Both Reuters and The Wall Street Journal featured articles yesterday on China's massive Yu'e Bao money market fund, which saw assets decline in the latest month and which has begun redirecting assets into other money market funds, according to the two articles. Reuters writes that "China's money market funds shrink at end-March as curbs bite." They explain, "The combined size of China's money market funds shrank by 6 percent in March from February, suggesting regulators' efforts to rein in the sector's feverish growth has started to show results. The monthly fall follows a doubling in net assets during the previous year, which prompted regulators to impose curbs amid concerns that rapid growth in some money market funds could lead to systemic risks in case of massive redemptions." We review the two updates on China's largest money fund, as well as the ICI's latest money fund asset totals.
The Reuters piece explains, "China's money market funds swelled to 7.81 trillion yuan ($1.23 trillion) at the end of February, but fell to 7.32 trillion yuan at the end of March, according to the Asset Management Association of China, underlining the impact of government intervention. The government published rules last year to tighten liquidity management in the mutual funds industry, and guided individual funds, including Ant Financial's money market fund Yu'e Bao, to place daily caps on subscription volumes. Yu'e Bao, the country's largest money market fund, saw its net assets jump more than 40 percent to 1.69 trillion yuan during the first quarter."
The Journal's piece, entitled, "Overflowing With Cash, The World's Largest-Money Market Fund Is Trying a New Tactic tells us, "The world's largest money-market fund has too much cash to manage. Billionaire Jack Ma's Ant Financial Services Group on Thursday said it would offer two additional money-market funds to customers who have been parking their spare cash in its hugely popular online fund, the latest attempt by the company to limit flows into the giant fund."
It continues, "The fund known as Tianhong Yu'e Bao, which a unit of Ant created in 2013, had $266 billion in assets under management as of March 31, after nearly doubling in size last year. The yuan-denominated fund is more than twice the size of the largest U.S. dollar money-market fund.... Ant ... said starting Friday it will add two funds managed by third-party asset management firms to its Yu’e Bao platform, whose name stands for 'leftover treasure'."
The WSJ says, "The fund's massive size, however, has drawn scrutiny from regulators who have labeled it as systemically significant. The fund has drawn a flood of money by offering generous yields, which were recently 3.96% on an annualized basis, well above interest rates on bank deposits. Like other Chinese money-market funds, it invests primarily in certificates of deposit issued by Chinese banks, short-term government securities and commercial paper."
They add, "Ant said in a statement that individuals can invest in two money-market funds managed by Bosera Asset Management Co. and Zhong Ou Asset Management Co., two relatively well-known Chinese fund managers that aren't affiliated with it. Bosera's fund was set up in 2004, has $496 million in assets and seven-day annualized yield of 4%. Zhong Ou's fund, which has been around since 2015, has $765 million under management and a seven-day annualized yield of 4.45%. There will be no limits on what individuals can invest in the two funds. Tianhong's Yu'e Bao fund will continue to impose daily and aggregate investment limits, said Le Shen, a spokesman for Ant."
According to Crane Data's analysis of the Investment Company Institute's quarterly Worldwide mutual fund data, China ranks as the second largest money fund market in the world, breaking above the $1 trillion level in total assets in Q4 2017. China has $1.035 trillion, or 17.5% of the world's money fund assets (up $418 billion, or 68% in 2017) vs. the world's largest market, the U.S., with $2.847 trillion, or 48.3%. Ireland ranks third with $584 billion, followed by France with $413 billion and Luxembourg with $394 billion. (See our March 28 News, "`Worldwide Money Fund Assets: US Jumps in Q4, China Breaks 1.0 Tril..")
In other news, ICI released its latest "Money Market Fund Assets" reports yesterday. Their numbers show money fund assets rebounding in the past week after 3 straight weeks of tax-driven declines. Year-to-date, MMF assets have decreased by $38 billion, or -1.3%, but they've increased by $156 billion, or 5.9%, over 52 weeks.
ICI writes, "Total money market fund assets increased by $7.59 billion to $2.80 trillion for the week ended Wednesday, May 2, the Investment Company Institute reported.... Among taxable money market funds, government funds increased by $2.02 billion and prime funds increased by $3.01 billion. Tax-exempt money market funds increased by $2.55 billion." Total Government MMF assets, which include Treasury funds too, stand at $2.208 trillion (78.9% of all money funds), while Total Prime MMFs stand at $458.0 billion (16.4%). Tax Exempt MMFs total $133.3 billion, or 4.8%.
They explain, "Assets of retail money market funds increased by $7.41 billion to $1.01 trillion. Among retail funds, government money market fund assets increased by $3.14 billion to $625.60 billion, prime money market fund assets increased by $2.27 billion to $262.47 billion, and tax-exempt fund assets increased by $1.99 billion to $125.80 billion." Retail assets account for over a third of total assets, or 36.2%, and Government Retail assets make up 61.7% of all Retail MMFs.
ICI's release adds, "Assets of institutional money market funds increased by $178 million to $1.79 trillion. Among institutional funds, government money market fund assets decreased by $1.12 billion to $1.58 trillion, prime money market fund assets increased by $738 million to $195.52 billion, and tax-exempt fund assets increased by $561 million to $7.51 billion." Institutional assets account for 63.8% of all MMF assets, with Government Inst assets making up 88.6% of all Institutional MMFs.
