Alibaba's four-year-old Yu'e Bao surpassed JPMorgan's U.S. government money market fund to become the world's largest, according to the Financial Times.
With 165.6 billion U.S. dollars under management, the Yu'e Bao fund has grown rapidly, reflecting the increasing importance and irreplaceable role of technology and e-commerce in China.
The payments affiliate company of Alibaba, Ant Financial Services Group found that a great deal of cash remains in customers' accounts, which could be used for a fund. The Yu'e Bao fund was therefore born in 2013 and swept the money in those accounts into it.
Due to Yu'e Bao's expansion, Tianhong Fund Management, the co-founder of Yu'e Bao has become the first fund company to break one trillion yuan (about 145 billion U.S. dollars). Moreover, Yu'e Bao's custodian bank CITIC Bank has also become the largest fund custody institution.
Peter Alexander, managing director of China consultancy Z-Ben Advisors commented that Yu'e Bao has "so many individual accounts they are able to have the power to negotiate with banks, and because the duration is very short, they also have high liquidity."
The large scale of the Yu'e Bao fund allowed it to "negotiate better rates, and banks need deposits to lend, and these are deposits," Alexander was quoted as saying by the Financial Times.
An analyst at Tianhong Fund Management said that their company gives top priority to the liquidity of capital flows, but they also take every measure to balance the yield rate, liquidity and financial risks.
"Yu'e Bao's large scale of capital brings challenge for investment, research and risk management," said Wang Dengfeng, a fund manager of Yu'e Bao. "On one hand, the fund holders have diverse demands, on the other hand, huge assets bring bigger pressure."
