Bloomberg on China's Yu'E Bao MMF
Bloomberg writes "China's Biggest Money Fund Bracing for More Liquidity Shocks." The article says, "China will face more frequent liquidity shocks this year, according to the manager of the nation's biggest money-market fund, which plans to hold extra cash to protect against the risk of rising redemptions. The government's efforts to curb risk in the financial system and support the sliding yuan are likely to 'over-stretch a rope that's already tight,' said Wang Dengfeng, who manages the 800 billion yuan ($115 billion) Yu'EBao fund at Tianhong Asset Management Co. 'The biggest challenge for us this year is to appropriately manage our own liquidity risks -- that we have ample cash to meet demand when large redemptions occur,' Wang said in an interview in Beijing last week. 'We'll set aside much more cash than needed, rather than allocating into high-yielding assets.'" The Bloomberg piece adds, "Yu'EBao is sold on Alibaba Group Holding Ltd.'s Alipay platform, and can be used to make credit-card payments and buy products. That means that most of its investors -- who numbered some 300 million as of June last year -- are individuals rather than cash-starved companies or financial intermediaries. In fact, Yu'EBao has been a beneficiary of the recent market volatility: the spike in borrowing costs is driving up money-market fund returns, attracting inflows in December, Wang said, without being more specific.... The average seven-day return for Yu'EBao investors was last at an annualized 3.37 percent, versus 2.52 percent at the end of November, data from Tianhong's website show. The pool is the world's fourth-largest money-market fund, according to data compiled by Bloomberg." Bloomberg also writes, "Tianhong is the biggest money manager in China, overseeing 845 billion yuan in assets at the end of last year, according to a statement on its website. Almost all of that is in the Enhanced Income Treasure Money Market Fund, marketed as Yu'EBao. Bank deposits and reserves accounted for 80 percent of the fund's investments at the end of Sept. 30, while bonds account for 18 percent, according to its third-quarter report. Holdings by institutional investors accounted for only 0.35 percent at the end of June."
