Yu’e Bao Becomes World’s Largest Money Market Fund

(Beijing) — An Ant Financial Services Group fund, amassing loose change held by China’s hundreds of millions of online spenders, has in less than five years snowballed into the largest money market fund in the world.

The assets of Yu’e Bao, the investment product of Ant Financial, reached $165 billion in the first quarter of this year.

This megasized fund, outstripping JPMorgan Chase & Co.’s U.S. government money market fund of $150 billion, largely comprises spare change from online payment accounts. Most users transfer small sums, such as payments from acquaintances and refunds from online purchases, into Yu’e Bao where they earn 3.96% interest.

More than 70% of individual Yu’e Bao accounts have balances of less than 1,000 yuan ($145), says the company, while 15% have less than 10,000 yuan.

Yields have taken a sizeable downturn since the fund’s inception in 2013, when it paid 6.2%. This has been due to falling interest rates in the nation’s drive to spur economic growth. Yu'e Bao still has an advantage over traditional banks because it is currently exempt from maintaining cash reserves against possible bad debt.

Over 64% of the funds are in the form of bank deposits, which earn higher rates of interest, and reserves, with the rest in short-term investments, policy bank bonds, company bonds and interbank deposits.

This story has been corrected to show that Yu'e Bao is not subject to cash reserve requirements like those imposed on commercial banks.

Contact reporter April Ma (fangjingma@caixin.com)