Caixin
Apr 26, 2018 07:24 PM
FINANCE

Growth Picks Up at World’s Largest Money Market Fund

Founded in 2013, Yu’e Bao has ballooned in size as millions of users migrate to its affiliated online-payment application, Alipay. Photo: VCG
Founded in 2013, Yu’e Bao has ballooned in size as millions of users migrate to its affiliated online-payment application, Alipay. Photo: VCG

*Yu’e Bao’s assets grew by 6.92% in the first quarter, up from the last quarter of 2017, but down from 8.9% in the third quarter

*The country’s money market funds as a whole grew by 23.69% and 6.79% in the third and fourth quarters of last year

Growth of the world’s largest money market fund picked up speed in the first quarter following a subpar expansion in the second half of 2017 amid regulatory pressure to cap investor contributions.

Yu’e Bao, controlled by Alibaba affiliate Ant Financial Services Group, increased its assets to 1.69 trillion yuan ($267.3 billion) at the end of the first quarter, up 6.92% from the end of last year, according to a quarterly report from fund manager Tianhong Asset Management Co. Ltd.

On average, China’s money market funds grew 23.69% and 6.79% quarter-on-quarter in the third and fourth quarters of 2017, according to data from the Asset Management Association of China (AMAC). In comparison, Yu’e Bao grew at 8.9% and 1.29% quarter-on-quarter during the same periods. AMAC has not released first quarter data, but estimates the money market fund industry grew by 15.89% during the first two months of this year.

After Yu’e Bao overtook JPMorgan Chase & Co.’s $150 billion U.S. government money market fund as the world’s largest money market fund in April 2017, it introduced a series of investment caps to curb its own growth as regulators grew wary of liquidity risks.

Under pressure from regulators, Yu’e Bao reduced the individual contribution limit to 250,000 yuan from 1 million yuan in May, before further reducing it to 100,000 yuan in August. In December, Yu’e Bao put in place an additional individual daily contribution limit of 20,000 yuan.

The latest self-imposed curbs, introduced in February, include suspending automatic transfers from an Alipay account to Yu’e Bao, and capping the total daily contributions from all Yu’e Bao accounts, without revealing what the exact cap is.

But there is at least one loophole. Caixin found that redeeming money invested through Alipay into other funds can be automatically directed to Yu’e Bao. These funds are not subject to February's cap on daily contributions.

Founded in 2013, Yu’e Bao, which means “leftover treasure,” has ballooned in size as millions of users migrate to its affiliated online-payment application, Alipay. Most Alipay users transfer payments and refunds from online transactions into Yu’e Bao to earn returns that far exceed bank deposit rates.

Contact reporter Liu Xiao (liuxiao@caixin.com)

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