Money market funds drive growth in China’s asset management business

08 July 2014   Category: News, Asia, China, Global   By Hui Ching-hoo

Money market funds (MMFs) continued to play a key role in the growth of mainland China’s asset management industry during the first half of the year, which financial pundits partly attributed to a lack of innovative investment products available on the market.

Citing figures from financial website howbuy.com, Shanghai Morning Post reported that Beijing-based Tianhong Asset Management, which paired up with ecommerce giant Alibaba Group to launch the online fund platform Yu’e Bao, trumped conventional asset managers with total AUM of 586.1 billion RMB (US$93.77 billion) as of the end of June.  

The assets overseen by Tianhong considerably dwarfed its nearest rival, China Asset Management Corporation, by 270 billion RMB.

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.

In May, Zhejiang Alibaba E-Commerce Co, an offshoot of Alibaba Group, received regulatory approval to buy a majority stake in Tianhong.

Lily Liao, China fund research centre analyst at Morningstar, told Asia Asset Management that fixed income funds and MMFs have been gaining traction in China due to the bearish A-share market: “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.”

The AUM of China’s fund industry increased by less than 10% in the first half, and Ms. Liao said that the market lacked a focal point in terms of innovation and fundraising, which she blamed on product homogeneity. However, she added that she expects market players will put more effort into developing alternative fund products in order to fill this void.

Assessing the industry landscape, she anticipated that share ownership reform for Mainland asset managers would be ongoing, while more asset management arms of banks or life insurance companies will be keen to participate in the mutual fund business.

Ms. Liao said that it was unlikely any would see demand similar to that of Tianhong as the market will become more competitive and polarised.