Wang Dengfeng: Do Not Fight Income To Deal With Extreme Situations

The confrontation between commercial banks and Alipay is becoming increasingly fierce. From the balance of the investment agreement deposit to the deposit reserve, and then to the quick payment war, the flames of war are pervasive. And Alipay and the balance of treasure almost "linked", the city gate fire, will bring disaster to the pond fish.

How to prevent liquidity risk is an unavoidable topic for balance treasure. In late March, Wang Dengfeng, the manager of Tianbao Zeng Li Bao monetary fund, received an exclusive interview with reporters.

　　 How much can we redeem the scale of redemption?

We think about redemption every day. For example, when we make asset allocation, we must consider how much redemption scale we can afford. We take the extreme situation into account.

Reporter: in the near future, the yield of the balance treasure is declining. The market also has similar new products coming out. Is your purchase and redemption affected?

Wang Dengfeng: as of February 26th, the number of users of the balance treasure was 81 million. As of January 15th, the scale was 250 billion. At present, the proportion of purchase and redemption is relatively stable, but the growth rate has slowed down. The purchase and redemption of the balance treasure has always had a relatively stable proportion to the total scale.

Reporter: the four major industries, agriculture, China and construction have lowered the Alipay fast payment limit. What is the impact of the balance on the purchase of the balance treasure?

Wang Dengfeng: the bank cut down the fast payment limit, will have certain influence to the user experience. Although users can purchase through the online banking mode, once users have formed the habit of quick payment and recharge, it is actually difficult to change them. This will increase the learning cost of users. Overall, the balance of the purchase treasure is not affected, but the convenience is not so good.

Reporter: in mid March, the central bank's "Payment institutions network payment business management measures" comments were exposed, the personal payment account recharge, transfer, consumption have taken more stringent measures, although still in the stage of soliciting opinions, but the impact of the balance of treasure is obvious. How are you going to deal with it?

Wang Dengfeng: we think about redemption every day. For example, when we make asset allocation, we must consider how much redemption scale we can afford. When we do stress tests, we take extreme cases into account. Even if there is a massive redemption, we will have no problem.

　　 More than 60% of assets will expire within one month.

On the expiration of asset allocation arrangements, our approach is very conservative, basically achieved every day assets maturity, of which more than 60% of assets are due within one month, to deal with the daily redemption no problem.

Reporter: at present, Yu Bao The scale has accounted for the 1/2 share of the entire IMF market, and the market also has a voice saying that the balance treasure is too big to fail.

Wang Dengfeng: according to the results of internal stress tests, even under extreme circumstances, we can cope with them, such as the risk of policy adjustment, market changing and even more extreme situations.

When we make an investment, the first thing we must consider is not simply the issue of income. It is more important to manage the liquidity of portfolio, for example, when to redeem and redemption. What if we exceed?

Second, the use of big data plays a more important role. For example, in last year's "double eleven", we repeated the calculation of the purchase and redemption, and based on this, we made steady investment allocation. Facts have proved that liquidity has no effect and configuration can be carried out smoothly.

In fact, the balance treasure not only has the function of financial management, but also has the function of consumption. The consumption function makes users more sticky, and has little correlation with the market yield. The product itself is relatively stable, so it is more conducive to forecasting and analyzing with the law of large numbers.

In the follow-up investment, we will continue to attach importance to big data analysis and combine other methods to reduce the error.

Third, from the perspective of asset allocation, in order to deal with unexpected redemptions, we retain relatively large amounts of cash. By the end of 2013, the proportion of cash and cash products accounted for about 5% of the total asset allocation. At the same time, the investment of bonds has been further increased.

Fourth, asset allocation maturity arrangements, our approach is very conservative, basically done every day assets maturity. There is no problem in dealing with daily redemption. It also increased the distribution of funds at special time points in order to deal with the redemption of special time points.

Interviewer: when you mentioned internal pressure tests, how do you guard against extreme situations?

Wang Dengfeng: 81 million users' funds are placed here. Any small problem may trigger big risks. We should be cautious in every aspect such as investment, settlement, system and so on.

The first big principle is to maintain a certain percentage of cash, such as the 5% retained cash. This is the first line of defense. The second line of defense is very conservative in asset allocation. In addition to cash, it is also said that a large number of assets will be allocated to maturity every day, of which more than 60% of assets are expired within one month (Note: Tianhong Zeng Li Bao money market fund 2013 annual report shows that as of the end of 2013, the average residual period of investment portfolio accounted for 63.69% days in 30 days). This means that every day we have a large amount of funds to be paid in due course, and the money that is maturing can be redeemed and reconfigured without redemption. The third line of defense is that we allocate a certain proportion of low risk, high liquidity bonds, which, if necessary, can be repurchased or traded through banks.

　 Inclusion in the proposal remains to be solved.

If Monetary Fund If the interbank deposit has to pay the deposit reserve, will it be necessary for the broker to manage the interbank deposit of the information management and insurance information management? More importantly, whether the interbank deposit of the bank management should be paid abroad, and there is no precedent for the foreign currency fund to pay the deposit reserve fund.

Reporter: now look at the balance of treasure 92% of the asset allocation in the agreement deposits, Celestica in partner selection, pricing mechanism, what are the considerations?

Wang Dengfeng: for the choice of partners, from the beginning of the balance treasure, we are considering how to list the white list. There are three main criteria: asset size, risk control and whether there have been any negative defaults. At present, the list is mainly national commercial banks, as well as a few large city commercial banks and agricultural firms.

In terms of pricing, basically, we make regular enquiries with all commercial banks open every day, with price priority and time priority on the basis of qualified risk control. Actually, we accept the market price passively.

Reporter: at present, there is a big controversy over the deposit agreement. There are public opinions calling for the agreement deposits of the money fund invested by the balance fund and other monetary funds into the deposit reserve management. What's your opinion?

Wang Dengfeng: for all the policies of the regulator, once implemented, we will support and cooperate closely.

However, there are some questionable aspects of these proposals. First of all, from the legal relationship, bank deposits are the relationship between debt and debt. In order to protect the interests of creditors, it is necessary to pay the reserve; and the IMF is the relationship between entrustment and agency, and investors take all the losses.

Secondly, bank assets are generally longer term loans, liquidity risk is greater, deposit reserve can provide a certain degree of protection, and the average residual period of monetary fund investment can not exceed 120 days, a single asset usually expires in a few months or days, and the risk of maturity mismatch is relatively small.

Once again, if the large redemption occurs, the monetary fund can activate the redemption clause, which is totally different from the bank's deposits. Moreover, if the interbank deposit of the IMF has to pay the deposit reserve, will it be necessary for the broker to manage the interbank deposit of the information management and insurance information management? More importantly, whether the interbank deposit of the bank's information management should be paid abroad, and there is no precedent for the foreign currency fund to pay the deposit reserve fund.

If it is to be implemented, this may have some impact on the yield of the balance treasure. But revenue is certainly not the most important issue we need to consider. As a value-added service of online shopping service, balance treasure has never been compared with the proceeds.

Reporter: once the bank cancels the exemption policy, how much will it affect the balance treasure?

Wang Dengfeng: we always put liquidity management in the first place, and do not risk liquidity because of one-sided pursuit of high returns.

In actual investment, there has never been an earlier withdrawal of the agreement deposit from the balance treasure. The cancellation of the non penalty clause in advance withdrawal will not have a direct impact on the proceeds of the fund. If this policy is implemented, we will further strengthen liquidity management.

　 2014 conservative strategy: bond portfolio will not exceed three months.

We are relatively cautious about the overall situation in 2014. The bonds will be held in the mid to high rated varieties above the AA+ rating, and the bond portfolio will not exceed three months.

Reporter: what is the strategy of asset allocation in 2014?

Wang Dengfeng: the weak recovery of the peripheral economy, especially the acceleration of the withdrawal of QE by the United States, has led to the reversal of capital flows in emerging market countries including China, and the recent increase in the volatility of the RMB exchange rate, which will continue to decrease in foreign exchange. The change in foreign exchange reserves will have a significant impact on the entire base currency.

At home, lowering the GDP target growth rate means that the government can tolerate lower economic growth rates, and there will be some changes in the relevant supporting economic policies. In terms of monetary policy, the stable tone has not changed. In the case of large scale of stock debt and accumulation of financial risks, the probability of monetary easing is not great. However, the growth of domestic economy will gradually decline, and the central bank will also avoid the recurrence of money shortage. The interest rate of money market will remain at a relatively stable level, and the interest rate of funds will not soar. On the whole, monetary policy will also be a neutral tone.

In addition, since the beginning of the year, credit risk events have been fermented, and with the large number of trust and stock bonds expiring in the two or three quarter, credit risks are getting bigger and bigger. We think these are unfavorable to the whole bond market.

Therefore, we have a relatively cautious attitude towards the whole in 2014. In the course of investment, our monetary policy is more conservative. For example, in order to avoid possible credit risk events, the bonds will be held in the middle and high ranking varieties above the AA+ rating, and the bond portfolio will not exceed three months in terms of price risk and duration. As long as the duration is controlled, interest rate risk will be controlled.

The proportion of interest rate debt will be increased relative to the ratio of portfolio, such as bond ratio, all of which are to reduce two risks, credit risk and interest rate risk.

Reporter: at present, the balance of treasure 92% of the assets allocated to the agreement deposits, then in the agreement deposits, bonds and other investment how to dynamically adjust?

　　 Deng Feng Wang Bond investment will gradually increase. By the end of 2013, interest rate bonds plus credit bonds accounted for about 4%-5%. Our difficult problem is that the market capacity of the configurable assets is not enough. First, the bonds available in the primary market are limited, and the two is the two level market with relatively poor liquidity and the availability of assets.

Reporter: what kind of reasonable income will the balance treasure get in 2014?

Wang Dengfeng: last year, when the balance treasure was set up, the yield was also at 3%-4%. Later, due to tight funds at the end of the year, the yield was 6%. Last year, from the establishment to the end of the year, the average yield of the balance treasure was 4.9%.

The income of the balance treasure is going along with the market. The interest rate of short-term funds will drop, and the income of the balance treasure will also decline. If the funds are tight and interest rates rise, its yield will also increase slowly. Just because we are big enough, the market's impact on us is lagging behind.