alender
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Post by alender on Aug 1, 2020 10:19:29 GMT
The trading of AAs will slow/stop new money entering the accounts as who would invest directly when you can buy cheaper on the SM.
Also anyone with any sense who is already invested will request a withdraw of their funds so they get out at par, they can take the money elsewhere or buy back in at a discount increasing their yield and perhaps a capital gain, and then immediately request to withdraw of these funds, I explained this when the AA SM was first considered and stated the only way to stop this behaviour and further disadvantage the AA holder was to create a subordinate loan product once an AA is traded that say perhaps can not be redeemed at par until normal condition return. The exit queues will increase.
Because of AC actions in creating an SM withdraws AAs for existing AA holders.AAs will be reduced because of no new money and increased exit queues.
I think you've gotta assume that anything offered on the SM will have already been in the queue. But it will encourage more funds to be added to the queue so you cam redeem at par and buy back in at a discount therefore increasing yield with larger capital repayments for the same funds.
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cb25
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Post by cb25 on Aug 1, 2020 10:21:34 GMT
The trading of AAs will slow/stop new money entering the accounts as who would invest directly when you can buy cheaper on the SM.
Also anyone with any sense who is already invested will request a withdraw of their funds so they get out at par, they can take the money elsewhere or buy back in at a discount increasing their yield and perhaps a capital gain, and then immediately request to withdraw of these funds, I explained this when the AA SM was first considered and stated the only way to stop this behaviour and further disadvantage the AA holder was to create a subordinate loan product once an AA is traded that say perhaps can not be redeemed at par until normal condition return. The exit queues will increase.
Because of AC actions in creating an SM withdraws AAs for existing AA holders.AAs will be reduced because of no new money and increased exit queues.
I think you've gotta assume that anything offered on the SM will have already been in the queue. As AC explain here the money doesn't have to be in the withdrawal queue to generate repayments " Currently, as funds become available for withdrawal from the Access Account, these are allocated to an investor’s withdrawal request on a pro-rata basis directly related to each investor’s total investment in that loan within the relevant AA that they are withdrawing from, not the size of their withdrawal request"
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alender
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Post by alender on Aug 1, 2020 10:34:25 GMT
I think you've gotta assume that anything offered on the SM will have already been in the queue. As AC explain here the money doesn't have to be in the withdrawal queue to generate repayments " Currently, as funds become available for withdrawal from the Access Account, these are allocated to an investor’s withdrawal request on a pro-rata basis directly related to each investor’s total investment in that loan within the relevant AA that they are withdrawing from, not the size of their withdrawal request" Correct but this does not alter the fact that if you do not wish to exit the AAs and have no money (either interest or capital repayments) requested for withdraw it now makes sense to request withdrawals and buy back in again therefore increasing yield and capital and decreasing the amount of money for those trying to withdraw at PAR along with the lack of new money this will create in the AAs. Great Idea for those with excess funds wishing to enter the AAs, very bad idea for those already in in the AAs who do not want to sell at a discount.
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cb25
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Post by cb25 on Aug 1, 2020 10:44:32 GMT
As AC explain here the money doesn't have to be in the withdrawal queue to generate repayments " Currently, as funds become available for withdrawal from the Access Account, these are allocated to an investor’s withdrawal request on a pro-rata basis directly related to each investor’s total investment in that loan within the relevant AA that they are withdrawing from, not the size of their withdrawal request" Correct but this does not alter the fact that if you do not wish to exit the AAs and have no money (either interest or capital repayments) requested for withdraw it now makes sense to request withdrawals and buy back in again therefore increasing yield and capital and decreasing the amount of money for those trying to withdraw at PAR along with the lack of new money this will create in the AAs. Great Idea for those with excess funds wishing to enter the AAs, very bad idea for those already in in the AAs who do not want to sell at a discount. I don't understand why you say "it now makes sense to request withdrawals" given the payout is based on total investment rather than amount on withdrawal. If for example I have £20K in 30DAA with none on withdrawal, I get the occasional payout of a few £s/£10K invested. How will that change by me putting in a withdrawal request for some/all of the £20K?
I agree that one could use the repayments to buy back into the AAs at a discount (but I sometimes use the AA payouts to buy more in the MLA market).
I also don't understand "very bad idea for those already in in the AAs who do not want to sell at a discount". Not all of my AA money is in the withdrawal queue (and probably won't be when the SM goes live), but I still get payouts from Borrower repayments. That will remain unchanged.
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dead-money
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Post by dead-money on Aug 1, 2020 10:45:32 GMT
As AC explain here the money doesn't have to be in the withdrawal queue to generate repayments " Currently, as funds become available for withdrawal from the Access Account, these are allocated to an investor’s withdrawal request on a pro-rata basis directly related to each investor’s total investment in that loan within the relevant AA that they are withdrawing from, not the size of their withdrawal request" Correct but this does not alter the fact that if you do not wish to exit the AAs and have no money (either interest or capital repayments) requested for withdraw it now makes sense to request withdrawals and buy back in again therefore increasing yield and capital and decreasing the amount of money for those trying to withdraw at PAR along with the lack of new money this will create in the AAs. Great Idea for those with excess funds wishing to enter the AAs, very bad idea for those already in in the AAs who do not want to sell at a discount. So your argument is that par is not a true valuation of an access account holding and that the secondary market will allow a fair value to be found by market forces. That's as it should be.
Interestingly, the email makes no mention of purchasers being able to set a discount at which they're willing to buy. Perhaps this will be there next week or maybe new money is supposed to bid blind to the discount they will receive?
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IFISAcava
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Post by IFISAcava on Aug 1, 2020 10:49:56 GMT
As AC explain here the money doesn't have to be in the withdrawal queue to generate repayments " Currently, as funds become available for withdrawal from the Access Account, these are allocated to an investor’s withdrawal request on a pro-rata basis directly related to each investor’s total investment in that loan within the relevant AA that they are withdrawing from, not the size of their withdrawal request" Correct but this does not alter the fact that if you do not wish to exit the AAs and have no money (either interest or capital repayments) requested for withdraw it now makes sense to request withdrawals and buy back in again therefore increasing yield and capital and decreasing the amount of money for those trying to withdraw at PAR along with the lack of new money this will create in the AAs. Great Idea for those with excess funds wishing to enter the AAs, very bad idea for those already in in the AAs who do not want to sell at a discount.but if you don't want to sell at a discount, you just keep on getting repayments as the individual loans come in i.e. the current situation. There is no getting away from the fact that at the moment, the AA bundle with virtually no liquidity just isn't worth par to get full liquidity now, no matter what you "want" to sell it at. No one in their right mind would pay par for an AA bundle at the moment.
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alender
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Post by alender on Aug 1, 2020 10:56:04 GMT
Correct but this does not alter the fact that if you do not wish to exit the AAs and have no money (either interest or capital repayments) requested for withdraw it now makes sense to request withdrawals and buy back in again therefore increasing yield and capital and decreasing the amount of money for those trying to withdraw at PAR along with the lack of new money this will create in the AAs. Great Idea for those with excess funds wishing to enter the AAs, very bad idea for those already in in the AAs who do not want to sell at a discount. I don't understand why you say "it now makes sense to request withdrawals" given the payout is based on total investment rather than amount on withdrawal. If for example I have £20K in 30DAA with none on withdrawal, I get the occasional payout of a few £s/£10K invested. How will that change by me putting in a withdrawal request for some/all of the £20K?
I agree that one could use the repayments to buy back into the AAs at a discount (but I sometimes use the AA payouts to buy more in the MLA market).
I also don't understand "very bad idea for those already in in the AAs who do not want to sell at a discount". Not all of my AA money is in the withdrawal queue (and probably won't be when the SM goes live), but I still get payouts from Borrower repayments. That will remain unchanged.
I don't understand why you say "it now makes sense to request withdrawals" given the payout is based on total investment rather than amount on withdrawal. If for example I have £20K in 30DAA with none on withdrawal, I get the occasional payout of a few £s/£10K invested. How will that change by me putting in a withdrawal request for some/all of the £20K?
Because if you do not have any money requested for withdrawal it now makes sense (and money) to make a withdrawal request for the reasons given. I can't remember the figure quoted by AC of those wishing to withdraw but this was low, and will now increase.
I also don't understand "very bad idea for those already in in the AAs who do not want to sell at a discount". Not all of my AA money is in the withdrawal queue (and probably won't be when the SM goes live), but I still get payouts from Borrower repayments. That will remain unchanged.
The borrow repayments you will receive will reduce as there will be more people in the withdraw queue again for the reasons given and also you payments will also decrease due to lack of new money entering the AAs as a result of this change.
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IFISAcava
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Post by IFISAcava on Aug 1, 2020 11:06:02 GMT
The trading of AAs will slow/stop new money entering the accounts as who would invest directly when you can buy cheaper on the SM.
Also anyone with any sense who is already invested will request a withdraw of their funds so they get out at par, they can take the money elsewhere or buy back in at a discount increasing their yield and perhaps a capital gain, and then immediately request to withdraw of these funds, I explained this when the AA SM was first considered and stated the only way to stop this behaviour and further disadvantage the AA holder was to create a subordinate loan product once an AA is traded that say perhaps can not be redeemed at par until normal condition return. The exit queues will increase.
Because of AC actions in creating an SM withdraws AAs for existing AA holders.AAs will be reduced because of no new money and increased exit queues.
But who would invest directly at the moment anyway? I don't know the figures for money coming in to the AA, but surely it can't be very high: why would you commit money to an account with unknown interest rate, virtually zero liquidity despite the name, and a large percentage of loans in distress of some sort, with a probably insufficiently sized and discretionary PF, at par? It just isn't worth it. One could even argue that to sell this at par as an access account is close to mis-selling (not saying AC are doing this, their warnings are pretty clear).
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dead-money
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Post by dead-money on Aug 1, 2020 11:07:13 GMT
I don't understand why you say "it now makes sense to request withdrawals" given the payout is based on total investment rather than amount on withdrawal. If for example I have £20K in 30DAA with none on withdrawal, I get the occasional payout of a few £s/£10K invested. How will that change by me putting in a withdrawal request for some/all of the £20K?
I agree that one could use the repayments to buy back into the AAs at a discount (but I sometimes use the AA payouts to buy more in the MLA market).
I also don't understand "very bad idea for those already in in the AAs who do not want to sell at a discount". Not all of my AA money is in the withdrawal queue (and probably won't be when the SM goes live), but I still get payouts from Borrower repayments. That will remain unchanged.
I don't understand why you say "it now makes sense to request withdrawals" given the payout is based on total investment rather than amount on withdrawal. If for example I have £20K in 30DAA with none on withdrawal, I get the occasional payout of a few £s/£10K invested. How will that change by me putting in a withdrawal request for some/all of the £20K?
Because if you do not have any money requested for withdrawal it now makes sense (and money) to make a withdrawal request for the reasons given. I can't remember the figure quoted by AC of those wishing to withdraw but this was low, and will now increase.
I also don't understand "very bad idea for those already in in the AAs who do not want to sell at a discount". Not all of my AA money is in the withdrawal queue (and probably won't be when the SM goes live), but I still get payouts from Borrower repayments. That will remain unchanged.
The borrow repayments you will receive will reduce as there will be more people in the withdraw queue again for the reasons given and also you payments will also decrease due to lack of new money entering the AAs as a result of this change.
Capital repayments & Interest payments are based on total investment held, the withdrawal queue has no impact on that!
Why would less new money come in if an asset is fairly priced rather than at a premium? Surely the reverse?
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IFISAcava
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Post by IFISAcava on Aug 1, 2020 11:11:12 GMT
I have to say, I do find it extraordinary that there are people who AREN'T getting their AA investments withdrawn as repayments come in, but who are in effect reinvesting at par. I'd be getting out what I could, sticking it somewhere else for a while, and if all goes well put it back in if/when things return to normal (or, if you are that way inclined, taking a punt and buying at a discount, i.e. realistic price).
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alender
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Post by alender on Aug 1, 2020 11:19:13 GMT
I don't understand why you say "it now makes sense to request withdrawals" given the payout is based on total investment rather than amount on withdrawal. If for example I have £20K in 30DAA with none on withdrawal, I get the occasional payout of a few £s/£10K invested. How will that change by me putting in a withdrawal request for some/all of the £20K?
Because if you do not have any money requested for withdrawal it now makes sense (and money) to make a withdrawal request for the reasons given. I can't remember the figure quoted by AC of those wishing to withdraw but this was low, and will now increase.
I also don't understand "very bad idea for those already in in the AAs who do not want to sell at a discount". Not all of my AA money is in the withdrawal queue (and probably won't be when the SM goes live), but I still get payouts from Borrower repayments. That will remain unchanged.
The borrow repayments you will receive will reduce as there will be more people in the withdraw queue again for the reasons given and also you payments will also decrease due to lack of new money entering the AAs as a result of this change.
Capital repayments & Interest payments are based on total investment held, the withdrawal queue has no impact on that!
Why would less new money come in if an asset is fairly priced rather than at a premium? Surely the reverse?
Capital repayments & Interest payments are based on total investment held, the withdrawal queue has no impact on that!
Incorrect, as is also dependent on the number of people in the withdraw queue and the total holding of those in the withdraw queue, the number of people in the withdraw queue will increase therefore decreasing the payments for those already in the queue.
Why would less new money come in if an asset is fairly priced rather than at a premium? Surely the reverse?
Currently new money is entering the AAs, i.e. people buying in at Par, with the SM it makes no sense to buy in at Par when you can buy in at a discount therefore stopping/reducing the new money into the AAs, for reference I am referring to new money/funds as additional funds in the AAs, not the same funds passed between different people via the SM.
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cb25
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Post by cb25 on Aug 1, 2020 11:35:34 GMT
alender Where in any AC literature does it say the amount of payout due to a lender "is also dependent on the number of people in the withdraw queue and the total holding of those in the withdraw queue"
AFAIK If the total amount of my 30DAA account is (say) 1/10,000th of the total 30DAA holdings, that is what generates my share of any payout. It isn't affected by how many lenders holds the remaining 9,999/10,000 fraction or how much is on the withdrawal queue (this last bit is covered in AA literature, and you agreed that point earlier).
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Post by essexboy on Aug 1, 2020 11:46:21 GMT
For those who are resistant to a secondary market, consider this...
1) The covid lockdown has reduced the value of all UK assets.
2) If you held the FTSE 250 right now and wanted to get out where you went in (lets say 22000), you could have a long wait. As you wait, you collect dividends. This is akin to your current AA position at par.
3) If you wanted to invest in the FTSE 250 right now, you would not pay 22000. This is akin to investing in the AA at par. A silly trade (as much as you wish the valuation was still par, as I do)
4) If you wanted to sell your FTSE 250 holding right now, you would have to accept the current market price (around 17000). If you did, you simply take over someone else's position (you do not affect those choosing not to sell!), and have the right to sell on again, or wait until the FTSE 250 recovers to 'par'. This is akin to the new AC secondary market; a liquidity option where sellers pay buyers to get out of their position by way of a discount. As others have pointed out, the AA is simply not worth par right now!
But....the 'great news' is that the discount for these loans should be NOWHERE NEAR the 'discount' currently being offered by the FTSE 250, since these are LOANS (in a zero interest rate environment), which are property backed (property as an asset class seems to be holding up) and they are not perpetual (you still have the option of holding until maturity to get your money back).
Hope it helps.
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alender
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Post by alender on Aug 1, 2020 11:57:53 GMT
alender Where in any AC literature does it say the amount of payout due to a lender "is also dependent on the number of people in the withdraw queue and the total holding of those in the withdraw queue"
AFAIK If the total amount of my 30DAA account is (say) 1/10,000th of the total 30DAA holdings, that is what generates my share of any payout. It isn't affected by how many lenders holds the remaining 9,999/10,000 fraction or how much is on the withdrawal queue (this last bit is covered in AA literature, and you agreed that point earlier).
alender Where in any AC literature does it say the amount of payout due to a lender "is also dependent on the number of people in the withdraw queue and the total holding of those in the withdraw queue"
Because AC state that money available for withdraw will be distributed to those in the withdraw queue Pro Rata based on funds invested, it therefore follows with additional people in the withdraw queue the less for each person already in the queue.
As there is a finite amount of money available for withdraw which is substantially less than held in the AAs or the withdraw queue (otherwise we would not in this mess). That money is currently distributed to those on the withdraw queue based on the amount of money those people have in the AAs, if you add more people to the queue the payments for those already in the queue will reduce. The only way this will not happen is if there is more money made available for withdrawals, so unless AC make more money available the repayments will decrease, there is nothing created in the SM which will increase funds but on the contrary will decrease funds due to lack of new money entering the AAs.
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IFISAcava
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Post by IFISAcava on Aug 1, 2020 12:00:17 GMT
Capital repayments & Interest payments are based on total investment held, the withdrawal queue has no impact on that!
Why would less new money come in if an asset is fairly priced rather than at a premium? Surely the reverse?
Capital repayments & Interest payments are based on total investment held, the withdrawal queue has no impact on that!
Incorrect, as is also dependent on the number of people in the withdraw queue and the total holding of those in the withdraw queue, the number of people in the withdraw queue will increase therefore decreasing the payments for those already in the queue.
Why would less new money come in if an asset is fairly priced rather than at a premium? Surely the reverse?
Currently new money is entering the AAs, i.e. people buying in at Par, with the SM it makes no sense to buy in at Par when you can buy in at a discount therefore stopping/reducing the new money into the AAs, for reference I am referring to new money/funds as additional funds in the AAs, not the same funds passed between different people via the SM.
Regardless of the existence of an SM or not, it makes no sense to buy in at par. Anyone doing so is making a poor decision, which you seem to want to encourage. Are there figures anywhere of how much new money (i.e. not just loan repayments) is entering the AA accounts currently?
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