How to arbitrage profits from stock funds?

Stock funds will fall miserably in 2022. In the first three quarters of 2022, the average return of stock funds was -21.6%.

Is there any way to avoid losses? Yes, that is arbitrage, risk-free arbitrage.

When a stock fund holds suspended stocks, the net value of the fund is calculated based on the increase in the industry index where the stock is located. If there is evidence to prove that the reasonable value increase of suspended stocks is much higher than the increase of industry index, then buying the fund before the stock resumes trading and selling the fund after the stock resumes trading is a risk-free arbitrage transaction.

Case: Ping An Dahua Strategy Pioneer Hybrid Arbitrage Baiyunshan A
On December 24, 2012, Guangzhou Pharmaceutical and Baiyunshan A passed the review of the China Securities Regulatory Commission through share exchange and merger. According to relevant agreements, 1 share Baiyunshan A will be forced to convert into 0.95 shares of Guangzhou Pharmaceutical stock.

March 13, 2013 was the last trading day of Baiyunshan A. The closing price was 23.60 yuan, and Guangzhou Pharmaceutical closed at 26.54 yuan. Since then, Guangzhou Pharmaceutical has been rising, and on May 15, 2013, it rose to 40.24 yuan.

By searching for funds holding Baiyunshan A, investors will find that Ping An Dahua Strategy Vanguard Hybrid Fund holds the largest proportion of Baiyunshan A, accounting for 9.74% of the net value. Table 6-2 shows Ping An Dahua Strategy Details of the top ten stock investments announced by Pioneer Mix in the first quarter of 2013.

The top ten stock investment details announced by Ping An Dahua Strategy Pioneer Mix in the first quarter of 2013
The top ten stock investment details announced by Ping An Dahua Strategy Pioneer Mix in the first quarter of 2013




On March 21, 2013, Ping An Dahua Strategic Pioneer Hybrid Fund issued an announcement to value Baiyunshan A based on the China Securities Association Industry Index.

Since the increase of Guangzhou Pharmaceutical during the suspension period of Baiyunshan A was much greater than the increase of the pharmaceutical industry index, Baiyunshan A held by Ping An Dahua Strategy Vanguard Hybrid Fund was seriously undervalued.

Since March 20, 2013, Ping An Dahua Fund Management Co., Ltd. (referred to as the Company) has used the China Securities Association SAC Industry Index as the calculation basis for its Ping An Dahua Strategic Pioneer Hybrid Securities Investment Fund. Baiyunshan A (stock code: 000522), a stock held that has been suspended from trading due to special events and whose potential valuation adjustment has an impact of more than 0.25% on the net asset value of the fund on the previous valuation day, adopts the "index income method" for valuation adjustment.

On May 7, 2013, Guangzhou Pharmaceutical issued an announcement regarding the "Indicative Announcement for Investors of Guangzhou Baiyunshan Pharmaceutical Co., Ltd. to do the work related to cross-market transfer registration". Since Guangzhou Pharmaceutical was registered in The Shanghai Stock Exchange and Baiyunshan A are registered on the Shenzhen Stock Exchange, so cross-market conversion is required. This indicates that the Baiyunshan A stocks held by Ping An Dahua Strategy will be converted into Guangzhou Pharmaceutical stocks, and the fund company will also Calculating the net value of the fund based on the stock price of Guangzhou Pharmaceuticals, the next few days are the best time for arbitrage funds to enter the Ping An Dahua Strategy Vanguard Hybrid Fund.

As shown in Table 6-3, the net value of Ping An Dahua Strategy Vanguard Hybrid Fund remained stable after May 7, 2013, but suddenly the net value rose sharply by about 5% on May 16, 2013. On May 18, 2013, Guangzhou Pharmaceutical announced the completion results of the share exchange merger of Baiyunshan A and the listing announcement of the new shares. This also shows that Ping An Dahua Strategic Fund has completed the share exchange and will be trading at the price of Guangzhou Pharmaceutical. The net value of the fund is revalued. Arbitrageurs should redeem Ping An UOB Strategy Fund on May 20, 2013. Assuming that the fund was subscribed on May 8, 2013, through this arbitrage, investors can obtain an income of approximately 7%.

Ping An Dahua Strategy Pioneer Mixed Net Worth Changes