since this year, the A-share market has fluctuated sharply, and there has been a general performance retreat in the private placement industry. Some private placement products have touched the early warning line or liquidation line (also known as the “stop loss line”), and some private placement products have to be passively reduced or liquidated. This has also caused industry insiders to worry about product position reduction or liquidation, which further exacerbates market adjustment.
The original intention of early warning line and liquidation line is to protect investors’ principal from excessive losses. However, from the perspective of investment, the setting of “two lines” has also increased the difficulty of investment, and some even believe that it deviates from the concept of value investment. Insiders also had a heated discussion on the rationality of the “two-line” setting.
more than 1000 products hit the warning line
At the beginning of the year, the market was significantly adjusted, and there was a general performance retreat in the private placement industry, and many 10 billion private placement were not spared.
According to the data of the third-party platform, as of February 7, the number of 10 billion private placements was 113, of which 94 10 billion private placements with performance disclosure have an average yield of – 4.32% this year; There are 11 10 billion private placements with positive performance, and the proportion of 10 billion private placements with positive income is only 11%, and the loss of 10 billion private placements is as high as 89%.
Data show that in January, a total of 59 10 billion private placements lost more than 5%, 37 10 billion private placements lost more than 7%, and 14 10 billion private placements lost more than 10%. Among them, Xitai investment, which had successively exploded in compliance and product performance, and Zhengyuan investment and alluvial assets with eye-catching performance in 2021, all suffered a large loss of more than 10% in January 2022.
At the same time, the quantitative products that once had unlimited scenery last year also encountered “trouble”. Recently, quantitative private placement giant Jiukun investment received market attention due to the sharp withdrawal of nearly 40% of its US $200 million US dollar fund in January. According to the data of the third-party platform, several other stock strategy products with quantitative private placement in China have retreated by about 10% since this year. Taking the magic square of head quantitative private placement as an example, one of its representative products has achieved a yield of – 11.72% this year. Since September last year, China’s quantitative private placement collective has experienced a significant pullback, and about 20% of the head quantitative private placement has generally retreated in the last six months.
In the context of large performance pullback, some private placement products touched the early warning line or liquidation line.
Recently, there are market rumors that the unit net value of more than 50 private placement products under private placement boss Dan bin has fallen below the traditional early warning line of 0.8 yuan, and the net value of 6 products has fallen below the liquidation line of 0.7 yuan. In response, Dan Bin responded to micro-blog on micro-blog, saying: “at present, our products are well controlled by corresponding wind control, and the net value is relatively stable. I and the trading department have always been cautious to deal with the situation. There are more market panic in the current market turmoil. The Eastern Harbour has experienced a bad market in the 2008 financial crisis, Baijiu crisis and 2015, and the development of the company is better after every time.” Dan bin did not directly respond to the net value and performance of its products. However, according to the data of the third-party platform, many of its products established in 2020 and 2021 are indeed in a state of significant losses, and the net value of many products is less than 0.8 yuan.
Previously, Zhejiang Shanyuan investment released the notification letter on Lixing No. 1 private equity fund touching the stop loss line on February 7, which showed that the unit net value of the fund on January 27, 2022 was 0.7909 yuan, which was 0.8 yuan lower than the stop loss line, and the risk stop loss operation will be carried out in accordance with the contract.
In addition, on February 11, 10 billion private placement Shanghai Hefu investment also issued an announcement to investors and consignment institutions, saying that its Hefu flexible hedge No. 9 phase a private securities investment fund had a net unit value of 0.8774 yuan on February 10, which was 0.88 yuan lower than the early warning line and touched the early warning.
According to the monitoring data of third-party institutions, according to the calculation of the net value of private placement products with the latest net value published as of February 12 (the net value and performance data of China’s private placement products lag behind due to the compliance of xinphi and other reasons), by the end of January 2022, the net value of more than 1000 private placement products (including stocks, CTA, bonds, Multi Strategy and other strategy types) had fallen below the traditional warning line of 0.8 yuan, The net value of 512 products fell below the traditional liquidation line of 0.7 yuan.
limited impact on the market
Will the increase of products touching the liquidation line and the sale of shares in the liquidation of products cause further decline in the market and chain reaction?
Some insiders believe that it is possible in theory. For example, the investment will be conducted according to the above-mentioned risk stop line. The company has also responded that recently, due to too many stock indexes and stocks, the withdrawal was large, and the company began to reduce its positions before the Spring Festival.
But, A research director of a private placement agency told reporters: “In theory, it will have an impact, but in practice, we should also be bullish on the number of private placement products that break the stop loss line. From our observation in recent years, there are fewer and fewer private placement products that set the stop loss line, and consignment agencies do not recommend setting the stop loss line, and few private placement institutions that cooperate with us have stop loss lines. Therefore, in fact, the proportion of products with such risks is not large.”
A stock bull private placement person also said: “in the past two years, many stock bull private placement products have cancelled the terms of early warning line and liquidation line, so passive selling is not significant.”
Xia fan, vice president of snowball, said that market fluctuations caused the net value of many products issued last year to approach or even fall below the warning line and stop loss line, resulting in managers having to liquidate products passively. However, these products account for very little of the total number of private equity funds. By the end of 2021, there were more than 9000 private securities managers and nearly 77000 existing products. From the perspective of the number of products on the edge of liquidation, they only account for about 0.5% of the total number of products, and the vast majority of products have not been involved in the aforementioned liquidation.
However, some market participants believe that compared with subjective stock long private placement, quantitative private placement products have a larger proportion of such terms. Many private placement quantitative index enhancement products issued in September last year have a net value of less than 0.85 yuan, which has the risk of passive selling.
For the problem of quantifying whether there is passive position reduction or liquidation risk of products, A senior quantitative person said: “Quantitative stock selection is very scattered. After selling a stock, the funds will enter other targets, so the overall index will not fall due to quantitative position adjustment. Quantitative stock strategies are divided into two types: one is index enhancement and the other is neutral hedging. Both types of strategies require positions to be full all the time, so most quantitative stock strategies in the market do not make position selection 。”
A head quantitative private placement person said: “the specific operation after the net value reaches the early warning line and liquidation line is related to the contract. The products issued by our company are basically products with a three-year closed period. There is no early warning line and liquidation line, and there will be no liquidation caused by market adjustment.” For the impact and impact of the market, the person believes that it depends on the scale and position concentration, and has nothing to do with quantification. In comparison, the positions of quantitative products under the same scale are more dispersed, and the impact and impact on the market are relatively small.
A financial product analyst of a head securities firm pointed out that from the perspective of the quantitative products sold by its company on a commission basis, the proportion of early warning line and liquidation line set for quantitative index enhancement products and quantitative stock long products is not large, and such products are basically full warehouse operation; Flexible hedging products have more “two lines”, but the number of such products is relatively small.
Therefore, on the whole, there are few passive position reduction of quantitative products, and the impact on the market is limited.
market disputes
Early warning line and liquidation line are risk control indicators set by the manager to protect the principal of investors from excessive losses. However, in recent years, the market has become more and more controversial about the setting of “two lines” and the discussion has become increasingly fierce.
A private equity investor said that the “two lines” can play a certain preventive role in controlling the net withdrawal of products and avoiding excessive losses of investors’ principal. For example, he said: “Recently, a 10 billion private placement has attracted market attention due to the huge loss of new products established last year. Many investors are very dissatisfied with the company, but they can’t redeem it because it is still in the holding period. At the end of last year, the net value has fallen to less than 0.7 yuan. At the beginning of this year, the market has fallen sharply, and now the net value is just 0.5 yuan. That is to say, they bought a product of 1 million yuan, There’s only 500000 yuan left. If there were an early warning line and stop loss line, when it fell to 0.8 yuan and 0.7 yuan, investors would be able to think about redemption, and it would not be 0.5 yuan now. They had to watch it fall all the time and there was nothing they could do. “
Zeng Linghua, research director of Haomai fund, believes that the original intention of setting the liquidation line is to enjoy high returns while controlling losses. In the management of private placement products, risk control is mainly done by managers. However, from the perspective of products, the setting of liquidation line may cause “illusion” to investors. Taking stock private placement as an example, the liquidation line of general private placement is set at 0.8 yuan, which makes investors have the illusion that they can enjoy the benefits of the stock market, and the biggest risk is a loss of 20%. Obviously, this does not change the risk return characteristic attribute of stock products. To some extent, it encourages investors with low risk tolerance to invest in unsuitable high-risk products.
From the perspective of investment, fund managers generally hold a negative attitude towards the setting of “two lines”.
Chen Yihe, investment director of Wanfeng friends, said that the early warning line and liquidation line are a “double-edged sword”. On the one hand, it defines the safety margin of investment, which helps managers to comprehensively consider at the beginning of investment, find appropriate matching investment opportunities and allocation schemes within the scope of risk constraints, and reasonably arrange positions and risk control plans in advance. On the other hand, once there is an extreme market situation in the market, resulting in the net value of products touching the liquidation line, the fund manager will be forced to liquidate, which will aggravate the market volatility and is not conducive to the consistency of the implementation of the value investment principle.
Dan bin had previously called for the cancellation of the early warning line and liquidation line. “Indeed, the setting of early warning line and liquidation line has made it more difficult to invest, because even excellent companies have time to adjust. The advantage of public funds is that it is easier to stick to the concept without paying attention to the problems of early warning line and liquidation line. We also decided not to issue products with such restrictions in the future.” He said.
\u3000\u3000 “Periodic fluctuations in the equity market are the norm. From the perspective of mean reversion, when the market point is low, it is often when the value return is better. At this time, the early warning and stop loss of products seem to be contrary to the logic of value investment. In addition, many managers also hope to stick to their original strategies and styles more in extreme market conditions, and the early warning line and stop loss line The rebound of net worth often becomes the constraint of management. In the long run, the value and compound rate of return of equity assets can stand the test of time, and short-term fluctuations should not affect the long-term asset allocation strategy. Therefore, many fund products have also cancelled the setting of early warning line and stop loss line accordingly. ” Xia Fan said.
