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Post by valueinvestor123 on Nov 1, 2016 13:49:55 GMT
Please help me understand this new cash account that Assetz is offering.
What exactly does it invest in? From the bits and pieces I read, it seems to spread investments and mentions the word "normal market conditions" many times, which reads like a 'get out' clause. I would like to use it however I don't quite see why it is supposed to be better/less risky than for example keeping 50% of monies invested in p2p at 12% and keeping the other 50% in a government protected bank account (close to 0% I suppose).
The reason being that the time when one really needs instant access to cash, market conditions are most certainly not going to be normal!
While I am glad that new products are being innovated and offered I am also concerned about the slightly opaque nature of these products, parading as something as low risk, while it may in fact be high risk (anyone still remembers re-packaged mortgages in the US?)
More info & thoughts would be welcome as I am trying to get my head around this new account.
Thanks!
vi123
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SteveT
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Post by SteveT on Nov 1, 2016 13:58:51 GMT
It's not exactly new; it launched more than a year ago. Scroll down to (or search for) the "AC - QAA a staggering 3.75%" thread for 69 pages of erudite analysis and discussion!
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Post by valueinvestor123 on Nov 1, 2016 14:03:48 GMT
Thanks, i did read the first 10 pages of it until I passed out...Could a kind soul not provide an "executive summary" of it by any chance? Or is there a FAQ?
Has it proven popular/successful?
I am mainly interested in: in which circumstances would I NOT be able to withdraw cash?
I am trying to decide whether to keep some 2nd tier emergency cash there or in a Ratesetter account (and pay the small-ish penalty for withdrawing it, if I had to).
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SteveT
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Post by SteveT on Nov 1, 2016 14:09:28 GMT
Presumably a sustained "run" of withdrawal requests that overwhelmed the approx 50% of total funds that AC retain as cash.
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Post by andrewholgate on Nov 1, 2016 15:16:55 GMT
Firstly, it is not instant access. We do not guarantee that you will have your money instantly. In normal market conditions you can access your money very quickly and do not have to wait for another lender to buy your loan units. If there was a period where liquidity was flowing away from Assetz Capital then this might increase the time it takes you to get the money out but it will come out quicker than our other investment accounts.
The QAA invests across multiple loans on the AC platform but not every loan.
I hope that helps.
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n
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Post by n on Nov 1, 2016 15:28:40 GMT
Just a quick note as I think somebody got caught out by this. When you make a withdrawal from the QAA it goes into your Cash account (usually instant under "normal market conditions"). You then have to set up a withdrawal from the platform to have it sent to your bank. That can take a few days unless you get lucky with timings.
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Post by valueinvestor123 on Nov 1, 2016 15:59:52 GMT
Thanks for clarifying. I think I will have to pass. The bit that puts me off is "normal market conditions". I don't know how to quantify the risks of the transition from normal market conditions, to not normal market conditions. With QAA, it seems you are still investing across the same loans as you would be, if you were investing directly, at much higher rates, so subject to same risks. So if you were unable to sell out of ANY of the live loans, that means the conditions are probably not normal and you would also probably not be able to get money from the QAA either. I think the product seems somewhat complex and (on a first glance to me, at least) appears more risky than the rate implies.
Better to find something uncorrelated to p2p, even if it means a reduced rate.
It would appear that having some funds spread directly across many p2p loans and even something like Ratesetter, should provide less correlation as being invested in p2p loans and QAA.
Or is QAA specifically designed to keep your cash there while waiting to invest in p2p loans?
So what happens when the proverbial hits the fan usually, it all becomes a domino effect, where liquidity freezes as everyone heads for the exits. I think in that scenario, QAA will prove to bear the same risks as p2p loans themselves.
Maybe the structure is similar to a Split Capital Investment trust which provides various share classes (and therefore various risks. However it all depends on the success of the underlying investments of the trust and risk correlation is closer than it first appears).
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SteveT
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Post by SteveT on Nov 1, 2016 16:53:29 GMT
I only use the QAA to earn a few extra pennies on my swept funds awaiting investment in the MLIA. I'd much rather earn 11.5% and control which loans I'm exposed to than give up the majority of this for "priority" liquidity in the event of a notional market meltdown. But I can see why the DARTs* reckon it looks the business...
* Deposit Account Rate Tarts
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sqh
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Before P2P, savers put a guinea in a piggy bank, now they smash the banks to become guinea pigs.
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Post by sqh on Nov 1, 2016 22:06:02 GMT
Thanks for clarifying. I think I will have to pass. The bit that puts me off is "normal market conditions". I don't know how to quantify the risks of the transition from normal market conditions, to not normal market conditions. With QAA, it seems you are still investing across the same loans as you would be, if you were investing directly, at much higher rates, so subject to same risks. So if you were unable to sell out of ANY of the live loans, that means the conditions are probably not normal and you would also probably not be able to get money from the QAA either. I think the product seems somewhat complex and (on a first glance to me, at least) appears more risky than the rate implies. My understanding of "normal market conditions" means there are enough QAA lender funds to fill a good proportion of funds not taken up by MLIA investors. So "abnormal market conditions" means there isn't enough QAA lender funds, and a run on lender funds would make things worse. AC won't let that happen because their model could quickly break down. The fix is simple, AC would increase the interest rate paid on QAA and QAA 30 day deposits, to attract more money. In April the rate went to 4.25%, because there was a shortage of lender money, and the time to withdraw stayed at 0 seconds. The only situation I can foresee as "abnormal market conditions" would be a sudden Bank of England rate hike of 3% or more. Then AC might struggle to maintain a difference between the rate they lend at, and the rate offered in High Street deposit accounts. A gradual rise in Bank of England rates wouldn't be a problem, because AC would increase their rates for borrowers.
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Post by valueinvestor123 on Nov 1, 2016 23:13:41 GMT
What about investors loosing faith in the loans returning capital and loss of faith in the platform?
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sqh
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Post by sqh on Nov 1, 2016 23:37:58 GMT
What about investors loosing faith in the loans returning capital and loss of faith in the platform? I would think the QAA would be the last AC account to suffer from loan defaults. All loans are asset secured, so the QAA could absorb a high default rate. I'd be far more concerned that RS is dependent on a massive provision fund that has questionable protection.
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Post by valueinvestor123 on Nov 2, 2016 8:05:58 GMT
Has there not been a scenario where valuations turned out to be wrong or the assets worthless? Is it not imaginable to happen on a mass scale, during a liquidity crunch in which case QAA would be affected in the same way as the underlying loans.
I am not saying ratesetter is without risk, far from it, but to have two risky asset classes, as uncorrelated as possible, is significantly less risky than just the one, IMO.
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pikestaff
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Post by pikestaff on Nov 2, 2016 8:54:09 GMT
What about investors loosing faith in the loans returning capital and loss of faith in the platform? ...All loans are asset secured, so the QAA could absorb a high default rate. I'd be far more concerned that RS is dependent on a massive provision fund that has questionable protection. What makes you think that? Do you know how much protection the QAA has got? At least the RS fund is reasonably transparent. Historically, RS's provision fund has been the only one that I've really trusted - manly because of the transparency, and because the underlying loans were smaller and with (I believe) less correlated risk. Recent developments (RS writing larger loans including property, loss of westonkev) are shaking that faith somewhat.
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Post by chris on Nov 2, 2016 9:12:56 GMT
...All loans are asset secured, so the QAA could absorb a high default rate. I'd be far more concerned that RS is dependent on a massive provision fund that has questionable protection. What makes you think that? Do you know how much protection the QAA has got? At least the RS fund is reasonably transparent. Historically, RS's provision fund has been the only one that I've really trusted - manly because of the transparency, and because the underlying loans were smaller and with (I believe) less correlated risk. Recent developments (RS writing larger loans including property, loss of westonkev) are shaking that faith somewhat. There are details of our expected losses and PF coverage on this page.
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sqh
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Post by sqh on Nov 2, 2016 9:25:35 GMT
...All loans are asset secured, so the QAA could absorb a high default rate. I'd be far more concerned that RS is dependent on a massive provision fund that has questionable protection. What makes you think that? Do you know how much protection the QAA has got? At least the RS fund is reasonably transparent. Historically, RS's provision fund has been the only one that I've really trusted - manly because of the transparency, and because the underlying loans were smaller and with (I believe) less correlated risk. Recent developments (RS writing larger loans including property, loss of westonkev) are shaking that faith somewhat. The first time I checked, RS had the entire provision fund in one bank account. We are constantly reminded that the FSCS protect us for £75,000, but that won't apply to the provision fund. The last time I raised the question the answer was : p2pindependentforum.com/post/85342There was talk of it being insured, but is it?
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