Chen Zhi, a reporter of this newspaper, reported from Shanghai
"How to clean up the umbrella trust based on over-the-counter allocation is definitely a tricky task." Liu Gang, a person from a trust company, said with emotion.
After the regulator required securities institutions to terminate the data services of any external system to the OTC capital allocation business by September 30, Liu Gang's trust company asked him to assist the business department in cleaning up various trust products based on over-the-counter capital allocation as soon as possible.
But he soon discovered that the work could not be done overnight.
On the one hand, investors in the fundraising end of the trust allocation business - the bank's wealth management channels value the higher fixed income return of the umbrella trust and do not agree to the early liquidation of the relevant trust products; on the other hand, the wholesalers of the allocation funds downstream of the allocation business chain have complained that once they lose the income related to the over-the-counter capital allocation business, they will find it difficult to bear the interest expenses of the umbrella trust products of tens of millions of yuan.
This also puts trust companies in a dilemma – if the trust product cannot be liquidated in advance, who will fulfill the interest payment obligation during the existence of the corresponding product.
In fact, similar problems are also plaguing other trust company peers.
Recently, Zhongrong Trust issued a communication letter to Huatai Securities, saying that in order to avoid a large number of disputes caused by the termination of the data service of the external system, it hoped that the two sides could conduct an interview and jointly negotiate a response plan. It is reported that at present, there are 38 existing trust plans for Zhongrong Trust to access the Huatai Securities System, with a trust scale of 13.3 billion yuan, involving 758 investors, including 691 natural persons and 67 institutions.
"In fact, we have also communicated with securities companies, hoping that they can give specific regulatory basis for the suspension of over-the-counter capital allocation related services, as well as the scope of the suspension of services (including the name of the relevant trust plan), so that we can persuade investors to agree to the early liquidation of the product." Liu Gang said, but at present, the securities agency has not made any response to this.
At present, Liu Gang can only persuade the wholesalers of the allocated funds to first fulfill the interest payment obligations of the relevant umbrella trusts during the existence period, but the response given by the other party is to ask the trust company to allow them to invest the trust funds in private fund products in exchange for the corresponding investment income for interest payment.
"This means that the investment risk of umbrella trust funds has increased invisibly." Liu Gang said bluntly. But what surprised him even more was that while the relevant departments stepped up to clean up the over-the-counter allocation business, individual allocation agencies seemed to have found a new gray area that could bypass supervision and continue their own over-the-counter allocation business.
Product liquidation storm in advance
21st Century Business Herald reporters have learned from many sources that as the main fundraising channel of umbrella trusts, investors on the bank's financial management end are reluctant to liquidate umbrella trusts in advance, but in fact have their own interests. Because in their eyes, such trust products are regarded as fixed income products with high returns.
The reason for this is that the ratio of preferential/inferior shares of trust products used for equity allocation is set at 1:2.5 or 1:3. This means that only if the net value of the product falls to 0.7 yuan, it will trigger the loss of principal of the preferred share investors (that is, the investors on the bank's wealth management end). In fact, based on the consideration of risk control, the trust company also directly agreed with the stock allocation fund provider that once the net value of the trust product fell to 0.97 yuan and entered the warning line, the trust company would issue a risk warning and require the latter to moderately reduce the position to strengthen risk control; if the net value of the product fell to 0.95 yuan, the trust company would take measures to forcibly liquidate the position. Therefore, the probability of investors losing the principal of such trust products is further reduced.
In terms of product income, the annualized interest rate of over-the-counter capital allocation wealth management products issued by banks' wealth management channels is hovering around 7.4%-7.6%, which is quite attractive in the current stock market adjustment.
"It's really hard to convince investors to allow the umbrella trust to wind up early." Liu Gang said bluntly. Although they have communicated with these investors many times, explaining that the CSRC's requirement for securities institutions to terminate the provision of any external system data services to the OTC capital allocation business from September 30 is the main reason why umbrella trusts have to liquidate early. However, these investors believe that in April this year, the relevant departments stressed that securities companies should not participate in the allocation of over-the-counter stocks in any form, and must not provide services or conveniences such as data ports for over-the-counter stock allocation and umbrella trusts, but this does not affect the umbrella trust's involvement in the capital allocation business, so this policy may not be directly related to the early liquidation of the umbrella trust.
To this end, Liu Gang's trust company once hoped that securities institutions could give the specific scope of the securities company's suspension of over-the-counter capital allocation related services (including the specific name of the relevant trust plan), as well as the specific regulatory basis for stopping these services (such as the written documents of the relevant departments to stop the relevant business, etc.), so that the trust company could persuade investors to allow the product to be liquidated in advance.
"However, the securities agencies did not respond." Liu Gang said bluntly. In his view, the early liquidation of relevant trust products may involve contract breaches, and securities institutions are naturally reluctant to be involved in the legal liability issues arising from such disputes.
Unable to persuade investors to allow the umbrella trust to liquidate in advance, Liu Gang could only first ask the wholesaler of the allocated funds to perform the interest payment business during the existence of the relevant trust product as much as possible.
"In fact, these wholesalers of capital allocation funds are also very distressed - without the income brought by the over-the-counter capital allocation business, they may not be able to bear the interest expense of tens of millions of yuan by relying on their own financial strength." He said that in this regard, while agreeing to fulfill the obligation of interest payment, the allocation institution required the trust company to allow them to use the umbrella trust funds to invest in certain quantitative investment private equity fund products.
Specifically, these allocation institutions will look for quantitative investment private equity institutions with excellent performance and strong anti-risk ability, and allocate the corresponding funds of the umbrella trust to these institutions according to different investment amounts to entrust investment management, and collect a certain proportion of investment income from them for the payment of trust product interest on schedule.
However, in Liu Gang's view, the umbrella trust product for stock allocation was originally only a similar channel business, the investment risk is relatively controllable, once the wholesaler of the allocation fund will invest this trust fund in private fund products, the investment risk of the trust fund will increase significantly, if the loss of the private fund product is serious, dragging down the principal loss of the preferred share investors, it is not excluded that the trust company must rigidly pay the "interest and tranquility".
"Considering the pressure on the interest payment of trust products, in the absence of other effective investment channels, we can only acquiesce to some allocation institutions to invest trust funds in some private fund products that we recognize first, and first transition." He said helplessly.
New gray area
To Liu Gang's surprise, while the relevant departments are stepping up to clean up the over-the-counter capital allocation business, individual allocation agencies are still "going their own way", and they also seem to have found a new gray operation area that can bypass supervision.
Specifically, some allocation institutions no longer look for trust companies to issue umbrella trusts or single stratified securities investment fund trust products based on stock allocation, but cooperate with large enterprises, which first come forward to pledge high-quality assets, look for trust companies to issue trust products to raise funds, and then transfer the relevant funds to the accounts of these allocation institutions in the form of entrusted loans to continue their own capital allocation business.
"In this gray area of operation, in order to circumvent the regulatory review of the over-the-counter capital allocation business by relevant departments, the allocation agency will not introduce HOMS and other systems to open an account in the securities institution, but will directly transfer the capital allocation to the investor's account." Liu Gang said. However, these allocation agencies will send special risk control personnel to track the changes in the net value of each investor's account from time to time, and once the net value of the account falls below the risk warning line or liquidation line specified in the over-the-counter capital allocation business, these risk control personnel have the right to force the account to liquidate.
The reporter learned from many sources that at present, the allocation agency is quite cautious about this gray operation area, and is only open to some long-term customers of the allocation company with a high allocation amount. Usually, the corresponding allocation customers of such trust products will not exceed 20 people, so that the allocation institution has enough risk control personnel to carry out manual operation to ensure the safety of trust funds.
A person from a capital allocation agency revealed that in this gray operation zone industrial chain, large enterprises that assist allocation institutions in obtaining trust funds are undoubtedly the most lucrative. Usually large enterprises use high-quality funds as collateral, raise funds through trust channels at an annualized 8%-9% financing cost, and then lend to the wholesalers of capital allocation funds at an annualized financing rate of 12%-13%, which can invisibly earn a 4% spread income and almost no risk.
After all, if the allocation institution wants to obtain such trust funds, it still needs to invest 1/4 of the funds equivalent to the trust fundraising, as part of the inferior funding to ensure the absolute safety of the trust funds. At the same time, the two parties agreed that the allocation institution can only provide capital allocation services to customers on a daily basis, on the one hand, to minimize the investment risk caused by stock market fluctuations, on the other hand, it is also based on the need to avoid regulatory pressure - if large enterprises and allocation institutions find that the relevant departments notice such gray operation areas, they can withdraw the allocation funds as soon as possible and invest the trust funds in other fields.
"This tests the trust company's ability to manage trust products after investment." Liu Gang believes that the main reason for the quiet rise of this gray operation area is that trust companies lack continuous tracking supervision of the supervision of the fundraising use of trust products.
"Frankly speaking, it is also difficult for trust companies to control the direction of the use of trust financing by these large enterprises." A person from a trust company told reporters that usually these large enterprises will first transfer the trust funds in multiple accounts within the company in the name of the use of various funds, and finally flow to the accounts of the allocation agency, making it difficult for the trust company to distinguish the specific flow of trust funds and the actual use; what is more, some large enterprises will first allocate their own funds in the form of entrusted loans to the allocation institutions for capital allocation business, and then mortgage the high-quality funds to the trust company to supplement the gap in their own funds. (At the request of the interviewee, Liu Gang is anonymous)
(Editor: Xin Jizhao; if you have suggestions or clues, please contact: [email protected])
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