The Ant Group money market fund fell to its lowest level in more than four years as users shifted their cash flow amid China’s crackdown on Jack Ma’s payments group.
Funds invested in Ant’s flagship fund Yu’e Bao fell 18% in the first three months of the year to 972 billion Rmb ($ 150 billion) as the group pushed users to spend to funds from other providers, according to data released Thursday by his Tianhong. Asset management subsidiary. The money market fund, once the largest in the world, serves as the primary repository for leftover money stored by hundreds of millions of users of the Ant’s Alipay payment app.
The fall came as Chinese authorities stacked pressure on Ma’s internet empire since Ant’s initial public offering of $ 37 billion, which would have been the largest in the world, abruptly ended in November. Ma has barely been seen in public since the list was scuppered and regulators fined Alibaba, Ant’s sister e-commerce group, posted a record $ 2.8 billion for anti-competitive behavior this month.
Ant was ordered to “actively downsize” Yu’e Bao as part of a restructuring agreement struck with Chinese authorities last week. Regulators have long been concerned about Yu’e Bao’s immense size, fearing that a wave of buybacks could lead to systemic financial risks.
The flagship money market fund is managed by Tianhong and brought in 690 million investors at the end of 2020.
Alipay users said they recently received notifications encouraging them to transfer their savings elsewhere.
28-year-old law firm employee Constance Zhou said she transferred 100,000 Rmb at the end of January after receiving an in-app notification highlighting interest rates higher with another fund. “I looked at the difference and just transferred it,” she said, adding that the banks’ investment products offered better interest rates than Alipay.
Yu’e Bao offered annual interest rates of over 6% when it launched in 2013 by investing in assets, including bonds. But yields have fallen closer to 2% in recent months as the fund has prioritized safer, more liquid assets such as bank deposits, and as interest rates have fallen more broadly.
Kevin Kwek, analyst at Bernstein Research, said Yu’e Bao made users keep coming back to the app, so a “forced cut” reduced its attractiveness.
Ant had previously abandoned the marketing of its own financial products to serve as a platform for other groups to access its huge clientele. The Yu’e Bao platform markets more than two dozen money market funds from third-party asset managers.
Yu’e Bao is part of Ant’s investment business, which generated Rmb11 billion in turnover in the first six months of last year, or 16% of the group’s total.
Tianhong called the decline in assets “within the normal range” and said that similar fluctuations in Yu’e Bao’s size had occurred before. He added that the fund “operated in a stable manner and that the downscaling was not necessarily linked to the operational risk of the fund”.
Additional reporting by Nian Liu and Sherry Fei Ju in Beijing