Yu'ebao yield tops 24b yuan in 2014

Monetary fund sees big increases in users, investments

Beijing-based Tian Hong Asset Management Co said on Thursday that the yield of its Yu'ebao online monetary fund grew by twelvefold in 2014 from a year ago, while its user base increased to 185 million from 43 million in 2013.

The total yield of Yu'ebao stood at 24 billion yuan ($3.86 billion), compared to 1.79 billion yuan in 2013. The monetary fund, co-created by Alibaba's third-party payment system Alipay and Tian Hong Asset Management Co, realized an income to annual net worth ratio of 4.82 percent in 2014, compared to 2.87 percent in 2013.

Investment in Yu'ebao reached 578.9 billion yuan by the end of 2014, more than tripling the figure of 185.3 billion yuan by the end of 2013.

However, at a per account level, the earnings were less impressive with each account holding an average of 3,113 yuan with a yield of just 139 yuan.

The seven-day annualized return rate of Alibaba's Yu'ebao lingered below 5 percent after May 11, 2014, months after reaching an all-time high of 6.76 percent on January 2, 2014.

While Yu'ebao's yield is still higher than the yield of current accounts offered by Chinese banks, Chinese customers have found they have more options with higher yields to invest their money, according to experts.

Starting from the second half of 2014, the Chinese stock market has set off on a bullish run, with the Shanghai Composite Index climbing from around 2,000 points in the spring of 2014 to around 3,700 points this week.

"The stock market bull run and the emergence of other investment products certainly attracted some money away from Yu'ebao as capital flows quickly in pursuit of profit," Gan Li, director of Chengdu-based Survey and Research Center for China Household Finance, told the Global Times on Thursday.

"In the long run, the scale of Yu'ebao will gradually reduce as the monetary fund market is a fully competitive market with plenty of competitors," Gan said.

There have been concerns that the fund, founded on June 13, 2013, was losing its attractiveness as more financial institutions and Internet firms rolled out similar financial products.

On May 12, 2014, Ping An Insurance (Group) Co of China launched a similar fund product called 1qianbao, a mobile payment app that also features wealth management services similar to those of Yu'ebao.

Alibaba's rival Tencent rolled out online monetary fund Li­caitong in January 2014 and reportedly revealed in September 2014 that the fund had attracted 100 billion yuan since its launch.

An alarming development happened in the third quarter when Yu'ebao experienced a net redemption, with total investments reduced by 6.8 percent compared from 574.1 billion as of the end of the second quarter.

However, Li Chao, an industry analyst from another Beijing-based consultancy iResearch, believes the shrinking of investments in Yu'ebao has a limited effect as its main aim is not to provide a profit.

"Yu'ebao by nature is a value-added service offered by Alipay to customers who love to see their deposits grow by a tiny rate but mainly use Yu'ebao to deposit their money to conveniently purchase and use Alibaba services," Li said.

Yu'ebao's main function is to increase the retention of existing clients, rather than luring more customers, Li told the Global Times on Thursday.