Leftover Treasure | world's largest money market fund | EMQQ
The largest money market mutual fund in the world is probably not managed
where you think. It is not run by any of the three behemoth asset
management firms in the United States. Rather, it is overseen by Chinese
financial company Ant Financial, an affiliate of China ecommerce giant Alibaba
The fund is called Yu’e Bao, which means “leftover
treasure.” It lets users of Alipay, Ant Financials’s online payments
platform, invest their spare cash for short periods before they spend their
money online. Tianhong Asset Management, an affiliate of Ant Financial,
is the investment firm which manages the fund.
One-third of China invested in the fund
According to a Wall
Street Journal article, 588 million users of Alipay, Ant’s mobile-payments
network had money in the Yu’e Bao fund at the end of 2018.
Assets under management in the fund totalled 1.13 trillion yuan ($168.26
billion) at the end of last year, according to the article which also noted
that 114 million new investors put money into the fund.
Despite regulatory pressures
Assets in the fund
peaked around March 2018 with around 1.69 trillion yuan, according to the Wall
Street Journal, causing Chinese regulators to worry about the funds potential
systematic to China’s financial system. Not only did the fund’s assets
grow, but fund’s managers were investing in long-term, less liquid debt in
order to boost returns. In fact, at one point, the fund’s seven-day
annualised investment yield topped 6%, according to the article.
Fund management and
Ant began taking steps to address regulatory concerns. Ant started
offering money market funds from other firms which siphoned some of the money
that might have otherwise been invested in Yu’e Bao. The fund also
reduced its holdings of hard-to-sell assets, dropping its yields in the process
to around 2.37 in March of 2018.
Yet, Tianhong said its investor base grew 24% last
year, even though the fund’s assets under management shrank by 28% during 2018.
Ant Financial history
Ant Financial traces
its roots back to 2004 when Alibaba created Alipay to facilitate online
shopping. In 2010 Ant carved Alipay out of Alibaba after authorities said
the payment operation would need a new license to operate. The company
soon found itself holding large amounts of cash in escrow for customers
ecommerce accounts. Ant came up with the idea of letting customers stash
their idle Alipay money in an online money-market fund to earn income. In
2014 Alipay rebranded itself as Ant Financial.
While not a publicly
traded company, investors may gain partial access to Ant through holding
Alibaba which has a 33% stake in Ant Financial, according to the Financial
Find out more about EMQQ Emerging Markets Internet & Ecommerce UCITS ETF.
A money market fund (also called a money market mutual fund) is an open-ended
mutual fund that invests in short-term debt securities such as US Treasury
bills and commercial paper.
Xie, Stella Yifan, More Than a Third of China Is Now Invested in One Giant
Mutual Fund, The Wall Street Journal, 3/27/19
Lucas, Louise, Alibaba takes 33% stake in Ant Financial, The Financial Times,