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Chapter 27 Trust investment, a money game with credit as a bargaining chip (2)
Facing trust, a new investment and wealth management method and numerous trust varieties, how should investors respond and choose the appropriate investment varieties according to their own conditions?
For now, most of the trust products on the market are fund trust products and securities investment funds.After several years of development, securities investment funds have gradually been accepted by people. There are many introductions to their investment methods and strategies, so I won’t repeat them here. Here we mainly introduce the investment methods of fund trust products.Generally speaking, when investors choose this type of product investment, they should mainly consider the following factors.

[-]. The strength and credibility of the trust company that issues the trust product (plan)

Trust income comes from the distribution of trust companies to investors according to actual operating results, and the risk of trust financial management is reflected in the difference between expected income and actual income.Investors may obtain substantial profits, but may also lose principal.There are two major reasons for the risk: first, the trust company has fulfilled its duties, but unexpected changes in the project or other uncertain factors occur; second, the trust company has made operational mistakes in the management and disposal of trust properties, or violated laws and regulations.Since my country's trust industry is in the initial stage of development, and trust companies focus on establishing good financial management performance and establishing popularity, the second type of reason is less likely to occur.As for the first reason, it can best reflect the financial management level of the trust company.Therefore, choosing a trust product from a trust company with strong strength and good reputation is the prerequisite for successful investment in trust wealth management products.

[-]. The direction (or field) of fund investment in trust products (plans)
This will directly affect the income of the beneficiary trust.For the selection of fund trust products (plans), project assets with relatively stable cash flow and management costs should be selected for investment or loan, such as commercial buildings, major construction projects, chain stores, hotels, amusement parks or tourism projects, as well as certain scale Some project assets that are not easy to depreciate, such as residential quarters, should not choose to invest in stock market or securities trust products, because the current laws of our country have actually classified securities investment trusts into the scope of fund law.If an investor needs the client to invest in securities, he can invest in mutual funds. Under the same risk conditions, mutual fund companies are more professional than trust investment companies; they should not choose to invest in the company's equity or project assets of the trustee's related parties. This is prohibited by trust laws.

Investors can conduct specific analysis of the trust wealth management products with clear capital investment launched by trust companies.However, some trust companies have issued some products that generally refer to similar trust wealth management products, without clearly informing the necessary information such as the specific project name, the ultimate fund user, and the method of fund use, but only generally introducing the general investment fields and scope of funds.Therefore, it is impossible to determine where and how much the risks of these products are, and no specific risk control measures can be seen. Investors have incomplete information and cannot make independent judgments.Investors need to be cautious about such products.

[-]. The term of trust products
Fund trust products have a term of at least one year.Generally speaking, the longer the term, the more uncertain factors, such as policy changes and changes in market factors, will have an impact on the income of trust investment projects.In addition, compared with other investment products in the market, the liquidity of fund trust products is relatively poor, which is what investors need to pay attention to.Therefore, when choosing a trust plan, you should combine the investment field and investment period of the product, and try to choose a trust product with a short investment period or good liquidity.

[-]. Your own risk tolerance
Like other financial products, trusts have risks.But the risk is always directly proportional to the benefit.Since the risk of current fund trust products is between bank deposits and stock investment, and the returns are relatively considerable, this type of product has been favored by the majority of investors since its launch, and there has been a scene of queuing up to buy, which fully demonstrates that fund trust products The product has its unique advantages.However, investors should also be aware that when a trust company handles fund trust, it is not allowed to promise that the funds will not be lost, nor can it promise the minimum return on trust funds.At the same time, because trust companies can make industrial, securities investment or venture capital investment in the form of leasing, selling, investing, lending, interbank lending, etc., different investment methods and investment purposes are very different, and the risks cannot be generalized.Therefore, investors should keep a clear mind when faced with a wide range of fund trust products (plans), comprehensively analyze the characteristics of specific products according to their own risk tolerance and combine the previous aspects, and invest selectively.

[-]. Several other issues that need attention

(1) Guarantee issues.For a guaranteed trust plan, the settlor (that is, the investor) should also check whether the subject of the guarantee is legal or not, and have a solid understanding of the business status of the guarantor.What needs to be reminded is that the client should not only look at the asset size of the guarantor, but the appropriate asset-liability ratio, good profit margin, stable cash flow and sustainable development of the enterprise are important considerations.As for whether the mortgage (pledge) in the guarantee is strong, whether the mortgage (pledge) ratio is safe, how about the credit rating and financial strength of the guarantor, whether there is insurance intervention, whether the special compensation fund is sufficient, and the size of the secondary beneficiary right among the beneficiary rights Special attention should also be paid to the status of obligations and obligations.Diligent trust companies, when issuing trust products, generally fully and objectively inform various specific risk factors, analyze their priorities, do not conceal them, and design effective risk control measures, such as third-party guarantees, offset (quality ) mortgage, insurance, and bank loan interest rate linked, etc.The more safeguards provided, the better the client's interests can be protected.

(2) The rights of the client (ie, the investor).According to the provisions of Article No. 20 of the Trust Law of my country: the settlor has the right to understand the management, use, disposal, and income and expenditure of its trust property, and has the right to request the trustee to make an explanation.The settlor has the right to inspect, transcribe or duplicate the trust accounts related to its trust property and other documents dealing with trust affairs.At the same time, Article 20 of No.20 also stipulates that: if the trustee disposes of the trust property in violation of the purpose of the trust, or causes losses to the trust property due to violation of management duties or improper handling of trust affairs, the settlor has the right to apply to the people's court to revoke the disposition, and has the right to request The trustee shall restore the original state of the trust property or make compensation; if the transferee of the trust property knowingly accepts the property in violation of the purpose of the trust, it shall return it or make compensation.In addition, Article [-] of No.[-] stipulates that if the trustee disposes of the trust property in violation of the purpose of the trust, or commits gross negligence in the management, use, and disposal of the trust property, the settlor has the right to dismiss the trustee in accordance with the provisions of the trust document, or apply to the people's court for dismissing the trustee.Therefore, by making full use of the rights granted to the settlor by law, investors can take corresponding measures according to the situation during the trust process, so as to control risks more actively.

(3) Taxation of trusts.In foreign countries, the trust tax system mostly follows the principle of trust conduit and the principle of no increase in tax burden.According to the principle of trust conduit, a trust is a channel for distributing trust benefits to beneficiaries, and the mutual transfer of property between trust parties has no real economic significance, so it is not taxed like ordinary transactions.According to the principle of non-increasing tax burden, although the trust itself is taxable as a taxpayer, the beneficiaries are exempted from double taxation for the income obtained from the distribution of trust income.At present, due to the lack of relevant supporting policies for trusts, the taxation of fund trust products is still blank, and there is basically no taxation.I believe that when my country establishes a trust tax system, it should adopt the principle of trust conduit and the principle of non-increasing tax burden that are popular abroad.But here we still want to remind investors: When investing in fund trust products, pay attention to the taxation of specific products to avoid increasing opportunity costs.

After several years of development, trust investment and financial management has gradually been recognized and accepted by people. However, since the property management system of trust is imported from abroad, and the laws and supporting policies related to trust are not perfect, investors When conducting trust investment and financial management, you should observe more and think more, choose the most suitable trust product for yourself, and create more wealth from it.

There are four types of risks in trust products
For different types of trust products, the risk evaluation criteria used will also be different. For example, for securities portfolio trust products, the risks are mainly divided into market risk, management risk, liquidity risk, etc., while for projects with relatively fixed returns For quasi-trust products, risks can be divided into interest rate risk, credit risk, liquidity risk, etc.

Taking project-type trust products with relatively fixed returns currently on the market as an example, the judgment of its risks requires investors to carefully review the relevant terms of the trust contract and clarify several risks involved.

[-]. One-year trust has no interest rate risk

For interest rate risk, the current domestic interest rate is generally adjusted once a year, and one-year trust products, such as the "Harbor New City Project" of Shanghai International Investment Corporation, and the "Binzhou Yellow River" and "Jiufa Mineral Water" launched by Zhongtai Trust, Generally, there is no interest rate risk.Trust products with a term of more than two years depend on the terms of the contract signed for the use of funds.From the perspective of the use of trust funds, trust products used for loans generally agree with the borrower that the loan interest rate will be adjusted together with the central bank, thereby avoiding interest rate risks. The agreement on interest rate changes determines whether interest rate risk can be avoided.

[-]. Look at credit risk from four aspects

The size of the credit risk determines whether the investor's principal can be recovered smoothly, and whether the expected income can be realized smoothly, so it is also the risk factor that investors are most concerned about.To judge credit risk, first look at the investment situation of the fund utilization project, especially whether the cash flow of the project within the trust period can fully undertake the obligation of repaying the principal and interest; secondly, look at the background and strength of the project company, whether it has sufficient financial strength When the project cannot repay the principal and interest normally, digest it within the company; Third, look at the credit enhancement methods used by trust funds, such as whether the mortgage (pledge) is good, whether the mortgage (pledge) ratio is safe, and how the guarantor’s credit rating and financial strength are. , whether there is insurance intervention, whether the special compensation fund is sufficient, the scale of the secondary beneficiary rights among the beneficiary rights, and the obligations assumed, etc.; Fourth, whether the credibility of the trust company that sells trust products has a government background, and whether the project operation experience is rich and the size of capital strength.Based on the "Four Looks" as the standard for judging credit risk, the trust products currently issued are generally better than those for real estate investment and other project types, and the trust products used in large enterprise groups are better than those used in general companies. Trusts, trusts with sufficient mortgages and guarantees are better than general credit trusts.

[-]. Liquidity risk

The liquidity risk of trust business is mainly manifested in the way of trust property exchange after the trust contract expires.If the client agrees to take back the original trust property in the trust contract, the trust investment company will have no liquidity pressure. However, most clients often require the trust property to be taken back in the form of cash. At the end, the non-cash assets must be realized.Especially when the trust business is operated in the form of mutual funds, the risk of liquidity is higher.If the trust company invests cash in low-liquidity assets, and the value of the assets has not been realized at the end of the trust period, the liquidation of the trust contract at this time will cause losses to realize the low-liquidity assets.

[-]. Moral Hazard

Moral hazard in the trust industry mainly refers to the possibility that the bad behavior of the trustee will bring losses to the settlor or the beneficiary.A trust is based on trust. As a trustee, a trust investment company should be loyal to the settlor and the beneficiary, and must never be motivated by personal gain at any time.It is common for trust and investment companies in my country to misappropriate trust funds, seek benefits for others other than the beneficiary, fail to dispose of trust property in accordance with the provisions of the trust contract, and cause loss of entrusted property, or operate beyond the authorized limit to cause loss to the trustor, etc.The existence of moral hazard violates the basis of the existence of trust and hinders the healthy development of the trust industry.

At present, there is no relatively complete regulatory mechanism for trust business, and trust financial management also has certain risks. When conducting trust financial management, it is necessary to make necessary preparations and use relevant measures to avoid risks and avoid undue losses.

(End of this chapter)