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From a 31% plunge to total losses below a thousand yuan, UBS Group Silver was forced into a 'distribution by uproar'

By Chaoju Focus

On February 15, a somewhat heavy 'compensation announcement' temporarily brought closure to the two-week-long 'UBS Group Silver LOF (161226) rights protection storm.' The 'stay-at-home moms' who invested in the silver fund managed to recover some losses from the fund management.

On the same day, UBS Group announced a compensation plan for investors affected by the valuation adjustment of its silver LOF, stating that those with losses under 1,000 yuan would receive full compensation, while those above 1,000 yuan would be compensated proportionally.

After the announcement was issued, the atmosphere in various rights-protection groups instantly shifted from 'hostile confrontation' to 'spreading the word with relief.'

This sense of relief stood in stark contrast to the earlier aggressive tone on social media, where just hours before, these same investors were angrily posting screenshots of their accounts in comment sections, listing accusations against the fund company for 'arbitrarily changing rules.' Some had even begun organizing collective lawsuits across major forums, vowing to demand answers from relevant authorities.

From 'determined rights protection' to 'unexpected reconciliation,' the emotional rollercoaster for most investors was even more volatile than the fluctuations in silver prices.

So, what is the full story behind this uproar over the 'valuation controversy'? Have similar conflicts occurred in the past? When established rules clash violently with market conditions, what lessons can both institutions and investors learn from this expensive 'tuition fee'?

All the panic and anger began with what seemed like a definitive 'trading limit down.'

On February 2, after several days of upward momentum, overseas markets saw heightened volatility, leading to an epic collapse in silver prices. Affected by this, domestic silver futures plummeted at the opening bell and quickly locked into a limit-down position (with a decline of about 17%).

For investors holding UBS Silver LOF—especially the 'stay-at-home moms' group active on social platforms who are highly sensitive to shrinking household assets—the price line pinned to the floor on their screens represented both a nightmare and the only 'exit route.'

In the logical framework of most retail investors, trading rules should be linear and rigid: since the domestic futures market had already locked into a limit-down position, the fund's net asset value for the day should have been firmly capped at around a 17% decline.

The logic for redemption at this point was extremely straightforward – 'stop loss.'

Investors judged that rather than waiting for an unknown plunge the next day, it would be better to 'cut losses' and exit now. As long as they submitted their redemption request before the market close, though they would have to endure a sharp 17% loss, they could at least preserve 80% of their principal.

As a result, panic-driven redemption orders flooded the fund management companies like snowflakes that afternoon, with everyone rushing to squeeze through what seemed like a narrow but certain 'exit.'

However, the vast majority of people failed to realize that behind this 'exit' lay a fatal pricing black hole.

As a listed open-ended fund (LOF), UBS Baiyin LOF’s underlying assets are highly tied to silver futures. The trouble lies in the fact that while domestic futures were stuck at a 17% drop due to the circuit breaker mechanism, the international silver spot market (such as COMEX silver), which has no daily trading limit, continued its free fall, with actual losses already plummeting beyond sight, exceeding 30% at one point.

This created a significant fair value gap.

If the fund company strictly settled redemptions based on the domestic exchange’s closing price (-17%), it would mean using the remaining assets of the fund (i.e., the money of those who chose to stay and did not redeem) to cover the shortfall. In other words, those who exited first 'gained an advantage,' while the losses were transferred to those who stayed.

To prevent this arbitrage behavior, which would effectively lead to the fund's assets being exploited, and also to comply with the fund contract provisions regarding 'fair value,' UBS Group made the controversial decision after the market closed: activating the 'index return method' for valuation adjustments.

Simply put, instead of calculating based on the domestic limit-down price, the adjustment referenced the real declines seen in international markets for repricing.

With this change, all hell broke loose.

After the net asset value (NAV) was updated that evening, investors who originally thought they had 'only' lost 17% were shocked to find that their account's NAV had plummeted by 31.5%. For ordinary investors unfamiliar with the complex pricing mechanisms of LOF funds or the concept of 'liquidity discounts,' this experience was 'unprecedented.' Despite following trading rules during market hours, it felt as if the 'referee' changed the score after the game ended.

This huge discrepancy between 'trading according to the rules during market hours and changing the rules after the close' instantly shattered investors' trust底线. What started as a debate about 'compliance' and 'fairness' quickly escalated into a large-scale rights protection movement.

Even when UBS Group later explained that the market environment at the time had deviated from the 'normal' range, with epic-level crashes in international silver prices and daily fluctuations far exceeding regular conditions, continuing to use the settlement price of silver futures from the Shanghai Futures Exchange would have led to a fund NAV significantly higher than the true value of the underlying assets in the international market, creating an illusion of 'inflated' value. The consequence of such inflation would result in some fund investors bearing losses far greater than they should have.

However, this 'hardcore explanation' based on financial professional logic appeared苍白无力 in front of angry investors and was even seen as an arrogant evasion.

For many fund investors who impulsively bought after being influenced by social media recommendations, they neither cared nor could understand these complex financial terms.

In the minds of many retail investors, they do not know how the LOF fund operates, whether their shares are linked to domestic futures or international spot prices, and they cannot comprehend terms like 'premium in the secondary market,' 'liquidity crunch,' or 'return to fair value.'

All they could see was the 'limit-down price' displayed on the trading software, the fact that they clicked the 'redeem' button according to the rules during trading hours, and the estimated loss of 17% shown on the screen.

In their straightforward commercial logic, since the system allowed them to operate at this price, it was a 'what you see is what you get' contract.

Therefore, when the final NAV calculation broke this expectation and '-17%' turned into '-31.5%,' in their eyes, this was not a compliant 'valuation adjustment' but rather a blatant 'theft' carried out by institutions taking advantage of their interpretative authority.

This vast cognitive gap caused by professional barriers注定 made this conflict unavoidable and fueled the subsequent fierce维权风暴.

In various rights-protection chat groups, a radical consensus quickly formed: if they don't 'fight to the death,' it will set a terrible precedent for the industry to arbitrarily 'exploit' retail investors in the future. In their view, since the exchange did not announce a trading halt and since the trading system allowed redemptions at that time, the fund company's unilateral revision of the valuation logic afterward is a form of 'cheating' by leveraging informational advantages.

This dispute did not stop at online verbal battles but even escalated into a class-action lawsuit.

This 'real fight' has put unprecedented pressure on the fund company, which led to the release of a compensation announcement yesterday, with the following specific plan:

1. Individual investors affected by the valuation adjustment amount (from -17% to -31.5%) below 1,000 yuan will receive settlement amounts equivalent to the actual impact (this group constitutes over 90% of investors redeeming on the given day).

2. For individual investors affected by an adjustment in valuation exceeding 1,000 yuan (from -17% to -31.5%), the settlement amount will be calculated by adding 1,000 yuan to the excess amount multiplied by a certain percentage.

3. The above individual investors can search for the 'UBS Group Silver Fund' mini program via Alipay, complete identity verification according to the prompts, and follow the guidance to handle relevant matters online.

Given the large number of investors involved and the significant workload, to ensure that investor demands are resolved conveniently and reliably, the company is going all out to advance technical support preparations, and the related mini-program will officially launch on February 26, 2026.

This statement translates to: The overwhelming majority of retail investors who complained, lodged complaints, or shared grievances online actually suffered losses (i.e., the extra 14.5% loss) of less than 1,000 yuan.

The fund company’s strategy is highly pragmatic and very 'industry-savvy': For more than 90% of these 'small investors,' full compensation will be provided. This means that as long as you're not a major investor, you can basically recover the money you originally thought was 'stolen.'

However, from a certain perspective, this follows a 'compensation based on noise' logic, or it reflects how financial institutions are forced to 'spend money for peace' when facing mass public opinion crises.

In fact, crises triggered by this kind of 'mismatch between rules and perceptions,' along with the ensuing 'precise stability maintenance' routine, have already been performed countless times in the financial sector.

Rewinding the timeline, just a short while ago in the summer of 2024, a similar drama unfolded even more dramatically during the 'Lingnan Convertible Bond' default incident. This time, what was shattered was not only the algorithm for fund valuation but also the 'invincible golden rule' that the domestic convertible bond market had maintained for over 30 years, along with the 'state-owned enterprise faith' deeply rooted in countless investors' minds.

Before this, state-backed convertible bonds were perceived by the vast majority of Chinese investors as having a 'guaranteed floor with unlimited upside.' Although there were previous default cases like Landun and Soute Convertible Bonds, they lacked the same background.

However, behind Lingnan Co., Ltd. stood Zhongshan State-Owned Assets (Zhongshan Torch High-Tech Industrial Development Zone Management Committee), which, in the eyes of many retail investors, was akin to an 'irrevocable immunity from default.'

Nevertheless, when Lingnan Co., Ltd. announced its inability to repay principal and interest on time due to liquidity strain, this illusion was mercilessly shattered, marking it as the first-ever default on a state-owned enterprise convertible bond in the country.

At that moment, retail investors holding Lingnan Convertible Bonds fell into even deeper despair than today's mutual fund holders. They could not accept that the dual insurance of 'repaying debts' and 'state-owned backing' had failed, with anger in the rights-protection groups spreading from the listed company all the way to the local State-Owned Assets Supervision and Administration Commission.

The 'fire extinguisher' that ultimately calmed this storm followed a logic identical to UBS Group’s recent actions: state-owned intervention with selective repayment.

Not long after the default occurred, Zhongshan Talent Innovation and Entrepreneurship Ecosystem Park Service Co., Ltd. appeared, issuing an acquisition offer to all bondholders.

The core term of this offer established a 'life-or-death line' at 100,000 yuan (equivalent to 1,000 bonds).

For 'small investors' holding less than 1,000 bonds (approximately 100,000 yuan), the acquirer was willing to fully purchase them at 100.127 yuan per bond. This meant these retail investors would not only recoup their full principal but even walk away with interest intact.

However, for 'large holders' or institutions with holdings exceeding 1,000 bonds, only partial purchases up to the limit of 1,000 bonds were allowed, leaving the remainder trapped in the prolonged agony of debt restructuring.

And this is essentially a replica of UBS Silver's '1,000 yuan compensation threshold.'

Whether it’s the '100,000 yuan' for Lingnan Convertible Bonds or the '1,000 yuan' for UBS Silver, these figures have been meticulously calculated. They precisely delineate the boundary between 'innocent bystanders' and 'risk takers.'

In the logic of the management, small retail investors often lack professional discernment, belong to the 'vulnerable group,' are numerous in count, and their emotions can easily spread. If not handled properly, they could easily trigger mass incidents. Therefore, they must be covered by 'special measures.' On the other hand, large investors are presumed to possess stronger risk tolerance and professional judgment and should follow the market principle of 'buyer beware.'

This strategy is undoubtedly successful commercially, achieving maximum stability with minimal financial cost. It presents a cross-section to the market: when faced with an extreme liquidity crisis, the rigidity of rules can sometimes be softened.

However, while this approach has effectively quelled public outrage in the short term, it also leaves behind an awkward paradox: can flexible rules still be considered rules?

The uproar over the 'UBS Silver controversy' will most likely land smoothly amid sighs of relief from those who've 'secured their profits.'

However, this is not a true victory in the real sense.

For the fund company, this is an expensive PR bill. Although they’ve saved face, they’ve also inadvertently sent a dangerous signal to the market: as long as there's enough noise, contracts can be renegotiated, and net asset values can be negotiated.

This practice of sacrificing long-term rule seriousness for short-term stability is akin to drinking poison to quench thirst. While it soothes current unrest, it also plants greater risks for the future:Next time, when a bigger black swan event occurs and the compensation amount exceeds the institution's tolerance limit, who will bail out these already 'spoiled' investors?

For those retail investors who are naively celebrating their 'successful rights protection,' this experience is more like an addictive anesthetic rather than a wake-up call.

Receiving compensation may offset the paper losses in their accounts, but it cannot reverse the collapse of their understanding.

If, after getting back this 1,000 yuan, everyone still fails to understand the premium risk of LOFs, still can’t differentiate between futures and spot markets, and continues to blindly follow trends on social platforms by 'copying homework,' then the money reclaimed today through 'special treatment' will certainly be lost again tomorrow in another more hidden and complex trap, along with interest.

After all, financial markets have never been charitable institutions, nor will they forever accommodate those who try to evade responsibility with the excuse of 'I don’t understand.' Money earned by luck often ends up being lost through sheer incompetence.

This time, UBS Group might have played the role of shielding people from the storm; but when the next storm hits, the tuition fees the market charges you will likely be non-refundable.

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