SFC-authorised listed closed-ended alternative asset funds (LAFs) are traded on SEHK like stocks. They are complex products mainly investing in illiquid assets. Investment in LAFs involves significant risks and investors may lose a significant portion or all of their investments. When trading LAFs, investors should exercise caution, seek independent professional advice if in doubt and carefully consider the following points.

• No Subscription or Redemption Right
  LAFs are closed-ended. Investors can buy and sell funds units only on the SEHK at market prices. These funds do not continuously issue or repurchase fund units at NAV, and investors may only redeem some of the fund units at NAV when the fund manager exercises its discretion.

• Market Price Deviating from NAV Significantly
  Fund units are traded at market prices that are determined primarily by demand and supply in the secondary market and may deviate from the fund’s NAV. The trading price of LAFs may deviate significantly from their NAV. Investors may only be able to sell fund units at a substantial discount on the exchange and may suffer significant losses.  Investors should carefully consider their own circumstances, including their liquidity needs and investment concentration before making any investment decisions. Investors should not allocate all or a significant portion of their investment portfolio into LAFs.

• Fund Distributions
  Where an LAF has a policy to pay out distributions, it may specify its target distribution in its listing documents. However, a “target” is not a “guarantee”, and there is no guarantee that LAFs will pay the target distributions or make any distributions at all. Moreover, similar to other funds, LAFs may pay distributions out of capital or effectively out of capital. This represents a withdrawal of investor’s initial investment.
  
  This may result in an immediate reduction of the NAV per unit, in particular during adverse market conditions. This will also constrain future capital growth of the fund.
  
  Regardless of what the “target” distributions of an LAF is stated to be, investors should not assume these funds as high yield investment vehicles or high yield stocks, or consider that these funds will always generate high return or any positive return. Also, positive distribution payout does not represent positive investment return and investors may still suffer losses.

• Fees and Charges
  LAFs are actively managed. Investors should carefully consider the ongoing fees and expenses, including management and performance-related fees, and the fees and expenses to net asset value ratio.
  
  Due to various reasons such as complex due diligence and investment strategies, some LAFs may charge high fees and expenses and have complicated fees calculation formula and mechanism.
  
  Fees and expenses of a fund are charged to or paid out of the assets of the fund and will reduce investors’ potential return.

• Knowledge Test
  Before making any investment in LAFs, investors should understand the nature and risks of the investments and ensure that they have sufficient resources to be able to assume the risks and bear the potential losses.
  
  All LAFs are "complex products" which are subject to enhanced distribution requirements. When investors seek to purchase these funds, intermediaries will first conduct a knowledge test to assess whether the investors have knowledge of the relevant LAFs or alternative assets. If investors lack the relevant knowledge, intermediaries must provide adequate training to them before they may proceed with the transactions, ensuring that investors understand the nature and risks of the product. In addition, intermediaries should also provide investors with risk disclosure statements related to the relevant alternative assets and relevant LAFs.

• Stock Short Name
  All LAFs are required to start their English and Chinese stock short names with the marker “AL” for identification.

• Fund Information
  Investors should refer to the listing documents to understand the details of LAFs, including their investment features and risk factors, to assess whether the funds suit their investment needs.
  
  In addition, investors should also review all necessary information on the websites of the fund and SEHK, including the fund’s product key facts statement (which the fund manager is required to update from time to time), the fund’s announcements relating to material changes to the fund, the latest NAV (and if applicable, target distributions) of the fund and the fund’s interim and annual reports, to stay informed about the latest information regarding the fund.