(1) The credit plan is the quantitative calculation and structural control of the source and use of credit funds in a certain period, and it is an integral part of the national economic plan. Beginning in 1979 – the implementation of the method of contracting the credit balance. After 1984—implemented the credit fund management method of “unified planning, division of funds, actual loans and deposits, and mutual financing”, and the funds of the central bank and specialized banks were separated. After 1995 – the central bank formulated the asset-liability ratio management method for commercial banks, gradually improved the credit planning system, and finally completely transitioned to proportional management. For a long time, credit plans have been managed in the form of loan limits, which to a certain extent is conducive to controlling the money supply, maintaining price stability, and promoting the sustainable, rapid, and healthy development of the national economy. However, because the loan resources are not allocated according to the laws of the market economy, it is not conducive to fundamentally improving the quality of credit assets.
(2) Credit policy is a policy formulated by the Central Bank following national macroeconomic policies, industrial policies, regional economic development policies, and investment policies, as well as in conjunction with fiscal policies and policies on the utilization of foreign capital, etc. The formulation of credit policy should follow the basic principle of supporting the superior and limiting the inferior, and its main goal is to improve the credit structure, promote the adjustment of the economic structure, the progress of science and technology, and the optimal allocation of social resources.
What is a securities investment fund?
An investment fund is a collective investment system that shares benefits and risks. A securities investment fund raises funds by publicly issuing a certificate to the society and using the funds for securities investment. The certificates issued to the public are called fund certificates, also known as fund shares or fund units.
Whoever holds this certificate shall enjoy the ownership of assets, the right to distribute income, the right to dispose of the remaining property and other related rights to the Fund, and assume corresponding obligations.
What are the characteristics of investment funds?
One is to integrate a large number of scattered and small funds into a whole;
The second is to entrust the operation and management of experts with rich securities investment knowledge and experience, which can save transaction costs and improve investment returns;
The third is to diversify investment and reduce investment risks through investment portfolios.
What kinds of investment funds are there?
There are various types of investment funds, which can be divided according to different criteria. According to the organizational form, it can be divided into contract funds and company funds; according to whether the beneficiary certificate can be redeemed, it can be divided into closed-end funds and open-end funds; according to the investment industry, it can be divided into securities investment funds, industrial investment funds, etc.
Contractual funds: Contractual investment funds are formed according to the Trust Law, that is, the trustee, the trustee, and the beneficiary enter into a trust investment contract, the fund management company uses the trust property according to the contract, and the trustee (trust company or bank). ) is responsible for the custody of the trust property and the investment results are enjoyed by the investors (beneficiaries).
Company-type fund: A company-type fund is an investment fund established by the “Company Law”. Investors purchase company shares and become shareholders. The shareholders’ meeting elects directors and supervisors, and then the directors and supervisors vote to appoint an investment management company to manage the company. asset. The sale of such fund shares is generally entrusted to a specialized underwriting company.
Open-end fund: An open-end fund is a fund whose issuance amount is variable, and the total number of fund shares (units) can be increased or decreased at any time.
Closed-end fund: Closed-end funds determine the total amount of issuance in advance. During the closed period, the total number of fund shares (units) will remain unchanged. After the issuance, it can be listed and traded. Investors can buy and sell fund shares (units) through securities companies.
The 1992 European Monetary System Exchange Rate Mechanism (ERM) crisis, the 1994 international bond market turmoil, especially the Asian financial crisis that broke out and spread in 1997, and the 1998 Long Term Capital Management (LTCM) was on the verge of collapse. Society’s focus is on institutional investors, especially hedge funds. Hedge funds have been accused of exacerbating the wild swings in asset prices through highly leveraged trading, or by driving other market participants through the herd mentality.
Not long ago, the United States released a report recommending strengthening the supervision of hedge funds, which shows that the attitude of the US government to hedge funds has been greatly changed. The U.S. government has been strongly aware of the harm to the stability of the entire financial market caused by the high-risk operation of hedge funds, so it plans to formulate measures to require hedge funds to strengthen information disclosure, and also require investment banks and other financial institutions that provide loans to hedge funds to disclose their relationship with hedge funds. The Fund’s trading profile and the level of risk it faces.
What is a hedge fund? What are its development, structural characteristics, and investment strategy?
A hedge fund is a derivative fund, that is, a hedge fund can use a variety of investment strategies, including the use of various derivatives such as index futures, stock options, forward foreign exchange contracts, and even other financial leverage. You can invest in financial instruments, and you can also invest in the stock market, bond market, foreign exchange market, and commodity market in various places. Compared with commodity futures funds and securities funds in a specific market range or instrument range, hedge funds have a wider range of operations.
Origin and Development of Hedge Funds: The first limited partnership Jones hedge fund originated in 1949. The fund implements an investment strategy that combines short selling and leveraged lending. Short selling refers to selling borrowed securities and then repurchasing them when prices fall, capturing capital appreciation. Leveraged investment is to increase the value of the investment by borrowing to increase the income, but at the same time, it also has the risk of exacerbating the loss. The combination of the two forms a stable investment strategy. In the late 1980s, the development of financial liberalization provided broader investment opportunities for the fund industry and made hedge funds enter another stage of rapid development. In the 1990s, with the gradual removal of the world inflation threat and the maturity and diversification of financial instruments, hedge funds developed more vigorously.
There are currently three institutions engaged in the accumulation and collation of hedge fund data: “Managed Account Reports Inc.” (MAR), “Hedge Funds Research” (HFR), and “Hedge Fund Consultants” ( Van Hedge Funds Advisor, VHFA).
Unlike traditional funds, hedge funds are not obliged to disclose fund status to relevant regulators and the public. The reason for this is inseparable from the partnership-based organizational form of hedge funds, and the operation mode of evading supervision as much as possible based on offshore registration. The secrecy and lack of regulation of hedge fund operations are some of the reasons why hedge funds harm financial markets.
Hedge funds are divided into 8 categories:
(1) Macro funds. Such hedge funds trade on a global scale using investment instruments such as stocks and currency exchange rates according to changes in the international economic environment. Tiger Fund, Soros Fund, and LTCM are all typical “macro” funds.
(2) Global funds. More focused on picking stocks in individual markets with a bottom-up approach. They use fewer index derivatives than macro funds.
(3) Buy short (long trade) funds (long-only funds). They are structured like hedge funds, with profit incentive fees and leveraged investments, but are traditionally traded in shares.
(4) Market-neutral funds. Such funds use offsetting short selling to reduce risk.
(5) Short sales funds. The fund borrows securities it deems overvalued from the brokerage, sells them in the market, and then hopes to repurchase them back to the brokerage at a low price.
(6) Restructuring drives funds. Investors in such funds aim to capitalize on each corporate restructuring event.
(7) Mortgage securities funds.
(8) Funds of funds. That is hedge funds that invest in hedge funds.
Hedge Fund Assets and Registration:
According to MAR’s conservative estimates, the two largest hedge funds, Tiger Fund and Soros Fund had assets under management of more than $20 billion at one point during August 1998. Among the 1,115 hedge funds at the end of 1997, 569 were registered in the United States, accounting for 51%, and the rest were mainly registered on several islands in the Caribbean offshore financial center, mainly to take full advantage of the various taxes provided by these islands. and legal benefits. Hedge funds, especially large macro funds, evade supervision, which is an important reason why they can unscrupulously attack the international financial market to make huge profits.
Hedge funds have three distinct characteristics:
First, the fund manager’s remuneration is derived from the realized profit distribution, which is different from the traditional fund that charges a certain percentage of management fees based on total assets.
Second, hedge fund managers, as limited investment partners, invest their funds in the funds they manage. In traditional mutual funds, fund managers generally do not put their capital into the funds they manage. The above two characteristics directly affect the fund manager’s return objectives and risk exposure.
Third, using leveraged investment to maximize profits has become the most commonly used investment method for hedge funds. According to the different multiples of leverage used, hedge funds can be divided into three categories according to the level of investment risk they bear. One is low-risk funds, mainly engaged in market investment in the United States and foreign countries. These funds rarely use more than twice the capital of partners. They buy and sell stocks like other traditional funds. Short, they are true “hedge” funds. The second is the hybrid fund, which usually has a leverage ratio of no more than 4:1 and speculates in the stock market, bond market, and currency market. The third is a high-risk speculative fund, which adopts a high-leverage investment strategy, and the ratio of borrowing to partner capital is usually as high as 30:1. LTCM is the most typical highly leveraged fund. It has investment leverage of up to 30 times on its balance sheet. High leverage is one of the most direct and important factors for hedge funds to disrupt the international financial market order and lead to international financial turmoil. It, together with the mystery of fund actions, constitutes the basis for hedge funds to be harmful to the market.
Residential Mortgage Securitization
What is mortgage securitization?
To diversify the loan risks faced by financial institutions when issuing residential mortgage loans, a common method in the world is to implement residential mortgage loan securitization.
The so-called housing mortgage loan securitization is to convert housing mortgage loans issued by financial institutions into mortgage loan securities (mainly bonds), and then sell these securities to market investors in the capital market to finance capital and make housing loans risky. Decentralization is borne by many investors.
In essence, the issuance of residential mortgage loan securities is a kind of creditor’s rights transfer behavior of the mortgage loan institution, that is, the loan issuer transfers all the rights to the mortgage loan borrower to the securities investors. A mortgage-backed security is a mortgage-backed security (MBS), and the borrower’s monthly repayment cash flow is the source of income for the security.
Mortgage securitization is just one form of asset securitization. Asset securitization is a big trend.
What is the significance of residential mortgage securitization?
First, mortgage securitization diversifies the risk of financial institutions issuing mortgage loans. Mortgage loan securitization adjusts the asset-liability structure of financial institutions and diversifies loan risks, thereby improving the quality of their assets and facilitating the further development of their business activities.
Secondly, the securitization of housing mortgage loans expands the funding sources of housing mortgage loans of financial institutions, which is conducive to providing necessary financial support for individuals to purchase houses.
Third, the securitization of residential mortgage loans can also promote the development of the residential industry. The securitization of housing mortgage loans allows a large number of funds to flow into the housing industry through the capital market, which is conducive to activating the housing industry and supporting individual housing consumption as a new economic growth point.
Finally, the securitization of residential mortgages increased the investment vehicle in the securities market. The issuance of residential mortgage-backed securities opened up new investment channels in the securities market. Because residential mortgage-backed securities are secured and mortgaged by houses, the bonds have a higher credit rating, so investors have a better return and lower risk investment method.
All in all, all these are conducive to the smooth development of personal housing consumption in my country and will provide strong support for expanding domestic demand and promoting economic growth.
What technical problems exist in the securitization of residential mortgage loans?
The essence of the securitization of housing mortgage loans is to sell the creditor’s rights of housing mortgage loans in the securities market after technical processing. It involves the following aspects:
(1) How to centralize mortgage loans, classify and standardize them according to the size of loan risks and benefits.
(2) How to design standardized securities that can be circulated in the securities market according to standardized mortgage loans.
(3) Management of mortgage bonds.
(4) Issue of securities.
(5) Relevant legal, accounting, and tax issues.
A bond is a debt certificate that carries interest. The issuer promises to repay the specified amount of principal on a definite date in the future (usually several years after the bond is issued), while periodically paying a certain amount of interest.
Bonds are issued by countries, financial institutions, international organizations, and industrial and commercial enterprises by certain procedures. By issuing bonds, they directly raise funds widely from society. Bonds are like IOUs in a lending relationship, but the lending relationship is securitized. Bonds can be transferred midway, but IOUs are generally not transferable.
Types of bonds:
There are many types of bonds, and many types of bonds can be divided according to different standards. Below are some common types of bonds.
Floating rate bonds:
Unlike fixed-rate bonds, floating-rate bonds have interest rates that are calculated based on other interest rates according to a formula. Floating-rate bonds in the international financial market generally float based on the 3-month or 6-month London Interbank Offered Rate (LIBOR) plus a certain interest rate spread, which changes with changes in market interest rates.
Bonds that are backed by assets or a combination of assets specified by the bond issuer, which can be anything from accounts receivable to collateral.
Mortgage-backed bonds: Bonds secured by a series of collateral.
Subordinated bonds: Bonds that are paid after other, more senior bonds, usually with higher interest rates than senior bonds.
Allow investors to convert bonds into other securities, usually common or preferred stock, of the issuing company under certain conditions. Convertible bonds combine the characteristics of debt and equity and are therefore referred to as ” hybrid securities”.
This is a relatively common innovation in financial instruments. However, changes to the tax code have affected the market’s enthusiasm for it. Zero-coupon bonds pay no interest and, like treasury savings bonds, are sold at a steep discount to par. When the bond matures, the sum of the interest and the purchase price is the bond’s face value. Zero-coupon bonds are very volatile, and there’s another downside: Investors don’t earn interest in cash on their zero-coupon investments, but they’re also included in the investor’s taxable income.
Before the maturity date, part or all of the bond principal can be repaid in advance according to the conditions stipulated at the time of issuance.