Last Friday night, the CSRC publicly solicited opinions on the "Guidelines for the Side Bag Mechanism of Public Offering of Securities Investment Funds" (hereinafter referred to as the "Guidelines"); At the same time, the fund industry association issued the draft of "Operating Rules of the Side Bag Mechanism of Securities Investment Funds" for comments.
"The side pocket is to further protect the interests of investors and avoid arbitrage by those with information advantages. As long as it involves assets that are difficult to value, it will be used. " A bond fund manager in Beijing told the First Financial Reporter.
In recent years, liquidity risk cases have occurred frequently, and the market is seeking various new solutions. The reporter learned that in the first half of the year, the regulatory authorities solicited opinions on the side pocket account mechanism in Public Offering of Fund.
Analysts said that the introduction and use of the side-pocket mechanism is expected to solve the portfolio liquidity problem faced by fund managers in Public Offering of Fund, as well as the investor fairness problem that comes with the loss of liquidity in holding bonds.
Investor protection plus code
Article 17 of the Guidelines stipulates in principle the enabling conditions, redemption and investment arrangements, voting rights of holders' meetings, fees, valuation accounting and information disclosure of the side pocket mechanism, and strengthens the relevant responsibilities of various participants such as fund managers, fund custodians and fund sales institutions.
The so-called side pocket mechanism refers to the mechanism of separating the specific assets in the fund portfolio from the original account and putting them into a special account for independent management. The original account is the main bag account, and the independent account is the auxiliary bag account.
Side pocket mechanism is positioned as a liquidity risk management tool, which is used to deal with risks that cannot be solved by adjusting valuation, and is different from daily risk control measures.
In recent years, with the increasing number of bond default cases, the liquidity problem of Public Offering of Fund's portfolio has become more prominent. For example, at the end of the second quarter of 20 18, the management scale of Cinda Aussie pure bonds "16 Sanbao 02" and "16 Xinwei 0 1" was 48.982 million, but by the end of the third quarter, the scale of this product suddenly dropped to1366. In just one quarter, Cinda Aussie Bank's pure bonds were redeemed for 33.856 million shares, of which 365.438+0 million shares were redeemed by an institutional investor. Up to now, the fund has embarked on liquidation procedures, and the latest scale is only over 6.2 million.
"If one or more assets in the portfolio lose liquidity, it may make it difficult for fund managers to cope with the redemption of holders. Moreover, the holder's expectation of portfolio illiquidity will accelerate his redemption operation, which will further cause portfolio illiquidity. Fund managers are eager to sell assets in the market, which will lead to further decline in asset prices, thereby increasing the holder's willingness to redeem. " Zhang Xu, a fixed income analyst at Everbright Securities, said.
Generally speaking, once an issuer defaults on one bond, other bonds of the issuer will have a similar fate, and fund managers need to respond to these bonds.
On August 6th, 18, "18 Gong Jing SCP004" failed to pay on time, which constituted a material breach of contract. This was the first default on July 15, and then Gong Jing Group defaulted on its bonds in the open market again.
Once this "liquidity-redemption-price" negative feedback cycle begins, it is difficult to stop until the funds to buy such assets enter a liquidity dilemma.
"For those who have information advantages and redeem in advance, there is arbitrage space. For latecomers, they may face the consequences of insufficient liquidity, which also causes unfairness among holders. " The above-mentioned Beijing bond fund manager said.
According to the guidelines, after the establishment of the side pocket account, when the original investor withdraws from the fund, he will first get the redemption money corresponding to the assets in the main pocket account, and then receive the remaining redemption money after the assets in the side pocket account are realized.
Corresponding to the side pocket account is the main pocket account, which contains assets with good liquidity and effective valuation. So far, we haven't seen the XBRL template of information disclosure in the main bag account portfolio and the auxiliary bag account portfolio.
In addition, the Guidelines also emphasize that when the holding ratio of specific assets exceeds 50%, the fund valuation should be suspended in accordance with the requirements of the Regulations on Liquidity Risk Management of Public Offering of Open-end Securities Investment Funds, and measures should be taken to delay the payment of redemption money or suspend the acceptance of fund subscription and redemption applications.
In addition to the bond fund is the main application of the side pocket mechanism, stock funds also have application scenarios.
"Bond liquidity is worse, and stock valuation is also difficult, such as' stepping on thunder' and restructuring and mergers and acquisitions." A brokerage fund analyst in Shanghai said.
Money market funds and transactional open index funds do not enable the side pocket mechanism.
Preliminary attempt of side pocket
The first financial reporter also noticed that special accounts and private equity funds had tried the side pocket mechanism more or less before. The latest example is that the private placement fund of Yun Qi in Shannan was announced on July 8, 20 19, and was put on record by the fund industry association on July 10, marking the official landing of the first private placement fund in China. This fund is not only the first private equity allocation fund that has passed the filing, but also the first private equity fund that uses side pocket valuation.
At the end of March, the fund industry association issued the "Guidelines on the Content and Format of Asset Management Contract of Collective Asset Management Plan" (1, 20 19 will be implemented in May). Article 61 states: "If special valuation methods such as side-pocket valuation are used according to accounting standards, it shall be clearly agreed and specially disclosed in the risk disclosure", which is the first time that the concept of side-pocket valuation is mentioned in official domestic documents.
The realization of side bag valuation needs to be realized by combining valuation accounting system with TA system (share registration system). For example, the TA system should record the share holders of the main bag account as well as the list of share holders of the auxiliary bag account, which undoubtedly puts forward higher requirements for the TA system.
"If necessary, we also need to reform the basic information, net worth statement and fund portfolio table of the basic fund, so as to smoothly accept the information data such as the asset portfolio of the side pocket account, and connect and continue the information data with the asset portfolio of the main pocket account. After the cancellation of the side pocket account, the summary statistics of the portfolio should be returned to the original fund in time. " Hu Yan, general manager of Galaxy Securities Fund Research Center.
What needs to be seen is that the side pocket mechanism is not "beneficial". This is why the side pocket account originated in the late 1990s, and there are precedents for its application abroad, but Public Offering of Fund was gradually liberalized in China only recently.
Zhang Xu said that although the side pocket account has solved the problems of portfolio liquidity and investor fairness, it may also bring new potential risks, such as misappropriating the funds in the side pocket account, using the side pocket account mechanism to prevent the holders from redeeming, and maliciously charging higher management fees.
"Abuse, valuation troubles and information disclosure are all challenges to the valuation of side bags." The aforementioned Shanghai seller's fund researcher also called.
For example, managers can misappropriate assets at will to meet their own interests, and managers may also use side pockets to isolate underperforming assets.
(Article source: China Business News)