Investors in a silver-linked exchange-traded fund have begun receiving compensation payments, though the program excludes two specific groups, according to market experts.

A dedicated platform for the China-UBS Silver Fund was launched on Alipay on February 26, marking the official implementation of China-UBS's specialized plan addressing the fund's recent valuation adjustment incident. Screenshots of compensation amounts being credited to investor accounts were shared online that afternoon. As the Silver LOF incident concludes, some investors have questioned why those who did not redeem their shares and those who traded on the secondary market are not eligible for compensation.

Market experts clarified that investors who held their positions experienced only paper losses, while those trading on the exchange were subject to different pricing mechanisms, making their exclusion from the compensation plan reasonable under existing rules. The valuation adjustment has provided valuable experience for the asset management industry, highlighting the need for improved emergency response mechanisms to better protect investors.

**Question 1: Why are investors who did not redeem on February 2 not compensated?** According to the announcement, the compensation plan applies only to individual investors who submitted redemption requests between 3:00 PM on January 30, 2026, and 3:00 PM on February 2. A mid-sized public fund market expert explained that the key distinction lies between realized losses and unrealized paper fluctuations. Investors who redeemed during the specified period effectively closed their positions at the net asset value (NAV) of February 2, finalizing their gains or losses. In contrast, those who held shares beyond February 3 experienced the NAV fluctuation as an intermediate value, with the paper loss nullified after the valuation was restored on February 3. Public data shows the cumulative NAV decline for the Silver LOF over February 2 and 3 was -29.23%, closely aligning with the -29.34% drop in Shanghai Futures Exchange silver contracts, indicating that non-redeeming investors were largely unaffected.

**Question 2: Why are secondary market traders excluded from compensation?** LOF funds support both primary market subscriptions/redemptions and secondary market trading. The compensation plan does not cover secondary market investors due to fundamentally different pricing and settlement mechanisms. A public LOF fund manager noted that secondary market trades are executed at real-time prices determined by supply and demand, independent of the end-of-day NAV. The transaction price reflects the consensus of buyers and sellers at the time of trade and is not directly tied to the daily calculated NAV.

**Valuable lessons for handling extreme market conditions** On February 2, sharp fluctuations in international silver prices led to distorted closing prices for domestic silver futures due to price limits, preventing an accurate reflection of asset value. In line with guidelines on securities fund valuation, the fund manager adjusted the valuation to maintain fairness and prevent advantageous redemptions. While the adjustment upheld fairness, experts suggested that the timeliness of disclosures could be improved. Providing earlier warnings during abnormal market movements would help investors make more informed decisions. The incident has offered the asset management industry critical experience in managing extreme volatility, underscoring the importance of transparent communication and robust emergency protocols to safeguard investor interests.