These are open-end funds that are traded on a stock exchange. The curious thing is that they don’t seem to exist in the United States, and seem to be unique to mainland China. My guess right now is that they don’t exist in the United States because open-end funds can and do sell direct to the consumer, and there is no need to go through an exchange. By contrast, the mutual fund industry is not yet developed in China, so the LOF’s are a way for mutual funds to “piggy back” on top of the infrastructure that exists in the stock market. The other things that LOF and ETF does is that I think is gives the Shenzhen Stock Exchange something useful to do. My sense is that the major corporate stock listings are going to be in Shanghai, whereas Shenzhen is going to borrow a page from what the American Stock Exchange did and become a niche player in exchange traded funds.
The scary thing about the pace of change in Chinese markets is how fast everything is.