies.
In fact, ETF is a standard on-market index fund. The so-called on-site fund is a fund that trades in stock accounts. Most of the funds we usually talk about are OTC funds, which are traded through third-party platforms such as Alipay and Tian Tian Fund. Of course, the official name is subscription and redemption, not buying and selling. ETF is a very mature financial product abroad and has existed for many years. Our country started relatively late, that is, more than ten years.
LOF can be purchased and redeemed over the counter or traded on the floor. It is an ETF with China characteristics, and it can be regarded as our local innovative product.
Second, the difference between ETF and LOF
Although ETF and LOF have similarities, there are still obvious differences:
First, the corresponding fund types are different.
ETF funds are all index funds, and the varieties of ETFs, except domestic A-share indexes, such as CSI 300, CSI 500 and GEM, etc. It also includes bonds, commodity gold and overseas indexes, all of which passively track various indexes.
LOF funds are more free, which can be passively managed index funds or actively managed funds, so LOF fund management is more flexible. However, LOF funds are currently regarded as OTC funds by the mainstream market.
Off-site share is much larger than on-site share. If it is an on-site transaction, LOF is prone to insufficient liquidity and cannot successfully complete the transaction.
Second, the cost is different.
Although LOF can also be traded on the floor, its overall cost, including management fees and custody fees, is much higher than that of ETF, so ETF has more cost advantages than LOF funds for floor funds.
So, what are the benefits of a fund that can be listed and traded like ETF?
Although they are all index funds, due to the special trading mechanism of ETF funds, the positions of their index stocks will be higher, almost reaching 100%, which means that the capital utilization rate is almost 100%, so the effect of tracking the index is better than that of OTC index funds.
Another point is that the transaction cost is relatively low. We know that the handling fee for OTC subscription funds is generally 1.5%. If Alipay and Tian Tian Fund Platform 1 are discounted, it will be 0. 15%, but the redemption fee cannot be discounted, which is basically 0.5%, so the subscription and redemption rates are generally above 0.65%, which is 6.5‰.
According to the ultra-low commission brokers we provide to you, the transaction cost of ETF is 1 and 2 * * * 0, which is only 1/30 of the redemption cost of OTC funds, and the transaction of OTC funds is exempt from stamp duty.
Therefore, for index funds, because the tracking effect on the market is better and the transaction cost is lower, the ETF yield on the market will be slightly higher than that off-market in the long run.