Alibaba’s Yu’e Bao becomes world’s largest money market fund

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Alibaba’s money market fund, Yu’e Bao, has surpassed JPMorgan Chase’s U.S. government market fund of $150 billion to become the world’s largest money market fund.  According to the Financial Times, the four-year-old Yu’e Bao fund grew 41 percent in the first quarter, breaking 165 billion US dollars.

Yu’e Bao, which means “leftover treasures” was launched in 2013 as a way to invest money left over from online payments. The company now has more than 260 million users with the vast majority of users being under the age of 30.

The Financial Times reports that China’s money market fund industry, which is only a decade old, has been growing rapidly, driven by high demand for online funds managed by internet companies such as Alibaba, Tencent, and Baidu.

Unlike traditional banks, which usually offer an interest rate of 0.35 percent a year for an ordinary demand deposit in a savings account, Yu’e Bao (link in Chinese) offers an annualized seven-day yield of 3.96 percent to investors. There’s no minimum amount, and customers can withdraw their cash anytime. The company says that more than 70 percent of individual Yu’e Bao accounts have balances of less than 1,000 yuan ($145) while 15 percent have less than 10,000 yuan ($1,450).

More than 64 percent of the funds that Yu’e Bao invests reportedly goes into bank deposits, while the rest are short-term investments, policy bank bonds, company bonds, and interbank deposits.

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