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Post by profunder on Apr 6, 2016 22:12:19 GMT
So, the QAA doesn't have any transparency & commercial sensitivity is cited. Obviously I understand this but it got me wondering some time ago, "how would I make this account myself".
There are a few basic rules, interest to clients must be paid from actual loans and I need a provision fund.
My answer would be I would try and keep the loans stored by my QAA at 70% of investment and cash at 30%. If I was under weighted on loans I would look to buy any loan parts which represented a smaller than average percentage of my loan book. If I was overweight I would look to sell any loan parts that represented a larger than average percentage of my loan book.
The loan book would be split equally amongst all members, so recalculated every change in QAA. This would be merely a compliance technicality.
This seemed quite simple, and doesn't seem complicated. So my question really is have I missed something?
If I haven't missed anything then why such a big secret about its loan book and provision fund balance?
I'm a little concerned that this may end in some kind of bad behaviour, it's normally when times are tough risks are taken and things get hidden.
(1) If a loan failed to underwrite, they may use the QAA funds instead. the overweight position could then result in a catastrophic loss of money.
(2) There is a clear incentive to reduce cash reserves as this increases money being paid into the provision fund. Excess PF balance could eventually be distributed as profits to AC. if there was then a large demand for withdrawals then AC may decide to use provision fund money or be forced to offer promos and incentives for new investments.
Now neither of these really are worse than putting money into a non diverse portfolio, so not the end of the world. But does make me nervous.
would it not be possible to provide some basic information? A monthly report of balances in each loan and provision fund balance would make me happy. I wouldn't even ask for the Loan ids, just a list of invested amounts.
Thoughts?
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tonyr
Member of DD Central
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Post by tonyr on Apr 7, 2016 3:42:29 GMT
... My answer would be I would try and keep the loans stored by my QAA at 70% of investment and cash at 30%. If I was under weighted on loans I would look to buy any loan parts which represented a smaller than average percentage of my loan book. If I was overweight I would look to sell any loan parts that represented a larger than average percentage of my loan book. ... This seemed quite simple, and doesn't seem complicated. So my question really is have I missed something? ... Now neither of these really are worse than putting money into a non diverse portfolio, so not the end of the world. But does make me nervous. You've just outlined a really simple portfolio policy and then said that it makes you nervous - it's a straw man argument because you are implying that you are nervous of the QAA, but all you've really said is that you'd be nervous if you ran the QAA. Most of running a quant fund isn't maximising return, it's managing volatility and liquidity. There's a lot of good maths around all of this, you don't just stick your finger in the air and say "30% cash seems good". The QAA has some extra fun problems in that it's got an exceptionally high headroom between what it's earning and what it pays out and that headroom is absolutely necessary to fuel it's growth - only those that grow fastest will survive in the new IFISA world. In short, to answer your own question, yes, you've missed something.
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Post by profunder on Apr 7, 2016 16:41:53 GMT
... My answer would be I would try and keep the loans stored by my QAA at 70% of investment and cash at 30%. If I was under weighted on loans I would look to buy any loan parts which represented a smaller than average percentage of my loan book. If I was overweight I would look to sell any loan parts that represented a larger than average percentage of my loan book. ... This seemed quite simple, and doesn't seem complicated. So my question really is have I missed something? ... Now neither of these really are worse than putting money into a non diverse portfolio, so not the end of the world. But does make me nervous. You've just outlined a really simple portfolio policy and then said that it makes you nervous - it's a straw man argument because you are implying that you are nervous of the QAA, but all you've really said is that you'd be nervous if you ran the QAA. Most of running a quant fund isn't maximising return, it's managing volatility and liquidity. There's a lot of good maths around all of this, you don't just stick your finger in the air and say "30% cash seems good". The QAA has some extra fun problems in that it's got an exceptionally high headroom between what it's earning and what it pays out and that headroom is absolutely necessary to fuel it's growth - only those that grow fastest will survive in the new IFISA world. In short, to answer your own question, yes, you've missed something. I realise I was waffling, but to summarise my intended points: (1) There is nothing inheritly non feasible with this fund. (Positive) (2) I like the idea of this fund, I really like it and pleased it exists (Positive) (3) like all funds no guarantee possible of withdrawal - they make this clear, but it appears it should be ok because number 1, and even in event of no liquidity assets still there. (Netrual to Positive) (4) There is no information on the underlying assets (Negative) My intended conclusion: (1) They can't tell us full details for commercial reasons but I can't see why we can't have some kind of monthly figure for provision fund and basic stats. Even just the provision fund balance, top 3 loan amounts would do. I just want it to demonstrate solvency.
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Post by chris on Apr 7, 2016 16:51:28 GMT
profunder - the current provision fund balance is available, as a percentage of all investments, on the QAA information page. If you scroll down to the how it works section and expand the provision fund details you'll see the current percentage there. It's certainly more buried than I'd like which will be addressed at some point. Currently the account has 2% coverage of the investments it holds. All else being equal this should grow now at a steady rate each month as the growth of the account slows as a percentage of the overall fund, due to that fund being larger in size.
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Post by profunder on Apr 7, 2016 16:58:23 GMT
profunder - the current provision fund balance is available, as a percentage of all investments, on the QAA information page. If you scroll down to the how it works section and expand the provision fund details you'll see the current percentage there. It's certainly more buried than I'd like which will be addressed at some point. Currently the account has 2% coverage of the investments it holds. All else being equal this should grow now at a steady rate each month as the growth of the account slows as a percentage of the overall fund, due to that fund being larger in size. Thanks Chris! I didn't even realise that info was online. Makes me feel a little happier. Please consider displaying the top 3 loans in the future (as percentage would be fine).
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Post by stuartassetzcapital on Apr 7, 2016 18:19:53 GMT
We will also be publishing Expected Losses (EL) in normal and several stressed market conditions for the QAA and also all other Investment Accounts and of course the loan book as a whole. These figures go way beyond other platforms' analysis, mainly because they assume a 5 year cycle not a single year's losses or only in benign conditions. It also makes the exceptional assumption that we continue to lend through that cycle and we also track cumulative losses not just one year's losses. The provision fund on the Investment accounts represents in most scenarios many years of cumulative losses in its current qualntum, even ignoring future year's additions to that PF. When published this will be very useful additional data we trust.
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