Farewell, final rigid payment

2022-07-18 0 By

Some people say that this is the “title party”, you said that after the new asset management regulations there is no rigid payment, then I matured a big real estate trust last year, how did it smoothly payment?Is there a resurgence of “rigid payment”?On this issue, let’s talk about the capital source of “rigid payment”, we will be clear.When the trust project goes wrong, the trust company pays the funds to investors from three aspects: 1. The disposal of the project (selling off the project, litigating to collect debts, etc.). It is uncertain when and how much the funds will come back.2. Trust companies use their own money (including shareholders or affiliated companies) to make payments to everyone.The advantage of this model is that as long as the trust company has money and is willing, the investors can get back the principal immediately, just as there is no risk, which is the common “rigid payment”.(Many trust companies are indeed rich, but they do not have money printing machines at home. It is reported that a large state-owned enterprise trust has a stock of 100 billion real estate trusts, but only 6 billion live funds at its disposal this year, which will be exhausted in a minute.)Trust company: “I have no money, but do not want to project trouble, to the credit insurance fund to lend money to investors to pay, this is not happy?”In fact, most of the principal returned by trust investors after a major default in August last year was received by the trust Insurance Fund.A lot of people think it’s good to use the trust industry protection fund’s money to pay for the interests of investors and protect the reputation of the industry.But the last of the funders is going on strike!On February 11, the China Banking and Insurance Regulatory Commission (CBRC) began soliciting public comments on the draft management measures for trust Industry protection funds and liquidity mutual funds.Expressly states that the fund shall not be used to make rigid payments to beneficiaries!1 What does trust Insurance Fund do?Each financial sector has its own “umbrella” in 2014.From bank deposit insurance, insurance guarantee fund, securities investor protection fund, and today’s leading role – trust industry guarantee fund.Hundreds of billions of large scale, so that investors in financial products immediately have a guarantee.Many practitioners of wealth management institutions “claim” that trust companies are not only rich and generous, but also that the trust industry security fund has a scale of 150 billion yuan to support you!How safe trust products are!Many people are too naive to know the rules of the umbrella.Take bank deposit insurance as an example. An individual’s deposit is protected up to 500,000 yuan in a single bank, so some smart investors will try to spread their deposit risk across multiple banks.(I envy people with so much savings!)Each “umbrella” has its own characteristics and different ways of protection, but the trust industry protection fund is an exception.In fact, it can be seen from the name that other “umbrella” protects customers and investors, while the main body of trust industry protection fund is “trust industry”!The somebody else tells you from the name, I did not want to do to trust investor just add!If we carefully read the details of the Trust Industry Protection Fund Management Measures issued in December 2014, the above views will be further reinforced.(1) Because of insolvency, a trust company still needs to be restructured after the implementation of the recovery and disposal plan;(2) the trust company has entered into bankruptcy procedures according to law and is undergoing reorganization;(3) The trust company is ordered to close down or cancel due to illegal operation;(4) The trust company needs to provide short-term liquidity support due to temporary capital turnover difficulties;(5) other circumstances in which it is necessary to use the security fund.”Who can tell me which of the first four scenarios has something to do with investor redemption?As a matter of fact, the trust industry security fund only maintains the normal operation of the trust industry, especially the trust company. As a form of self-financing investment, trust products have never been considered as “rigid payment” by the regulatory authorities since the beginning of organizing the trust industry security fund.To break the rigid payment, supervision shouted for so many years, if the supervision of their own to make a security fund, and then sit solid just against, this face also played too loud?But the situation in 2021 is that there is no surplus food for the landowner!Trust companies, whose financial strength is much lower than in the past, had to take advantage of the loopholes in the policy by borrowing funds from the trust industry guarantee Fund to investors.A certain big, a certain summer, a certain light, one by one down, but you did not see a large number of trust investors came to the trust company to pull banners.It is true that the trust company borrowed the credit insurance fund to just exchange, which is hardly a good deed. It is just that the credit of maintaining the trust wealth will not explode in a short time, but it really brings good news to some trust investors.But this Gospel, in the end, will die!There are many changes in the “draft for comments” this time, including changes in the positioning of the credit insurance fund and adjustments to many rules. However, I believe that none of us will care about these contents.Let’s go straight to article 3: “Article 3 the fund shall not be used to make rigid payments to the beneficiary.Rigid payment refers to the trust companies in trust products cannot be duly honour or payment difficulties, to avoid reputational risks such as the purpose, in the payment amount and responsible the absence of correlation degree, still with self-owned capital flange, other trust products to undertake, or third-party compensatory way to honour the beneficiary of the principal or income.”Is the meaning of regulation clear enough?The other day, a client came up with a trust product as his second choice while hesitating to subscribe to a multi-strategy arbitrage product (long-term performance of 7-9% annualized, maximum retracement no more than 2%).I am very speechless, all this time, you still read the old classics five years ago!Since last June, it has been half a year since we left the trust industry.Jump out of trust to see trust, as expected has its own flavor.Some people laugh at investors who still believe in rigid payment, but I think today’s practitioners are no better than investors!It is difficult to assess who is right and who is wrong, as a trust company is suddenly in the spotlight due to multiple salary scandals.But I would like to ask: 1. In the context of continuous contraction of trust industry, isn’t it quite normal and easy to foresee to cut salary?(I had coffee with an old trust manager the other day, who predicted that his future salary would be a quarter of what it is now.) 2.Or are you still nostalgic for the past decade of trust bliss?Isn’t the essence of refraction behind these two unrelated things the same?People are lazy, and the more comfortable the past, the greater this inertia.This is human, not unique to the trust industry.And when we try to change, we inevitably get bruised.Scars, let our hearts for the past nostalgia, become more intense.The contrast of the environment, will make the original unstable us suffering, and even let us go back to the old way.Now that you think about it, off-bid conversion seems to be going well in the first half of 2019-2021, and many are optimistic.But we all forget that we are just riding the capital markets.Since last December, the loss of money effect of the capital market is becoming more and more obvious, those in the early effect of making money and under the influx of standard products investors and practitioners are afraid to see the real loss.Subjective bulls have largely been pulled back, with many funds having recorded their biggest pullbacks since December;Quantitative index increase, the hot last year caused the track crowded, the excess is less, the index fell, it is difficult to make money;Structured products represented by snowballs?This wave of adjustment after many investors to really lose money to leave;(Some overseas private bank clients have cashed in losses.) Even many big quantitative neutrals are pulling back, aren’t you hedging your risk?How can you also fall with it!(CTA is the only exception.) By contrast, it seems human nature to recall the “simple goodness” of the past, with the loss of money and the loss of no money.But I want to say that the dawn is often in the darkest time, the choice to go to the dawn of significance, far more than staying in the dark to continue to wait.As investors, please abandon the illusion of non-standard and rigid payment, bravely embrace the capital market, seeking long-term certainty in the volatility.Because it’s the only future we can be sure of.Similarly, for the trust industry and practitioners, give up the final expectation of non-standard final, and strive to throw themselves into the melting pot of the capital market for retraining, so as to usher in the final rebirth!