bg
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Post by bg on Sept 8, 2015 11:48:20 GMT
What sort of diversification is this account going to have? My concern is that it will basically just mop up the unpopular loans on the platform which is all well and good until there is some sort of problem. My understanding is that you get an amount, say £1m invested into the account (and i'm sure you'll get the £1m maximum), a portion of this is retained in cash (i estimate 30%, but i'm sure you will vary this depending on various factors) and the balance (£700k say) is used to buy whatever units are available on the platform (average rate c10%, so less the cash not invested it gives a return of 7%. 3.75% is paid to investors, some is paid to a PF and AC make some profit). As things stand, most of this 700k will flow into the unpopular trade finance loans. What happens if next week these loans go under? I would say on that basis it kills the platform. Credibility would be shot How would the loss be apportioned? Which investors hold the loan element and the cash element? That's not the investment strategy, not even close, but I'll let stuartassetzcapital decide how much he's willing to release at this stage. I'm just not keen investing in something if you won't explain how it works. I think that should be a minimum requirement.
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bg
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Post by bg on Sept 8, 2015 11:50:48 GMT
[snip] My concern is that it will basically just mop up the unpopular loans on the platform which is all well and good until there is some sort of problem. [snip] How would the loss be apportioned? Which investors hold the loan element and the cash element? There's the rub. It's the dilemma of any bank: what happens when everyone wants to convert the investment into cash (and withdraw it) all at the same time? Obviously the first people out hold the cash, and the people left behind end up holding the non-performing loans. If it's 30% cash, then it's better than a bank (what are their regulated capital requirements? ~10%?). But it does make AC begin to look a little more like a bank and a little less like a P2B. A bank's "promise" that you can withdraw cash from your instant-access account(s) whenever you wish is good only for the first 10% of customers who want out -- or rather, it relies on the fact that 90% of people will keep their money in the bank most of the time. Banks can always increase reserves at at the BOE to meet withdrawal requirements (by various methods). It's only when they are insolvent things get messy (like with Northern Rock). Unfortunately Assetz can not access this liquidity.
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Post by chris on Sept 8, 2015 12:20:17 GMT
That's not the investment strategy, not even close, but I'll let stuartassetzcapital decide how much he's willing to release at this stage. That answer is a bit of a red flag to me. I assumed the investment strategy involved at it's core the simple superposition of a cash element and a loan element. If that isn't the case what complexities are being hidden from us? Do the lenders in the QAA account still face the borrowers or is someone else sitting between us i.e is a third party providing a synthetic receivable? It's a 1:1 relationship with borrowers, anything else would be outside our permissions with the FCA. So holdings will either be cash or directly lent to a borrower. The only reason for secrecy is that there is potentially competitive information involved if I give away too much which is why I've left it for Stuart to define where that boundary is.
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caesium
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Post by caesium on Sept 8, 2015 13:04:07 GMT
Is this still launching today? Been checking my account but no sign of it yet.
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Post by chris on Sept 8, 2015 13:28:58 GMT
Is this still launching today? Been checking my account but no sign of it yet. Working on it but have just run into a compliance change that we're implementing (display only rather than functionality).
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Post by stuartassetzcapital on Sept 8, 2015 14:50:22 GMT
What sort of diversification is this account going to have? My concern is that it will basically just mop up the unpopular loans on the platform which is all well and good until there is some sort of problem. My understanding is that you get an amount, say £1m invested into the account (and i'm sure you'll get the £1m maximum), a portion of this is retained in cash (i estimate 30%, but i'm sure you will vary this depending on various factors) and the balance (£700k say) is used to buy whatever units are available on the platform (average rate c10%, so less the cash not invested it gives a return of 7%. 3.75% is paid to investors, some is paid to a PF and AC make some profit). As things stand, most of this 700k will flow into the unpopular trade finance loans. What happens if next week these loans go under? I would say on that basis it kills the platform. Credibility would be shot How would the loss be apportioned? Which investors hold the loan element and the cash element? We don't wish to publish the full strategy as it's a competitive advantage but what we do publish must be true and we want to be as transparent as possible. Bottom line is we most certainly will not be investing in larger/ less popular loans as we want high certainty of sale, secondly we don't want to have to sell any longer term hold loans unless all the cash is expended on liquidity, thirdly we want cash liquidity available to be typically well over half the account size. Give it a try and see and watch the performance that we will publish (along the lines of "X% of all access requests were fulfilled in 1 minute or less in the last 7 days")
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Post by stuartassetzcapital on Sept 8, 2015 14:52:23 GMT
Slightly expanding the question by bg, it would be useful if the investment criteria for QAA was known .... just as the GBBA criteria was disclosed as something along the lines of "non-green loans with max 75% LTV in property security" The loan investment criteria 9for the modest holdings it will have) is more liquidity based not a type of loan - so popular loans will be of interest to it but it could be invested in a part of any loan if there are few/no parts available and a lot of demand.
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Post by stuartassetzcapital on Sept 8, 2015 14:55:26 GMT
[snip] My concern is that it will basically just mop up the unpopular loans on the platform which is all well and good until there is some sort of problem. [snip] How would the loss be apportioned? Which investors hold the loan element and the cash element? There's the rub. It's the dilemma of any bank: what happens when everyone wants to convert the investment into cash (and withdraw it) all at the same time? Obviously the first people out hold the cash, and the people left behind end up holding the non-performing loans. If it's 30% cash, then it's better than a bank (what are their regulated capital requirements? ~10%?). But it does make AC begin to look a little more like a bank and a little less like a P2B. A bank's "promise" that you can withdraw cash from your instant-access account(s) whenever you wish is good only for the first 10% of customers who want out -- or rather, it relies on the fact that 90% of people will keep their money in the bank most of the time. Our liquidity design is far higher level than a bank. If 50% of people wanted to withdraw this minute from a bank then 'Northern Rock' effect and bank closes. If that happens with the QAA then no issue in any normal situation as we hold that or more in cash. This is NOT us claiming fantastic liquidity and then we privately hope no more than 10% want to withdraw. That's why the rate is low as we are heavily in cash.
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Post by stuartassetzcapital on Sept 8, 2015 14:57:29 GMT
There's the rub. It's the dilemma of any bank: what happens when everyone wants to convert the investment into cash (and withdraw it) all at the same time? Obviously the first people out hold the cash, and the people left behind end up holding the non-performing loans. If it's 30% cash, then it's better than a bank (what are their regulated capital requirements? ~10%?). But it does make AC begin to look a little more like a bank and a little less like a P2B. A bank's "promise" that you can withdraw cash from your instant-access account(s) whenever you wish is good only for the first 10% of customers who want out -- or rather, it relies on the fact that 90% of people will keep their money in the bank most of the time. Banks can always increase reserves at at the BOE to meet withdrawal requirements (by various methods). It's only when they are insolvent things get messy (like with Northern Rock). Unfortunately Assetz can not access this liquidity. The % of our account that can be withdrawn in seconds is designed to be many times higher than the % of withdrawals that a bank could stand before folding. The flipside is we are limiting the account size, initially to £1m so first come first served.
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Post by stuartassetzcapital on Sept 8, 2015 14:57:55 GMT
That's not the investment strategy, not even close, but I'll let stuartassetzcapital decide how much he's willing to release at this stage. That answer is a bit of a red flag to me. I assumed the investment strategy involved at it's core the simple superposition of a cash element and a loan element. If that isn't the case what complexities are being hidden from us? Do the lenders in the QAA account still face the borrowers or is someone else sitting between us i.e is a third party providing a synthetic receivable? It is simple. Cash plus limited lending in liquid loans.
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oldgrumpy
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Post by oldgrumpy on Sept 8, 2015 15:20:25 GMT
A million pounds is in the account. There will be inflow and outflow to and from it constantly. How will my funds waiting to get in it be allowed; some automatic queueing system, or manual, pot luck?
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Post by chris on Sept 8, 2015 15:24:33 GMT
A million pounds is in the account. There will be inflow and outflow to and from it constantly. How will my funds waiting to get in it be allowed; some automatic queueing system, or manual, pot luck? There's a queue that's first come first served. So in addition to cash being present there should also be a weight of funds waiting to invest.
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Post by Ton ⓉⓞⓃ on Sept 8, 2015 16:17:45 GMT
A million pounds is in the account. There will be inflow and outflow to and from it constantly. How will my funds waiting to get in it be allowed; some automatic queueing system, or manual, pot luck? AIUI it will be easier for QAA interest to be re-invested, so that must be high in the queue.
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bigfoot12
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Post by bigfoot12 on Sept 8, 2015 16:28:54 GMT
Hi,
What happens if the account is at the £1m limit and then interest is paid? Will someone be forced out, will the interest be paid outside the QAA or will the balance be allowed to go over the £1m? Or something else?
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j
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Post by j on Sept 8, 2015 17:45:21 GMT
Banks can always increase reserves at at the BOE to meet withdrawal requirements (by various methods). It's only when they are insolvent things get messy (like with Northern Rock). Unfortunately Assetz can not access this liquidity. The % of our account that can be withdrawn in seconds is designed to be many times higher than the % of withdrawals that a bank could stand before folding. The flipside is we are limiting the account size, initially to £1m so first come first served. So, if all your 'active' lenders (we don't know the figure) have £1m lent each (highly unlikely) via QAA & all decided to withdraw 100% at the same time, will AC have enough cash reserves to meet the demand? - A vey doomsday scenario I know & will never happen but, if the answer is yes then it puts everyones mind to rest that the QAA option is THE place to park money until auto invest limits ar called in by AC & will then automatically sell & transfer monies from QAA into MLIA.
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