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Post by chris on Jan 7, 2016 14:11:12 GMT
I think the way it set up it does not matter who has the bad loan if the provision fund was not enough to cover it then everyone would take an equal hit, Who is everyone? Money is churning through the QAA rapidly and a loan failing is not an instant event. In the interval between the first sign of trouble and AC declaring a default the lenders will have changed considerably. What is equal? Amount or proportion? Does not look like I will be returning at present. As it is currently set up with the QAA the last person to withdraw funds from the account would end up with the bad debt, however that presumes that the provision fund had been exhausted, that AC were not going to fund any deficit, and that there had been a run on the account with everyone withdrawing. Even in that disaster scenario every penny lent would still have asset protection so there would still be the possibility of zero losses but you would certainly be at the mercy of the recovery time frame rather than have quick access to those funds. All lender holdings are automatically and continuously balanced so that they are all directly proportional to the amount invested (i.e. a lender who has funded 1% of the total in the QAA would hold 1% of the QAA's holdings in each loan). AC have the technical option to freeze holdings as they are so if a doomsday scenario is expected then I'd imagine that we'd freeze holdings as they were or set limits on the amount people could withdraw so that the risks were shared. That's a technical capability rather than published policy though as I understand it. If that isn't for you then that's good to know but ultimately your choice. However this is just one way of investing via the platform with the GEIA and GBBA having different mechanisms and you can always use the MLIA to invest manually yourself, picking and choosing the loans you want to invest in. No one account is supposed to be a one size fits all solution, so if the QAA alone isn't for you then that shouldn't require you to pull your funds out of the platform.
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SteveT
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Post by SteveT on Jan 7, 2016 14:47:32 GMT
chris, I remember you musing some time ago (soon after the QAA was launched and found itself quickly inundated with DART money) that there might be a role for a slightly less "QA" account carrying a slightly higher rate. Has this gone anywhere or is the plan now to keep increasing the QAA cap slightly ahead of investment demand?
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Post by chris on Jan 7, 2016 14:50:11 GMT
chris , I remember you musing some time ago (soon after the QAA was launched and found itself quickly inundated with DART money) that there might be a role for a slightly less "QA" account carrying a slightly higher rate. Has this gone anywhere or is the plan now to keep increasing the QAA cap slightly ahead of investment demand? At the moment we're going to try and keep raising the cap just ahead of demand, as there is a huge amount of demand for the account. However I know that Stuart is working on some ideas for other new accounts as we continue to broaden our offering.
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ben
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Post by ben on Jan 7, 2016 20:20:21 GMT
I agree with that but then why show it
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markdirac
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Post by markdirac on Jan 7, 2016 20:24:05 GMT
chris , I remember you musing some time ago (soon after the QAA was launched and found itself quickly inundated with DART money) that there might be a role for a slightly less "QA" account carrying a slightly higher rate. Are the Great British Business Account and the Green Energy Investment Account not just this? Higher rates with less liquidity?
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mikes1531
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Post by mikes1531 on Jan 8, 2016 15:01:21 GMT
The QAA pays interest on cash & loans. It holds the majority of funds in cash and only a minority percentage in loans... ISTM that the QAA would be hard pressed to pay 3.75%, and build up the PF as well, if it were holding the majority of its assets in idle cash. I thought we had been told that it was going to hold about one-third cash and have two-thirds invested. I'm certainly no expert, but I would have thought that having one-third in cash would be more than enough to allow it to provide instant withdrawals in all situations except for a 'bank run'. Not to mention that in normal circumstances some of the assets would be convertible to cash very quickly via the market. AC can see which loans have unfulfilled buying orders so they should be able to have a good idea at all times of what part of the loans held by the QAA could be liquidated in a hurry if necessary. I'd also guess that the bigger the QAA is, the smaller the proportion of its assets that would have to be kept in cash in order to cover the normal flow of withdrawal requests. I suspect that's another reason why it's advantageous for AC to allow the QAA to grow very large. Not to mention that it should become a profit producer for them once the PF has been built up to the desired level.
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SteveT
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Post by SteveT on Jan 8, 2016 15:14:33 GMT
The QAA pays interest on cash & loans. It holds the majority of funds in cash and only a minority percentage in loans... ISTM that the QAA would be hard pressed to pay 3.75%, and build up the PF as well, if it were holding the majority of its assets in idle cash. I thought we had been told that it was going to hold about one-third cash and have two-thirds invested. I'm certainly no expert, but I would have thought that having one-third in cash would be more than enough to allow it to provide instant withdrawals in all situations except for a 'bank run'. Not to mention that in normal circumstances some of the assets would be convertible to cash very quickly via the market. AC can see which loans have unfulfilled buying orders so they should be able to have a good idea at all times of what part of the loans held by the QAA could be liquidated in a hurry if necessary. I'd also guess that the bigger the QAA is, the smaller the proportion of its assets that would have to be kept in cash in order to cover the normal flow of withdrawal requests. I suspect that's another reason why it's advantageous for AC to allow the QAA to grow very large. Not to mention that it should become a profit producer for them once the PF has been built up to the desired level. Chris's post on the "Out for now" thread earlier states "In general though [the QAA] holds something in the region of one third to one half of the invested funds in cash to facilitate the instant withdrawal (although that can fluctuate) with the rest of the funds being invested in loans in order to earn interest to pay the 3.75% and fund the provision fund."
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ilmoro
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Post by ilmoro on Jan 8, 2016 15:22:44 GMT
The QAA pays interest on cash & loans. It holds the majority of funds in cash and only a minority percentage in loans... ISTM that the QAA would be hard pressed to pay 3.75%, and build up the PF as well, if it were holding the majority of its assets in idle cash. I thought we had been told that it was going to hold about one-third cash and have two-thirds invested. I'm certainly no expert, but I would have thought that having one-third in cash would be more than enough to allow it to provide instant withdrawals in all situations except for a 'bank run'. Not to mention that in normal circumstances some of the assets would be convertible to cash very quickly via the market. AC can see which loans have unfulfilled buying orders so they should be able to have a good idea at all times of what part of the loans held by the QAA could be liquidated in a hurry if necessary. I'd also guess that the bigger the QAA is, the smaller the proportion of its assets that would have to be kept in cash in order to cover the normal flow of withdrawal requests. I suspect that's another reason why it's advantageous for AC to allow the QAA to grow very large. Not to mention that it should become a profit producer for them once the PF has been built up to the desired level. Hmm, you're probably right. I remember a comment by Stuart at the start it was going to be cash heavy but not any actual percentages. Edit - see SteveT has provided the relevant link
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ablender
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Post by ablender on Jan 8, 2016 15:55:26 GMT
chris , I remember you musing some time ago (soon after the QAA was launched and found itself quickly inundated with DART money) that there might be a role for a slightly less "QA" account carrying a slightly higher rate. Has this gone anywhere or is the plan now to keep increasing the QAA cap slightly ahead of investment demand? At the moment we're going to try and keep raising the cap just ahead of demand, as there is a huge amount of demand for the account. However I know that Stuart is working on some ideas for other new accounts as we continue to broaden our offering. Is there a reason for having a cap in the first place?
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Post by chris on Jan 8, 2016 15:57:44 GMT
At the moment we're going to try and keep raising the cap just ahead of demand, as there is a huge amount of demand for the account. However I know that Stuart is working on some ideas for other new accounts as we continue to broaden our offering. Is there a reason for having a cap in the first place? Yes, it's a legal requirement for the interest earned to be article 36H compliant, which therefore limits the growth of the account with the way it's been structured.
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littleoldlady
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Post by littleoldlady on Jan 10, 2016 16:37:17 GMT
ISTM that the QAA is a bog-standard set up with lenders taking the risk of default but paying a very low rate. True there is a PF and assets behind the loans but this equally true of other platforms eg SS paying 12%. I can only suppose that the enormous demand for the product is because investors don't realise this and are treating it as a deposit account.
Or am I missing the point?
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oldgrumpy
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Post by oldgrumpy on Jan 10, 2016 16:51:51 GMT
littleoldlady Yes, maybe they are, but let them. As long as it provides an instantly accessible 3.75% home for a few days/weeks, just for the odd low three (or sometimes four, just) figure sum I have waiting for reinvestment - that suits me. For those putting up to £50K in it - they must have their own aggenda, methinks. edit: ahem ............. agenda!
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ilmoro
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Post by ilmoro on Jan 10, 2016 16:52:50 GMT
ISTM that the QAA is a bog-standard set up with lenders taking the risk of default but paying a very low rate. True there is a PF and assets behind the loans but this equally true of other platforms eg SS paying 12%. I can only suppose that the enormous demand for the product is because investors don't realise this and are treating it as a deposit account. Or am I missing the point? Slightly I feel. Its an instant access account with very low risk of default or loss in normal circumstances but offers an instant 3.75% on up to 50k. Cant think of anwhere else that offers all those criteria. Also who offers 3.75% on funds waiting to earn at a higher rate? Of course, this is all dependent on AC continuing to create space for new funds through loan flow/universal cap increases.
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pikestaff
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Post by pikestaff on Jan 10, 2016 17:04:41 GMT
The QAA is not intended as a lending vehicle per se, but as a home for short term funds including those awaiting investment in the MLIA. AC's PF backed lending vehicles are the GBBA and the GEIA. The QAA's main selling point is liquidity becasue it is backed by cash as well as loans. The most direct competition in the p2p space would probably be RS's monthly account. The QAA pays a little more, and unlike RS has no early redemption costs.
As for SS, I ask myself if 12% with a provision fund is credible and sustainable and my answer is no. I think it is too good to be true and expect SS to fall over when the tide turns against property which it inevitably will at some point. But each to his own.
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mikes1531
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Post by mikes1531 on Jan 10, 2016 17:36:12 GMT
The QAA is not intended as a lending vehicle per se, but as a home for short term funds including those awaiting investment in the MLIA. That's certainly the way I'm using the QAA, but AC seem to see the QAA as having another purpose as well, which is why they offer the direct QAA investment option as well. People using that option are putting money into the QAA to earn 3.75%, with no obvious intention of investing it via AC.
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