Born in the era of credit currency, each of us was kidnapped by finance at birth. The wealth accumulated in our life is no longer the physical assets such as gold, silver and copper, but the credit symbol of the monetary authorities. Therefore, everyone who lives in the moment has to face a problem: how to invest? Because even if you choose not to invest, you will only invest in the figures printed by central banks, which may be more dangerous. This is probably the fundamental driving force for most customers to invest, and it is also the rice bowl for people in an industry to support their families.
Both public investors and institutional investors will face the problem of what to invest after knowing that they must invest. That is, choose one or several large categories of assets. Every kind of assets can exist for a long time, which generally has its rationality. There is a logic that tells investors why they should invest in such assets. Stocks, futures, bonds and (financing) trusts are the most common types of assets in China. Looking at a person or a certain type of institution alone, due to the limitation of professional knowledge or regulatory provisions, the choice of large-scale assets may be relatively stable, but looking at the whole market comprehensively, several large-scale assets need strong logic to attract funds. This logic is mainly about the matching of risks and benefits. If these types of assets are compared horizontally, the two elements of investment logic are generally constantly pursuing balance in the dynamic to meet the needs (risk preferences) of different customers. For example, bonds can only meet the needs of customers below 8%, and financing trusts can meet the needs of customers from 8% to 12%, while customers above 12% generally choose stocks and futures.
Most customers' requirements for investment are certainty and avoiding gambling. Unless it causes greed, investment is often passively accepting risks (the concept of professional investors is completely different). Only savvy investors will continue to question the investment logic behind each type of asset and optimize their investment portfolio.
Second, creditor's rights products
Individual and institutional investors are mostly conservative investors, and creditor's rights (fixed income) assets will be their main choice. At present, the types of creditor's rights investment with large stock are bank loans, trust loans, standardized bonds and bank deposits (bank financing is not a basic asset and is not included). Creditor's rights assets have very similar characteristics, they can only get fixed income, they all need to bear credit risks, and they all have certain liquidity (including trust, deposits and bank loans). Therefore, not only in the eyes of financiers, the three debt financing methods have strong mutual substitution; In the eyes of investors, debt assets can also be replaced, and the root of the difference lies in the differences in business models.
Some customers will take the initiative to accept the concept that "bonds are safer than trusts and have lower yields", but savvy customers will ask why they are safe. What are the business models of bank loans, trust loans and standardized bonds? What are the key points?
(A) the king in the moat
Bank loan is the basic business model and pricing basis of fixed income products. Although bank loans are difficult for most institutional investors to enter, the existence of bank loans actually affects the investment logic of every creditor.
First of all, the amount of bank loans is the largest. It can be said that banks control the lifeblood of enterprises. Once an enterprise is loaned by a bank, its repayment ability will be in jeopardy. On the contrary, credit risk is controllable.
Secondly, banks control capital accounts, and their understanding of enterprises is beyond the reach of banking institutions.
Third, the bank credit manager lives next to the enterprise every day. Once enterprises have financing needs, banks are often the first to eat meat. Similarly, once an enterprise encounters difficulties, banks are also the most likely to obtain high-quality assets.
If we consider the possible connections between local banks and enterprises and local authorities, it is equivalent to establishing an insurmountable moat between banks and other institutional investors. Even with the emergence of credit ABS, the information advantage and possible moral hazard of banks in the packaging process make it difficult for most investors to really bear the risks and benefits of buying bank loans. Therefore, although banks are fully competitive, their competitive advantage comes from the support of business models and outlets, which is not balanced by professional investment institutions on their own.
(2) Mountain thieves and little girls outside the moat
Whether it is a trust investor or a bond investor, someone is usually stopped outside this moat. There are no branches all over the country, and there is no first-hand account information of customers.
Although trust products are aimed at high-yield customers and bond products are aimed at low-yield customers, the debt subjects are often the same group of debtors, and their credit ratings and even public information are the same. What makes the difference between the two investment returns possible?
Therefore, the customer raised such a question: the only difference between the same borrower, trust and bond on paper lies in the difference between the issuance procedure and the transaction custody place. Trust companies lend fast, the interest rate is determined, and the audit of issuing bonds is complicated. Of course, borrowers are willing to pay high prices for time and certainty. In addition, trust companies also have the potential protection of rigid payment and a group of more experienced post-loan managers. Why should I give up 10% trust and invest in 7% credit bonds? Where is the bond safe? Where is the liquidity? When money is tight, aren't all bonds exploding?
It is not easy to answer this question:
Theoretically, public information can make the market supervise the behavior of borrowers, and the qualifications of debtors are recognized by the market, thus bringing a liquidity premium. However, in practice, the ability of bond investment managers to supervise borrowers is very limited, at least far less than that of trust managers from project backgrounds. As a result, when bond investment institutions encounter problems, they often panic and block a class of institutions or fight blindly, resulting in the issuer facing refinancing pressure. But these pressures can't change the debtor's behavior, and even lead to the result of "too many lice don't bite" and "forced to pick rotten apples". Mutual punishment between investors will in turn weaken the liquidity advantage of bonds and make credit bonds with poor qualifications more similar to trust products. If AAA trust products with good security are compared with bond products with the same qualification, the liquidity premium of trust products will even be lower than that of bonds because of their high yield and good liquidity.
In the post-loan disposal, bond investors often lack the ability to dispose of non-performing assets. Professional institutions can participate in several field surveys, and most institutions can only rely on rating reports. If there is a real risk of default, it is often difficult for professional investment institutions to act quickly. Many times, they can only stand behind individual investors and seek the protection of regulatory agencies. On the contrary, the business personnel of the trust company can give full play to the advantages of being familiar with the project and the business ability exercised in the bank, showing stronger disposal ability.
In short, investors' doubts are not unreasonable. The logical basis of high security and good liquidity of bonds lies not in the business model itself, but in some obscure factors, such as regulatory protection, public opinion supervision (the effect will be reduced if there is more default) and individual investor shielding (the disposal institution will treat institutions and individuals differently).
Then the question comes: Is the investment logic of "bonds are relatively safe assets and trusts are risky assets" wrong, or should bond investors change their business models and establish their own post-loan management machines to get rid of their dependence on regulatory protection?
It is difficult to have a definite answer to this question, but two things are clear: investors in standardized bond products should not try to do what banks have done, and additional protection (in practice, only from supervision and system) is the basis for the positioning of "security and liquidity" in the bond market. As investors of low-risk assets, bond investors should buy low-risk products. This is the basic investment logic, the psychological expectation accepted by the public investors, and the intangible wealth accumulated by the bond market over the years. Therefore, the development of the bond market can't bypass the hurdle of protecting bond investors. In the environment of insufficient supervision of public information (that is, the objective environment with low cost of dishonesty), supervision and protection is the cornerstone of bond attraction. With the increase of credit events, vague regulatory protection will inevitably weaken gradually. How to make the market bear the credit risk and strengthen the institutional arrangement of supervision and protection may be the direction to promote the benign development of the bond market and the key point to test the wisdom of supervision.
(C) from the perspective of bond brand image, the importance of regulatory protection
The "buyer's responsibility" in credit risk is correct in theory, but even the rigid redemption of trust products is difficult to break in practice. Everything that is correct in theory and often hits a wall in reality usually needs extra care.
To put it another way, let investors who are thousands of miles away safely hand over their money to a borrower who has only read the rating report (at most once a year). In the absence of a strong public opinion supervision environment, this is wishful thinking in itself. The ultimate investor of any financial product must be a non-professional investor and an ordinary person. Professional investment institutions are just intermediaries who rely on the trust and professional self-confidence of ordinary people to make a living. If the default in the bond market is handled according to the principle that the buyer is responsible, it will hit the public investors' trust in the bond market, and credit bonds are likely to be affected. This is the same reason that the trust dare not break the "fair exchange". It is easy for ordinary people to suffer losses, but it is difficult to refinance later.
Once the brand image of the bond market with low risk and low return is destroyed, the institutions and bond issuing enterprises that participate in the bond market will inevitably suffer. It is also difficult for monetary authorities to reduce social financing costs and provide investment varieties for low-risk preference funds (such as future overseas RMB investment credit bonds). To maintain this image, we need to face up to the moat of "asset disposal capacity gap". Without a bridge across this moat, there would be no security advantage, liquidity advantage, low financing cost advantage and attractiveness to global investors. Therefore, the protection of bonds not only needs to be institutionalized.
Third, policy stability.
China's 5,000-year history of civilization has no glorious financial history. Since foreigners recorded business information in China during the Qianlong period, interest rates have been high, prosperous and low. This abnormal state cannot be explained by the rise and fall of the economy itself. Looking at it for hundreds of years, the only things that remain unchanged for a long time are unstable "policies" and institutional credit that has never been established. If the latter document is always greater than the previous document, one document can cause losses to investors, so no one can foresee the future losses, and the fund users can only make up for the possible losses of borrowers by paying high interest, and the credit lending system will fall into a vicious circle and even crush the real economy. It is hard to say what role this problem played in the decline of the national economy in the last years of Qianlong, but a similar cycle did exist.
I hope that in the process of the rise of great powers, we can stabilize policies and lay a good foundation for the credit economy. Only on this basis can we have a respectable commercial civilization, which can even be called the great era of the prosperous Tang Dynasty.