In recent years, the rapid development of quantitative private placement has attracted the focus of supervision. According to quantitative private placement sources, in December 2021, some custodians have received window guidance, requiring private placement managers not to withdraw the performance remuneration of the excess return in the case of customer losses, and the customer’s share can not be in a loss state after the withdrawal is completed. At the same time, some quantitative private placement products are no longer applicable to the fast filing channel, the filing cycle is lengthened, and the supervision of quantitative private placement industry is becoming stricter.
Insiders said that the development space of quantitative investment is broad. With reference to the development law of mature markets, effective industry norms are essential. Significantly improving the regulatory attention is conducive to the healthy development of the industry.
there are “new rules” in the accrual of performance remuneration
Recently, the reporter of Shanghai Securities News learned in an interview that the regulation prohibits quantifying the performance remuneration of private placement managers for withdrawing the excess return under the loss of investors.
“In December last year, the custodian informed us that we had received window guidance, requiring that when the absolute return of investors is negative in the fund contract, the manager cannot withdraw performance compensation, so the contract should be done again.” According to a 10 billion quantitative private placement source in Shanghai.
A recent product filing policy ppt produced by the trusteeship Department of a securities firm obtained by the reporter this month also mentioned that index enhancement products shall not accrue performance compensation in case of customer losses. In the past, the practice of accruing performance compensation in excess of the index has been non-compliance. At the same time, the private placement manager needs to ensure that the share income held by the investor is positive after withdrawing the performance remuneration of the excess part, that is, the investor should also be in a positive income state after the private placement manager withdraws the performance remuneration.
A 10 billion private placement general manager in Shanghai said: “when filing a product recently, if the Association finds that the net value of the product is less than 1 yuan, it can withdraw the performance compensation of the excess part, and will require to revise the contract.”
According to the above 10 billion quantitative private placement people, the index enhancement strategy is one of the three core strategies of quantitative private placement. Its performance compensation extraction methods include withdrawing according to absolute income and withdrawing according to excess income. The latter may even withdraw performance compensation when investors are in a state of loss. For example, the CSI 500 index fell by 20% in a certain period of time, and the index enhancement products purchased by investors fell by 10% in the same period. According to previous regulations, private placement managers can withdraw the performance compensation of 10% excess return, but this is difficult for investors to accept.
Channel people also admitted: “Previously, a small number of quantitative private placement in the industry accrued performance compensation according to excess performance. In recent two years, some customers wanted to accrue performance compensation according to excess return, so there are more and more quantitative private placement in this operation. However, this practice will indeed cause controversy when the index falls, and the new regulatory regulations can protect the interests of holders to a certain extent.”
regulatory attention has increased significantly
Since last year, the rapid progress of quantitative private placement has attracted more and more regulatory attention.
Quantitative private placement sources told reporters that since the fourth quarter of last year, the company will be returned due to many details when filing private placement products, so the product filing time is still relatively long.
At the beginning of 2020, China Foundation Association launched the pilot reform of “channel separation system + spot check system” for private fund product filing. In September 2021, China Infrastructure Development Association carried out the second phase pilot work of the lane separation system, and the product filing speed of qualified high-quality private placement institutions was accelerated. However, some private placement feedback said that the fast filing channel may not be applicable to some private placement quantitative products.
In addition, supervision also strengthens the monitoring of quantitative investment products through multiple means. Last November, the China Foundation Association issued the notice on launching the “quantitative private equity fund operation report” to the private equity fund manager. After the release of the notice, the frequency of submitting operation data by quantitative private fund managers was increased from quarterly to monthly. In the same month, China Securities Association also issued the notice on submitting quantitative trading data information of securities companies to securities companies, which clearly requires securities companies to submit quantitative trading data information, so as to further master the quantitative strategy and scale of self support and asset management of the securities industry.
head private placement focuses on strategy optimization
A 10 billion level quantitative private placement person in Beijing said: “from the development law of foreign mature markets, quantitative investment has a broad development space, but at present, investors do not fully understand the quantitative strategy, some quantitative private placement styles are also more radical, and effective industry norms are essential.”
In the context of stricter supervision, the pace of quantitative private placement filing slowed down significantly, and the head quantitative private placement managers began to focus on polishing their own strategies.
According to the latest data of private placement network, more than half of January is coming, but as of January 13, the number of quantitative private placement filing new products is only 52, compared with 565 in January last year. In addition, from the monthly data, the quantitative private placement filing has cooled significantly since the fourth quarter of last year. According to statistics, the number of quantitative private placement monthly filings in the third quarter of last year was around 1000, but the number of filings plummeted to 587 in October and only about 800 in November and December.
“Stricter supervision is one of the reasons for the slowdown in filing, but the most important thing is that the focus of private placement managers has changed.” A head quantitative private placement person in Shanghai said that the scale of many quantitative private placements has increased rapidly in the past two years. Although the popularity has increased significantly, it also means that the competition is becoming more and more fierce. For example, a newly developed quantitative model may have a significant decline in the rate of return (or excess rate of return) due to the more efficient strategy iteration of other quantitative institutions. Therefore, it has become the consensus of most quantitative organizations to return to a more peaceful release rhythm and focus more on model optimization and iteration.
