In just more than half a year, the scale of the balance treasure has seen fissile growth, and as of now there are reports that the scale has exceeded 400 billion yuan, and the balance treasure now accounts for the total size of the market-wide money fund, which has also risen from 0 to about 40% at present.

The rapid development of the balance of treasure, mainly benefited from the high cost of funds in the second half of 2013, at the same time with the combination of the Internet platform also accelerated the process. In previous years, the overall average return of the money fund were around 3%, however, the end of 2013 so far the tight money has led to significantly higher interest rates, the money fund seven-day annualized return of more than 5% or even 6% abound.

How to achieve such high returns, the secret lies in the currency fund investment strategy behind. The balance of the corresponding Tianhong Fund ZengLiBao money market fund, its investment target is mainly interbank deposits, accounting for 80% to 90%, the rest of the part is invested in interest rate bonds, high-grade credit bonds, etc..

The liquidity crunch in the interbank market erupted in June last year, with market capital prices soaring. Since then, the bank's funds rate has been at a high level, and bank agreement deposits linked to the shibor rate are exactly the main assets that balance treasure invests in. Balance treasure through the form of agreement deposits will be lent to the lack of money in the form of banks, so the rate of return has been at a high level.

Tianhong Zenglibao fund manager said in the 2013 quarterly report, "short-term loan yields follow the trend of funds rate, also appeared to rise sharply. Bank deposit yields have also generally risen, especially across the end of the year and the Chinese New Year the demand for funds is very strong, returns have been maintained at a high level."

With the increasing ability of Balance Treasure to absorb money, it has basically been in a net subscription state since its launch. Such a high scale also makes it has a very high agreement deposit negotiation ability, benefit from this market change, in the tighter funds when many agreement deposit annualized return higher than 8% or even 9%.

At the end of 2011, the Securities and Futures Commission canceled the 30% cap on money fund investment in agreement deposits, and since then the main investment target of money funds have shifted to agreement deposits. Simply put, the balance treasure through the gathering of personal idle funds and then invested in the agreement deposit of the bank to get a part of the spread. The interest rate of personal demand deposits is only 0.35%, but through the balance of treasure can get 5% to 6% of the agreement deposit interest rate, which is exactly the balance of treasure to bring investors income spread.

From the data of the fund's four-quarterly report, the proportion of balance treasure's assets invested in agreement deposits is as high as 92.21%, and the proportion of its investment portfolio's assets with an average remaining maturity of less than 30 days to the fund's net asset value is 63.69%. In other words, more than 90% of Balance Treasure's assets are invested in agreement deposits, and the proportion of agreement deposits with a maturity of less than 1 month is more than 60%. This is much higher than the level of other similar money funds.

Data show that the balance treasure was established in May 2013, from December 26, 2013, so far the seven-day annualized return remained above 6%. Performance since its inception, according to Wind Information data, as of February 21, 2014, Tianhong Zengli Bao since its inception total return of 3.78%, annualized return of 5.19%, the average return of money market funds in the same period were 3.36%, 4.60%, the balance of the treasure's return is slightly higher than the average return of money funds.

As balance treasure customers are mostly ordinary investors, the average household size of its 70 million customers is only about 5,700 yuan, and the volatility of the return is also smaller. In fact, with the volatility of the money market, there have been two peaks in the seven-day annualization of the balance since its inception. The first occurred in the middle of the year, and then its returns have been around 4 percent, only to rise back to 5 percent at the end of the third quarter.

But inevitably, the drop in returns will lead to a marked decline in the attractiveness of money market funds, which will also face significant liquidity risks in the future.

With the upsurge in scale, the remaining term of the balance treasure investment portfolio has also seen a big change, and the remaining term of the portfolio has seen a significant shortening. As of the end of the fourth quarter of 2013, the proportion of portfolio assets with a remaining term of 30 days or less was as high as 63.69%, and the proportion of portfolio assets with a remaining term of 60 to 90 days was 29.71%. At the end of the third quarter of 2013, the highest percentage was 57.84 percent for assets with remaining maturities of 6 to 90 days, while assets with remaining maturities of 30 days or less accounted for only 23.57 percent.

Industry insiders believe that, benefiting from the deepening of interest rate marketization, the balance can be invested in agreement deposits to get higher returns for quite a long time. However, in the future, if the bank deposit and loan spreads reduce, the stability of deposit returns decline, the balance of the investment strategy and the underlying need to continue to innovate, otherwise the decline in yields is difficult to avoid.

How do funds flow in the

closed loop?

The process for customers to buy balance treasure is to automatically open an account at the time of the first subscription, and the balance treasure borrows Taobao's revenue platform to pay for it, thus making the purchase time even shorter for customers who are deposited within Alipay. But for new customers, you need to open an Alipay account first.

An Alipay-related person told the "First Financial", Alipay customers to buy the balance of the treasure, the funds directly into the Tianhong fund account, the daily realized gains are reflected in the Tianhong fund account.

Unlike ordinary money funds, Balance Treasure realizes both consumption and wealth management by being built into the Alipay account and supporting the shopping payment function. At the same time, Balance Treasure also supports fast cash withdrawal so that users can take it out at any time, making its liquidity comparable to that of demand savings.

The specific process, the user will deposit funds into the balance treasure, the balance treasure will be invested in the agreement deposit in order to obtain a higher return, at the same time, the fund through the term mismatch, every day there is a maturity of the assets used to cope with the redemption.

Normally, it takes 1 to 2 working days for the money from a money fund redemption to arrive. However, most of the fund companies have realized "t+0" redemption through their own funds advance, after the customer issued the redemption instruction, the fund company will use the super net banking system to transfer their own funds to the customer's bank account quickly to achieve "t+0" to the account. When the money really arrives, it will make up for the fund company's advances.

Since the fast redemption on the same day does not enjoy interest, the fund company's advanced funds can get the interest of the day. However, this model, the larger the size of the money fund, the fund company's own funds advances the greater the pressure. The balance of the treasure is the use of Alipay's huge pool of funds within the transfer to solve the problem of advancing funds, did not use the fund company's own funds.

In addition, the balance treasure through the provision of shopping payment function will be a large amount of money deposited in the Alipay account to reduce the pressure of advancing. If users shop on Taobao, they can use the balance treasure to settle directly, and the shopping payment is equivalent to redeeming the money fund.

But the funds are not really transferred out after the user's shopping payment, they are still in the Alipay account, and only after the final confirmation of receipt are the funds really transferred out to the seller's account. Balance through the shopping process and Alipay settlement time difference will be able to not have to advance funds to improve the efficiency of capital utilization. It is understood that the majority of users is the balance of the treasure as a "online shopping wallet" to use, the funds in the account is mostly used in Taobao shopping and consumption, the proportion of funds withdrawn is not high.

How to wind control?

The scale of the balance treasure has developed to 400 billion yuan, and its risk is also being concerned by the market. According to the above-mentioned Alipay sources, the risk of balance treasure is mainly focused on two aspects: investment risk, IT risk.

Balance since the launch of the treasure in addition to the "double eleven", has been in a state of net inflow of funds, once the future net inflow of funds trend breaks down, this is undoubtedly a huge challenge to its liquidity management capabilities.

Investment risk is manifested in, first of all, the risk of the fund's investment target. "We have also been controlling the fund manager's 'negative deviation', not to pursue high returns." The above Alipay related person said, because the scale of the balance treasure is getting bigger and bigger, it can be the product of the fund investment in the long, medium and short term various types of bank interbank deposits for allocation, to maintain a smooth rate of return.

Secondly, there is the issue of liquidity risk. in June 2013, the liquidity of the interbank market is tight, the liquidity risk is also transmitted to some of the money funds, these money funds were large redemptions, once below the net value.

For the liquidity problem, Balance Bao first set a holding limit of 1 million yuan for ordinary individual investor accounts to minimize the impact of the frequent entry and exit of large sums of money on the operation of Zenglibao funds.

Big data analysis, reasonable investment term allocation, scientific investment appraisal, and reasonable guidance and publicity are all preventive and control measures made by Balance Treasure for liquidity risk. Balance treasure has a very advanced big data analysis system support, every hour for a data update, every moment to track the redemption situation. At the same time, the specialized team through big data analysis, the daily subscription and redemption estimate so that the fund manager to keep enough cash position, and on this basis, add a part of the "safety cushion".

Balance also takes the measure of counterparty reserves under special circumstances. "In order to enhance the ability to raise short-term funds that can't be predicted in advance, Tianhong is strengthening its strategic cooperation with the financial market departments of commercial banks and the asset management departments of insurance institutions to provide short-term liquidity support to each other," the balance of its risk control, for example, with the China Development Bank to establish a strategic framework agreement in the areas of bond issuance and short-term liquidity support. strategic framework agreement in bond issuance and short-term liquidity support.

The counterparty reserve is also one of the mechanisms for Tianhong Zenglibao Fund to establish multi-party cooperation to cope with liquidity risks in extreme situations.

Balance treasure related introduction shows that, with China Development Bank to develop to meet the asset allocation needs of ZengLiBao fund of China Development Bond, on the one hand, to solve the dilemma of China Development Bond issuance in the period of the bond market decline; on the other hand, the fund has gained the right of China Development Bank to provide liquidity support in the case of funding constraints, due to the fact that the funds of China Development Bank generated from the proceeds of the issuance of debt, and proceeds from the issuance of debt must be set aside a portion of the position, and the source of its funds and the There is a fundamental difference between the interbank funds, therefore, when the interbank funds are tight, the CDB funds will still be more relaxed, and can provide more favorable support to the fund.

In addition, in order to guard against the risk of payment in extreme cases, the fund company and the bank signed an agreement deposit will have "early withdrawal without penalty" agreement. In other words, if the amount of redemption funds is greater than the maturity assets of the fund, then the fund can respond by early withdrawal of the agreement deposit. But if this rule is broken, it will have an impact on the liquidity and return of the money fund.

According to the regulator's rules, losses incurred by money funds due to early withdrawals will be compensated by the fund company. At the end of 2011 when the currency fund investment agreement deposit ceiling liberalization, the regulator in order to prevent risk requires the fund company's risk reserve must cover the currency fund invested in the agreement deposit unpaid interest of two times, and the risk reserve will be from the fund management fees. However, with the rapid growth in the size of the balance of the treasure, the pressure on the risk reserve is also increasing.

IT risk, fund theft, payment security and other investors are more worried about the risk of events. "There is no 100 percent safe payment, Alipay's overall risk probability is one in 100,000." The above Alipay related person said, Alipay choose to try to control the risk of background.

For example, the background will be online monitoring of customer payments, the occurrence of scene changes, changes in payment habits, etc. to make tracking, if there is anomalies in the security level is automatically raised. In addition, Alipay has also cooperated with insurance companies to launch payment insurance and so on.

In addition, the balance of treasure also put forward a series of measures to deal with credit risk, operational risk, Tianhong Zenglibao fund also made the corresponding risk prevention and control of extreme risk.

Is it a vampire?

Balance treasure is embroiled in a controversy most centered on how much of an impact the rising cost of banks' liability side.

The rise in the cost of bank liabilities is actually not a recent development. The advancement of interest rate marketization, accelerated financial disintermediation, etc., has long made banks face the pressure of rising debt costs.

In the view of Wen Bin, head of international financial research at the Bank of China, the marketization of interest rates has the greatest impact on the pricing of bank liability rates, specifically in the form of more and more types of bank liabilities, pricing upward; followed by structural deposits will increase the cost of bank liabilities, for example, the bank table such as capital-protected wealth management products, as they can be counted as deposits, is the bank to use the increase in earnings to attract customer deposits A part of the expected size of nearly 2 trillion yuan; and third is the interbank certificates of deposit.

"These are the embodiment of the marketization of interest rates, and there are also changes in demand deposits that have a great impact on banks. Commercial banks mainly rely on the profit model, lies in the demand deposits are relatively stable, the bank can be mismatched investment." Wen Bin said. However, in recent years, the deposit "move", has become a big mountain on the bank.

In accordance with Wen Bin's estimate of the decline in demand deposits of banks in the past three years, each year, the bank for the conversion of financial products to raise the cost of the bank needs to pay nearly 100 billion yuan more, to the bank's profitability to bring a huge challenge.

And the emergence of the balance of treasure, it is moving the cheese of the bank demand deposits.

"From the point of view of interest rate marketization to promote, the bank liability cost increase will be a gradual change, relatively slow process, but the emergence of the balance of the treasure, but accelerated the process of raising the cost of bank liabilities, may make the cost of bank liabilities rise sharply." Bank of Communications chief economist Lian Ping told the First Financial Daily reporter analysis.

Lian Ping said that the balance treasure on the bank's personal demand deposits have a relatively large impact. At present, the proportion of personal demand deposits is higher than 10%, and the bank's personal deposits reached 103.44 trillion yuan, and personal demand deposits are about 10 trillion yuan. "At present, the balance of the treasure type of product is only just beginning, if the scale continues to be large, it will have a great impact on the cost of bank liabilities."

In fact, the market disputes the impact of balance treasurers on the rising cost of bank liabilities, not worried about the impact of the current scale, but the future development of the scale of the balance treasurers.

However, the balance of treasure is not without a ceiling, Ping An Securities recent report estimates that if the balance of treasure growth in 2014 to reach the average daily assets under management of 400 billion to 500 billion yuan, then its net cost of expenditure after deducting the Tianhong Fund's management fees and sales fee rebates will reach about 2.1 billion to 2.7 billion yuan. If Alibaba's 2013 net profit of $2.3 billion is used as a basis for calculation, it will account for about 15%~20%. Ping An Securities believes that expenses of this scale have basically reached the current budget targets for Alibaba as well as Alipay.

Meanwhile, being able to truly replicate the scale of BalanceBao's products and other small and medium-sized T+0 money funds, Ping An Securities expects the overall relative scale to reach 1.5 trillion to 2 trillion yuan in 2014.

What changes have been brought to banks?

Balance treasure brings banks to think about, just lies in the controversy of higher deposit costs? In fact, it is more in the use of Internet technology impact on traditional banks.

"In the early stages of development, the bank agreement rate will rise faster, balance treasure or wealth management, there is such a customer base is the mass group." Wen Bin said that the convenience of Internet technology can not be replaced, the core of Internet finance is to do a sales channel, in a certain sense to replace the bank. However, the bank also has a customer base, the future of the bank to develop the network of finance, but also to achieve the convenience that the Internet can provide.

In fact, banks have already begun to do so.

Products, the rapid development of the balance of treasure and the impact of a variety of treasure financial management, but also let the bank to join the ranks of treasure financial management. For example, the Bank of China's recently established "Bank of China Call Treasure", which officially opened for redemption on February 18, its first day of 7-day annualized return of up to 6.758%, the return is comparable to the Internet channel of treasure products.

Only, the bank does not focus on vigorously publicize, which has multiple considerations: on the one hand, the bank in the "treasure" under the impact of financial management, deposit diversion pressure increases, the bank if they push the "treasure" financial management at least can be deposits stay in their own line; on the other hand, the bank will be able to keep the deposits in the bank; the bank will be able to keep the deposits in the bank. On the other hand, banks are also caught in the embarrassment of not being able to promote these products in all aspects. If the full promotion, more demand deposits depositors will be deposited into the "treasure" financial management, the bank's deposit costs will inevitably rise again.

In terms of ideas, the rise of Internet finance in recent years, mainly the balance of treasure, has accelerated the layout of the bank's Internet business. For example, banks have established their own e-commerce, the Bank of China launched a full range of network brand "Bank of China E-commerce", Minsheng Bank to push the direct selling bank and so on.

"At present, there is also a regulatory unfairness, the balance of treasure behind the money fund products, money fund products and some banks actually capital preservation type of financial products investment has similarities, now, the balance of treasure investment threshold is not, while the bank financial products also need to have 50,000 yuan investment threshold." A joint-stock bank financial sources told this reporter, some of the capital preservation type bank financial products can also be considered through the Internet.

"From the banking industry, on the one hand, we can consider the development of Internet finance, on the other hand, to increase efforts to do is to promote the bank itself has a competitive advantage in the business." Lian Ping said that in the face of the balance of the treasure people, the bank does not have a better way to fight against, need to make adjustments in the business. For example, do similar to the retail degree of very high business, such as wholesale business, private banking, corporate business in the large and medium-sized enterprises package of financial services.