1 year and $92 billion later, Alibaba’s massive mutual fund starts to stagnate

Chinese ecommerce giant Alibaba’s premiere mutual fund savings product Yuebao turned one year old this week, and announced it now holds RMB 574 billion (US$92 billion) in assets. That makes it the fourth-largest money market fund in the world, according to the company’s official blog.

That’s pretty impressive, but those assets are growing at a much slower clip now than they were in the first quarter of this year. This is due to a variety of reasons.

Yuebao’s annual yield fell below five percent for the first time in May. This is in part due to heavier pressure placed on Alibaba and its bank partners by China’s big four state-owned banks. New restrictions emerged around March, making it harder for customers to shift funds to online rivals, imposing transfer limits, banning new types of payments such as QR codes, and preeminently halting the launch of virtual credit cards. Alibaba chairman Jack Ma publicly slammed the central bank and big four for abusing their ‘monopoly’.

See: How does Alibaba respond when China cracks down on investment products? It launches another investment product.

Additionally, as China’s overall economy begins to slow, yields will probably dip across the board.

Secondly, Yuebao seemed to really take off around Chinese New Year, when cash gifts between friends and family are a common custom. This likely led to a surge in deposits and the inevitable lull in the months after.

Yuebao caught fire in China because of its higher yields and lower barrier to entry than the big four banks. There’s no minimum investment amount, and users can deposit funds directly from their Alipay accounts on both PCs and mobile devices. Alipay is China’s biggest third-party payment system used on the biggest ecommerce marketplaces in the country, Alibaba’s Taobao and Tmall, among many other online storefronts.

Alibaba recently acquired Tianhong Asset Management, the fund firm that ultimately runs Yuebao, to secure a stronger hold over its customers’ money.

Yuebao, as part of the Alipay arm, will not be part of the company’s impending US IPO.

Data for chart pulled from multiple sources including Nikkei Asian Review, Global Times, China Internet Watch, The Wall Street Journal, and Business Spectator.