Back in August of 2016 I wrote to my readers about the Crisis at Vanguard, where funds are getting so big they close to new investors. That doesn’t seem to be a concern for China’s massive Ant Financial Services Group. The Group’s Tianhong Yu’e Bao fund manages 1.13 trillion yuan for 588 million investors. That’s more investors than the entire populations of the United States, Mexico, Canada, and the UK combined. The fund has grown so large, China’s government is worried it could destabilize the country’s economy. Stella Yifan Xie of The Wall Street Journal reports:
The fund, whose name means “leftover treasure,” was started in 2013 and became the world’s largest money-market fund in 2017. It lets users of Alipay invest their spare cash for short periods before they spend their money online. The fund’s seven-day annualized investment yield once topped 6% in its early years, thanks to its investments in bank certificates of deposits and other high-yielding products. Its annualized yield was recently 2.379%, still well above short-term Chinese bank deposit rates.
Many investors in the fund treat it like an online checking account, depositing money at all hours of the day and withdrawing funds whenever they need to spend money. Alipay, which has more than 700 million active users in China, lets people use their mobile phones to pay for everything from bus and taxi rides to meals and shopping online and in stores.
Tianhong Asset Management, an Ant subsidiary that manages the giant fund, said its investor base grew 24% last year, even though the fund’s assets under management shrank by 28% during 2018.
The fund’s size had reached 1.69 trillion yuan at its peak last March, worrying regulators about its potential risk to China’s financial system. Its manager has taken a series of steps to limit inflows and reduce its holdings of hard-to-sell assets, dropping its yields in the process. Alipay also started offering more than a dozen other money-market funds to its users, which has drawn money away from the Tianhong Yu’e Bao fund.
Read more here.