Yu’ebao, the investment service introduced by Chinese e-commerce giant Alibaba, has raised 250 billion yuan (US$41.3 billion), with the number of its users exceeding 49 million since its launch on June 13

February 4, 2014 Leave a comment

Yu’ebao generates considerable profits from bank deposits

Staff Reporter 

2014-01-28

Yu’ebao, the investment service introduced by payment service Alipay, a division of Chinese e-commerce giant Alibaba, has raised 250 billion yuan (US$41.3 billion), with the number of its users exceeding 49 million since its launch on June 13, 2013, reports Shanghai’s China Business News.

The investment service has become China’s largest investment fund but its scale has not proved to be an obstacle to its returns. Market observers stated that Yu’ebao generated at least 4 billion yuan (US$661 million) in returns for investors over the last eight months.

According to the financial report for the fourth quarter of 2013, Tianhong Asset Management’s investment in bank deposits and settlement reserves accounted for 92.21% of its total investment.

Assets that are due in less than 30 days make up 63.7% of the net value of fund assets. In other words, Yu’ebao allocated over 90% of its assets to bank deposits during the last quarter of 2013 and more than 60% of them were due in less than a month. Yu’ebao’s earnings mostly stemmed from its investment in bank deposits.

Bank deposits have become the favorite tool for newly established investment funds because of the high interest rate they offer.

Alibaba, which owns the third-party payment service Alipay, has benefited from Yu’ebao’s growing scale.

There are two major ways for investment funds to pay for their collaboration with internet firms. Investment funds have to either pay internet companies sales services a fee as they sell funds through them. Some internet companies also take a commission. Yu’ebao commissions are reportedly as high as 90%.

Alibaba has refused to disclose how it charges fees.

The other way was for the fund to pay internet companies a fixed amount of marketing fees and not have them charge further fees for the transactions.

 

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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