Archive for July, 2014

MMFs and China Investment Management

July 28th, 2014

China-economyThe asset management sector is continuing to grow in China, bolstered by Money Market Funds (MMFs) and innovative investment products. At the end of last month, Tianhong Asset Management (that joined Alibaba Group to launch Yu’e Bao), came in at a total AUM of 586.1 billion RMB (US$93.77 billion). Tianhong’s ballooning AUM has mainly been driven by its partnership with Alibaba, through which it launched its first online MMF, the Tianhong Zenglibao Monetary Fund, in June 2013.

Yu’e Bao, last year provided many investors with an alternative option to banks/stock markets for small asset management, as well as an understanding of liquidity and annualized rate of return. But things have changed in a year. Yu’e Bao’s returns are no longer satisfying those same investors. However, when Yu’e Bao was first created it was set to enable customers to place their money between online transactions. Now, it is facing competitors like Baidu (similar to Google) and Tencent.

China’s doing well…especially in the technology market. Today it houses four out of the world’s ten largest web/technology firms: Alibaba, Baidu, Tencent, and Xiaomi. Its bourgeoning economy specializes in the mobile/digital sector and the market cap for the region’s largest web firms is at over $400 billion. But perception is everything and the way foreigners see the region needs to change.

According to one analyst, Lily Liao, MMFs and fixed income funds have been doing well in China given the bearish A-share market. She pointed out that: “An increasing number of investors are switching their money from equities funds to MMFs, as they’ve become more risk averse under the grim A-share market conditions.”

There’s a lot more success waiting to happen in China – the country located to proceed with its innovation both in technology and other sectors.