iRobot
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Post by iRobot on Apr 30, 2020 9:25:17 GMT
Good call mate just busy opening 200 new email accounts to buy my access account funds with - then given the disparate nature of my investment holdings I will be out in July. Seriously, when oh when are management going to do the right and proper thing  The only other fair alternative to pro-rata imho is to give additional interest as compensation (ie 10% interest) for all account holders with in excess of say £50k invested. That might encourage investment. When you say pro-rata, are you referring to the old queued system? Or the current pooled system but one where larger holdings get a larger slice of the pie regardless of when they entered the pool?
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Post by davee39 on Apr 30, 2020 9:36:00 GMT
A lot of good ideas here.
Yes, at present, a flat rate cash out of £10 will result in a larger lender, who would be due for a larger share of the cash, to acquire loans from a lender with an entitlement of less than £10. At present the sums involved are small and any change would not make a material difference to the larger lender. Where the loan parts taken on are already defaulted they will be covered by ring fenced cash. The concern is that marketable loan parts will be higher risk.
I think it sensible to assume the current pool will be in place for a very limited time. My non-isa only held £500, a sum which has almost repaid, and which would be very useful to smaller lenders. My ISA, and accounts held by my wife are rather different, here the monthly interest remains more significant.
Once trading starts, and a market level is set, the accounts will need to move to a pro-rata, or dated queue to prevent gaming of the pool process. Assetz management are fairly bright, they will be aware of this.
One fix for the gaming possibility would be for all discounted purchases to be made through a 180 day access account, this would stop these purchases immediately going back up for sale. There may also be issues with fastest finger contestants keen to buy at -20 and immediately resell at -15. (As a former FC lender I learned all about buying loan parts at 2% cashback and flipping at 1% discount).
So far the pool has allowed lenders some limited access to cash and has bought time for a longer term solution but it will not be around much longer.
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alender
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Post by alender on Apr 30, 2020 9:38:02 GMT
There are many factors that will determine the discount, markets rarely price on what is the perceive true value, just take a look at discount/premium for closed end investment trusts, PSSL and VSL are probably the closest to traded AAs
The factors are
Confidence
How much is up for sale
How much money is waiting to buy
For buyers, trend (the tend is your friend), is it going up must get in quick (FOMO), it is going down, shall I hold and wait for a lower price.
For sellers, what is on the market and the discount, if there is a huge amount at 20% and you must raise some cash you will place on at 21%
Sellers, may view 20% discount is the correct value but they think it is worth for safety and being able to sleep at night to drop below a 20% to get out while they can.
Flipping, make a profit, get out wait for reversal
Are there are places to put you money for better returns.
The payment system which means small holders get out with 100% or close to 100% par value. Open accounts for your spouse, children etc and play the system
Those not wishing to get out now ask for repayments and/or interest not to be reinvested as they can buy back in at discount.
. . . . . . .
Good call mate just busy opening 200 new email accounts to buy my access account funds with - then given the disparate nature of my investment holdings I will be out in July. Seriously, when oh when are management going to do the right and proper thing The only other fair alternative to pro-rata imho is to give additional interest as compensation (ie 10% interest) for all account holders with in excess of say £50k invested. That might encourage investment. Trading the AAs will help some people to get out but I fear a race to the bottom and the larger lenders will be hit by less repayments which should increase by Jun as there are less tranches to fund. If the AAs traded funds (perhaps we should call this AATFs) were subordinate to the AAs by perhaps not allowing any withdrawal during the liquidity event they would not impact existing holders but would be less attractive and therefore require a higher discount. I believe these should also have a lower rank in a resolution event, lets say 80%. If the AATFs were on the same terms as the AAs this would in effect be an conversion of all AAs to AATFs
Be interesting to see what the FCA makes of such a complicated product. It will consist of a set up underlying loans (proportions constantly changing), a cash element (again constantly changing), a series of commitments to future tranches (disproportionately higher that current investment as these loans also exits in MLA which do not need to take up the tranches) and a PF element. It will have 2 ways to exit, selling on the market at at discount or through repayments at par but of course the proportion of repayments you get will be inversely proportional to your holding therefore the value of each unit. Its price would have no floor but be capped at 100% par as people will just buy into the AAs direct. It is a mixture of a closed and open fund.
There could be 3 versions of this product with different interest rates and conversion periods, 90d, 30d and QAA. Both the 90d and 30d will be convertible to QAA.
There is also the fee which can vary.
Good luck trying to price this product.
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iRobot
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Post by iRobot on Apr 30, 2020 10:06:59 GMT
A lot of good ideas here. Yes, at present, a flat rate cash out of £10 will result in a larger lender, who would be due for a larger share of the cash, to acquire loans from a lender with an entitlement of less than £10. At present the sums involved are small and any change would not make a material difference to the larger lender. Where the loan parts taken on are already defaulted they will be covered by ring fenced cash. The concern is that marketable loan parts will be higher risk. I think it sensible to assume the current pool will be in place for a very limited time. My non-isa only held £500, a sum which has almost repaid, and which would be very useful to smaller lenders. My ISA, and accounts held by my wife are rather different, here the monthly interest remains more significant. Once trading starts, and a market level is set, the accounts will need to move to a pro-rata, or dated queue to prevent gaming of the pool process. Assetz management are fairly bright, they will be aware of this. One fix for the gaming possibility would be for all discounted purchases to be made through a 180 day access account, this would stop these purchases immediately going back up for sale. There may also be issues with fastest finger contestants keen to buy at -20 and immediately resell at -15. (As a former FC lender I learned all about buying loan parts at 2% cashback and flipping at 1% discount). So far the pool has allowed lenders some limited access to cash and has bought time for a longer term solution but it will not be around much longer. Agreed, davee39 , but would query this point.How would moving to a pro-rata payout within the current pooled system prevent gaming? Dated queue, yes, and would actually be a supporter of the 180DAA approach - anything to prevent the FFF / bot brigade from doing exactly what you outline with churning sums purchased at -X% and re-issuing at a slightly lower discount. As you say - albeit with a risk of 'damning with faint praise'!  - " Assetz management are fairly bright, they will be aware of this", and I would expect they are decent types, too, so would prevent this form of profiteering.
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ceejay
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Post by ceejay on Apr 30, 2020 10:46:09 GMT
Lots of interesting comments about the difficulty of pricing a traded AA, the games we might play, and the steps that might be taken to reduce the impact of that.
Can I just refer back to some comments made a while ago by one or more of the Assetz guys - that they were looking seriously at a one-off non-reversible option to crystallise a share of the AAs into its constituent parts? You'd find yourself holding 550 or whatever loan parts, in various states of health, plus a little cash. In that scenario we'd just be trading loans, presumably in the open MLA market.
What does the panel think about that option? Is it still on the table?
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iRobot
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Post by iRobot on Apr 30, 2020 10:50:34 GMT
Lots of interesting comments about the difficulty of pricing a traded AA, the games we might play, and the steps that might be taken to reduce the impact of that. Can I just refer back to some comments made a while ago by one or more of the Assetz guys - that they were looking seriously at a one-off non-reversible option to crystallise a share of the AAs into its constituent parts? You'd find yourself holding 550 or whatever loan parts, in various states of health, plus a little cash. In that scenario we'd just be trading loans, presumably in the open MLA market. What does the panel think about that option? Is it still on the table? Can you provide links to those comments so that those unfamiliar with them can read what was actually written, please?
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Post by davee39 on Apr 30, 2020 10:57:50 GMT
Lots of interesting comments about the difficulty of pricing a traded AA, the games we might play, and the steps that might be taken to reduce the impact of that. Can I just refer back to some comments made a while ago by one or more of the Assetz guys - that they were looking seriously at a one-off non-reversible option to crystallise a share of the AAs into its constituent parts? You'd find yourself holding 550 or whatever loan parts, in various states of health, plus a little cash. In that scenario we'd just be trading loans, presumably in the open MLA market. What does the panel think about that option? Is it still on the table? I think there is a move away from shifting Access to MLA. Too hard to correctly attribute parts, value suspended loans and correctly allocate provision fund/ring fenced shares. Much easier to use the current algorithithm to shuffle funds within the acess accounts. With discounts of 20%+ we could then have a whole new set of threads complaining about the unfairness of the buying routines!!! iRobot Pro-rata would replace the pool. The cashout at a discount option should reduce the size of the withdrawal queue allowing a more 'normal' withdrawal system. Re moving from access to MLA - this was floated early on. The bad loans would be accompanied by a provision fund share, and the cash portion of the Access account would become accessible. As I indicate above I doubt this is still the plan.
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IFISAcava
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Post by IFISAcava on Apr 30, 2020 10:58:15 GMT
With all these complaints about how unfair it will be when people are able to sell AA loan parts, shall we just call it off so no one has any access to liquidity?
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ceejay
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Post by ceejay on Apr 30, 2020 10:58:56 GMT
Lots of interesting comments about the difficulty of pricing a traded AA, the games we might play, and the steps that might be taken to reduce the impact of that. Can I just refer back to some comments made a while ago by one or more of the Assetz guys - that they were looking seriously at a one-off non-reversible option to crystallise a share of the AAs into its constituent parts? You'd find yourself holding 550 or whatever loan parts, in various states of health, plus a little cash. In that scenario we'd just be trading loans, presumably in the open MLA market. What does the panel think about that option? Is it still on the table? Can you provide links to those comments so that those unfamiliar with them can read what was actually written, please? "In the meantime, we are hoping to release a function shortly to allow people to crystallise their loan holdings and their correct share of uninvested cash out of the Access Accounts and into a new loan holding account. That is an irrevocable exit from the Access Accounts The rest of the loans will repay by monthly amortisations or end of term/ early redemptions as normal."
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ceejay
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Post by ceejay on Apr 30, 2020 11:03:29 GMT
Lots of interesting comments about the difficulty of pricing a traded AA, the games we might play, and the steps that might be taken to reduce the impact of that. Can I just refer back to some comments made a while ago by one or more of the Assetz guys - that they were looking seriously at a one-off non-reversible option to crystallise a share of the AAs into its constituent parts? You'd find yourself holding 550 or whatever loan parts, in various states of health, plus a little cash. In that scenario we'd just be trading loans, presumably in the open MLA market. What does the panel think about that option? Is it still on the table? I think there is a move away from shifting Access to MLA. Too hard to correctly attribute parts, value suspended loans and correctly allocate provision fund/ring fenced shares. Much easier to use the current algorithithm to shuffle funds within the acess accounts. With discounts of 20%+ we could then have a whole new set of threads complaining about the unfairness of the buying routines!!! You may well be right, though this thread is showing up the challenges with the approach of trading AAs. I have to say that I'm struggling to see a future for the AAs: in the short term, they may be necessary to keep the funds available for follow-on loan tranches, but if AC can find an alternative way of funding those (perhaps COVID related) then I'd have thought that simply blowing up the AAs would be a simpler solution. Certainly a lot more transparent. Edit: Thinking some more about the complications, I can certainly see it might be hard to do the crystallisation calculation on the fly for each investor who wanted out. Perhaps it would be easier if they picked a single point in time (say, after an end-of-month interest run) for the crystallisation event which we all had the chance to opt-in to for whatever % of our holdings?
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iRobot
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Post by iRobot on Apr 30, 2020 12:26:30 GMT
With all these complaints about how unfair it will be when people are able to sell AA loan parts, shall we just call it off so no one has any access to liquidity? I don't see any complaints about selling of AA loan parts, per se. I do see unfavourable comments about 'gaming the system' and the potential profiteering from the reselling of loan parts bought at a discount via automated processes. Would you be looking to participate in the latter activity?
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jlend
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Post by jlend on Apr 30, 2020 12:30:34 GMT
Is anyone expecting interest rates in one or more of the access accounts to be reduced?
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Post by simons on Apr 30, 2020 12:40:45 GMT
Lots of interesting comments about the difficulty of pricing a traded AA, the games we might play, and the steps that might be taken to reduce the impact of that. Can I just refer back to some comments made a while ago by one or more of the Assetz guys - that they were looking seriously at a one-off non-reversible option to crystallise a share of the AAs into its constituent parts? You'd find yourself holding 550 or whatever loan parts, in various states of health, plus a little cash. In that scenario we'd just be trading loans, presumably in the open MLA market. What does the panel think about that option? Is it still on the table? I think the 3 options are: 1 Trading of access account holdings, effectively like an index - one transaction between buyer and seller at some price 2 Split up into consituent parts enabling sale of the non-suspended loans via MLA - likely to be very time consuming, but nevertheless provides an exit Option 1 above was described as being released "shortly" on April 7th. Option 2 was described as "imminent" on April 27th Option 3 is to sit and rot in the withdrawal queue (or whatever you want to call it), which seems to be the least favourable option for many
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iRobot
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Post by iRobot on Apr 30, 2020 13:01:41 GMT
Lots of interesting comments about the difficulty of pricing a traded AA, the games we might play, and the steps that might be taken to reduce the impact of that. Can I just refer back to some comments made a while ago by one or more of the Assetz guys - that they were looking seriously at a one-off non-reversible option to crystallise a share of the AAs into its constituent parts? You'd find yourself holding 550 or whatever loan parts, in various states of health, plus a little cash. In that scenario we'd just be trading loans, presumably in the open MLA market. What does the panel think about that option? Is it still on the table? I think the 3 options are: 1 Trading of access account holdings, effectively like an index - one transaction between buyer and seller at some price 2 Split up into consituent parts enabling sale of the non-suspended loans via MLA - likely to be very time consuming, but nevertheless provides an exit Option 1 above was described as being released "shortly" on April 7th. Option 2 was described as "imminent" on April 27thOption 3 is to sit and rot in the withdrawal queue (or whatever you want to call it), which seems to be the least favourable option for many Is that the case, simons? If you are referring to the following from the 27th, " We will be announcing, imminently, new functions to allow trading in the Access Accounts to permit people to potentially release their cash more quickly but without impacting on the funding of in-flight property development loans. This new functionality will not suit everyone, but it will provide another option to those who may wish to release some or all of their capital urgently." I think it could equally apply to Option 1 as it might to Option 2, where Option 1 announced on the 7th was: " As an alternative investor choice, we are exploring the possibility of an Access Accounts trading feature which would allow a choice to sell some or all of your Quick Access Account investment at a discount, subject to other investor demand at that price. This would allow you to list some or all of your Quick Access Account holdings (not individual loans) for sale to another investor."
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agent69
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Post by agent69 on Apr 30, 2020 13:02:42 GMT
Can't believe how many people are viewing the future with such rose tinted glasses.
In normal times the provision fund makes good any losses from defaulted loans in the access accounts. Times are not normal, defaults will rocket, the PF will be overwhelmed and the only issud is how those losses will be divied up between remaining investors. At present I believe it's a bit like pass the parcel: when the music stops whoever is holding the defaulted loans picks up the tab. AC need to increase the size of the PF by either reducing interest rates or charge a fee for withdrawls (based on the size of the black hole).
Be assured that losses are on there way, the only issue is how they are shared out between investors.
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The only other fair alternative to pro-rata imho is to give additional interest as compensation (ie 10% interest) for all account holders with in excess of say £50k invested. That might encourage investment. 
- "Assetz management are fairly bright, they will be aware of this", and I would expect they are decent types, too, so would prevent this form of profiteering.