Packaged Products: Mutual Funds, ETFs, and Insurance-Based Products
This domain tests collective investment vehicles: how public and private funds differ, how fees are charged, how ETFs create and redeem, what public REITs must hold and distribute, and how insurance-wrapped products shift risk to the policyholder. Fee arithmetic and premium/discount questions appear frequently.
Funds and fee mechanics
- Public funds are openly offered and may take retail money in small amounts; private funds are capped at 200 investors and require qualified investors (≥3 million yuan financial assets or ≥500,000 yuan average income, minimum 1 million yuan per fund).
- Fees: subscription fee up front, redemption fee on exit, and ongoing management, custody and sales-service fees. After the 2023 fee reform, many active equity funds charge about 1.2% management and 0.2% custody. A shares carry front-end load; C shares swap it for a sales-service fee.
- Redemption fees must be at least 1.5% for holdings under seven days, and that money goes back into fund assets - a deliberate anti-churning rule.
ETFs, LOFs and REITs
- ETFs trade intraday and create/redeem in kind against a basket, which is what keeps price near net asset value. IOPV is the intraday indicative value; a market price above it signals a premium and invites creation-and-sell arbitrage.
- Equity ETFs settle T+1 for trading purposes; cross-border, bond, gold and money-market ETFs permit T+0.
- Public REITs must put at least 80% of assets into infrastructure ABS and distribute at least 90% of distributable income.
Insurance-based products
- Universal life credits interest to an account with a minimum guaranteed rate; investment-linked products put unit value risk on the policyholder; participating policies pay non-guaranteed dividends. None is a bank deposit and none enjoys deposit insurance.
Worked example
An ETF has an IOPV of 2.000 and trades at 2.040. A client with a creation basket asks whether arbitrage is attractive.
Reasoning: premium = (2.040 − 2.000) ÷ 2.000 = 2%. Creating units at NAV and selling at 2.040 captures about 0.040 per unit, or 40 yuan per 1,000 units, before commissions, basket transaction costs and any T+1 exposure while the position is being assembled. If those costs exceed 2%, the apparent arbitrage disappears. The premium alone is never the answer.
Traps that cost marks
- Reading a premium as a reason to buy rather than to arbitrage.
- Confusing the 1.5% short-holding redemption fee with an ordinary fee tier.
- Treating investment-linked insurance as principal-protected.