China drafts new money market fund rules

Chinese equities downThe China Securities Regulatory Commission (CSRC) has issued new draft regulations designed to rein in some of the country’s biggest money market funds. The proposals require that major money market funds set aside 40% of management fees every month as risk reserves while fund sales agents should similarly set aside 20% of their monthly sales revenues.  As a further step, the regulations also demand that fund managers ensure they are adequately staffed with at least two qualified and dedicated employees in investment, trading, risk control, compliance, research, operations and auditing roles for each major money market fund. The CSRC’s rules are also explicit about what constitutes a ‘major’ money market fund, defining it as more than 200 billion yuan (US$31.5 billion) in net assets or more than 50 million investors. This would include the likes of Tianhong Yu'e Bao, a money market fund managed by Tianhong Asset Management that is 51% controlled by Ant Group, and E Fund Management's E Fund Money Market Fund. The rules also state that separate money market funds run by the same fund managers would also be included if their accumulated size exceeds the stated limits. Despite their size and meterioc rise in the last five years, both the Yu’e Bao and E Fund have seen their assets fall in the last 12 months, partly a result of investors switching to other funds and partly a result of caps introduced. Back in April 2021, the Chinese government called for a cap on Yu’e Bao, while its parent company Ant Group was ordered to manage the liquidity risks of the products it distributes. ©2022 funds global asia

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