The money market fund, tied in to Alibaba’s online payment platform, is the world’s largest with RMB 1.43trn ($210bn) of assets under management.
Inflows into the product also helped grow overall onshore mutual fund assets to RMB 10trn ($1.5trn) in assets in the first half, up 10% from RMB 9.16trn at the end of 2016, according to state-run Xinhua News Agency.
A-share equity funds gained on average 4.8% to the end of June, the report said.
The Yuebao money market fund is managed by Tianhong Asset Management and tied to online payment platform Alipay, both owned by Alibaba’s founder Jack Ma.
Tianhong remains the largest fund house in China with RMB 1.5trn AUM, meaning 95% of its assets are from the Yuebao product. China’s second largest manager is ICBC Credit Suisse with an AUM of RMB 700bn, followed by E Fund, with RMB 485bn. Both firms focus on active investment strategies.
Money market vs bonds
The increasing domestic investment in money market funds is linked to capital flight from China’s onshore bonds.
“Stricter regulations to reduce financial market leverage and accompanying tighter liquidity conditions has resulted in one of the largest selloffs in the onshore Chinese bond market in recent years,” said Angus Hui, Schroders’ Asian fixed income fund manager, as reported earlier.
Domestic investors have shifted attention to the almost risk-free money market funds, which have seen annual yields grow to nearly 4% in July from about 2% in the middle of 2016.
In terms of offshore investments, QDII funds, which domestic institutions use to invest in overseas markets through an assigned quota, were the best performing of all asset clases. QDII funds returned 7.2% in the first six months of this year, the Xinhua report said.
The outperformance of overseas markets has also contributed to the improving sales of Hong Kong-domiciled funds selling in mainland China through the Mutual Recognition of Funds (MRF) program.
One of the northbound MRF funds, the BOCHK All Weather China High Yield Bond Fund, which stopped onshore subscription last month because capital inflows hit the regulatory limit, announced it would resume sales yesterday.
