The promotion of an 8% yield apparently touched the bottom line of the CSRC. Currently, the Baidu Finance Center website no longer displays the promotional words "8% yield", and related Weibo posts have also been deleted.
Reported by Zheng Pengyuan from Beijing for Investment Weekly
The largest fund management company in the industry has had an unpleasant experience with its online journey.
The official Weibo account of the CSRC posted a response at noon on the 23rd to media reports regarding Baidu's Baifah guaranteed principal and yield wealth management plan. The CSRC stated that the reported annualized target yield of 8% for the wealth management plan jointly launched by Baidu and ChinaAMC does not meet the requirements of relevant laws and regulations.
The Baidu Finance Center website no longer displays the promotional words "8% yield", and related Weibo posts have also been deleted. Previously, Baidu had claimed that the product selection criteria for the wealth management plan was principal protection and guaranteed returns.
"Baidu may find it difficult to honor the 8% return." A person close to Baidu told Investment Weekly that Baidu's plan for the 8% return was achieved by simultaneously subscribing to a certain share, then transferring the gains to investors.
Mystery of the 8% Yield
On October 21st, Baidu announced that it would launch the Baidu Finance Center Wealth Management Platform on the 28th, whereupon it would introduce the "Baifah" wealth management plan. On that day, the promotional slogan for the "Baifah" wealth management plan on the Baidu Finance Center webpage was "Customized products, limited sales, approximate annualized yield of 8%".
In fact, the first phase of the "Baifah" wealth management plan is linked to ChinaAMC Cash Enhancement Money Market Fund. On October 19th, ChinaAMC announced that as of October 28, 2013, the E-class shares of ChinaAMC Cash Enhancement Securities Investment Fund will be added. After adding the share classes, the fund will be divided into A and E class shares. The newly added E-class is abbreviated as "ChinaAMC Cash Enhancement Money Market E", with a minimum subscription amount of 0.01 yuan and a minimum redemption amount of 0.01 shares. The remaining business rules are the same as those for the A class shares of ChinaAMC Cash Enhancement Money Market Fund.
The 8% yield comes from Baidu Finance Center giving discounts to attract customers. A person close to Baidu revealed that the product is funded by Baidu and linked to the ChinaAMC Cash Enhancement Money Market Fund. Baidu simultaneously subscribes to a portion of the shares, transferring the profits from the first two months to investors to ensure they achieve principal protection and interest. If calculated based on an 8% annualized yield, referring to the current yield of ChinaAMC money market funds, Baidu would need to subsidize 3% to 4% to ensure investors' principal protection and interest. However, starting from the third month, the yield will be linked to the ChinaAMC money market fund product, so the 8% yield shares are limited and correspond to the funds subscribed by Baidu Finance.
In addition, Baidu introduced China Investment Guarantee Co., Ltd. for full-process guarantees in the cooperation. Since the upper limit of the scale has been determined, it is easy to calculate the income gap of ChinaAMC Cash Enhancement. Therefore, Baidu can also directly guarantee this through a fixed premium.
Data as of October 24th showed that the seven-day annualized yield of ChinaAMC Cash Enhancement was 4.813%. By doubling the leverage through Baidu subscriptions, achieving an 8% yield is not difficult. WIND data shows that the seven-day annualized yield of money market funds rose from an average of 3.59% in the first quarter to an average of 3.97% in the third quarter. A fund analyst from Citic Securities also told Investment Weekly that the current tight balance of funds will continue, keeping interest rates high for a period of time, resulting in higher yields for money market funds.
Currently, Baidu has launched a "1 cent for 5 yuan phone credit + 1000 yuan big package" promotional strategy, but the prerequisite is to become a registered customer of "Bai Fu Bao", after which the 8% yield shares will also be promoted in a similar manner.
Violation of Regulations in Promotion
Unlike the marriage between Tianhong and Alipay, ChinaAMC did not show sufficient enthusiasm in jointly launching products with Baidu. A knowledgeable person previously told Investment Weekly that ChinaAMC never disclosed details of its cooperation with Baidu, and many messages originated from Baidu.
According to the third-quarter report of the fund, as of September 30th, Tianhong Asset Management's total scale reached 66.829 billion yuan, increasing nearly four times compared to the second quarter's 13.647 billion yuan management scale, making it the fund company with the most significant scale growth. Tianhong Asset Management emerged due to the substantial growth of Zenglibao money market fund under its management, rising to the 16th place in asset management scale across the entire industry, successfully entering the "1" category.
Tianhong Zenglibao money market fund leads with a total scale of 55.653 billion yuan among money market funds, smoothly becoming the largest fund in terms of asset scale across the entire market. ChinaAMC Cash Enhancement closely follows with a scale of 47.024 billion yuan.
Currently, the yields of ChinaAMC Zengli and Tianhong Zengli are roughly equal, but the per 10,000 units of fund income is still lower than Tianhong Zengli. Moreover, from the second half of the year, the overall yield level of ChinaAMC Zengli is slightly lower than Tianhong Zengli. Simply replicating the Yu'e Bao model would be hard to achieve great success, but an 8% yield can create enough hype.
However, promoting an 8% yield clearly touched the bottom line of the CSRC. At 11:43 AM on October 23rd, the official Weibo account of the CSRC posted a response to media reports regarding Baidu's Baifah guaranteed principal and yield wealth management plan. The CSRC indicated that the reported annualized target yield of 8% for the wealth management plan jointly launched by Baidu and ChinaAMC does not meet the requirements of relevant laws and regulations. Next steps will involve checking the compliance of the business based on the written materials submitted by Baidu and related institutions.
Additionally, the CSRC Weibo account mentioned that according to the "Sales Management Measures for Securities Investment Funds", fund sales institutions are not allowed to use lotteries, rebates, or give away physical goods, insurance, or fund shares as ways to sell funds. Internet-based fund sales businesses should naturally comply with relevant regulations.
Subsequently, the Baidu Finance Center website no longer displayed the promotional words "8% yield", and related Weibo posts were also deleted. Previously, Baidu had claimed that the product selection criteria for the wealth management plan was principal protection and guaranteed returns. ChinaAMC responded to Investment Weekly that their cooperation with Baidu was simply selling their existing money market fund through Bai Fu Bao, not jointly developing a new product promising an 8% return.
Previously, when Yu'e Bao was launched, the promotional method of "interest exceeding banks by 8 times" appeared in numerous media outlets. Subsequently, Alipay stated that Yu'e Bao is not a deposit business and itself would not bring interest to users; instead, the investment returns generated by purchasing wealth management products come from the fund company.
Another person close to Baidu revealed that the promotion and planning of the "Baifah" wealth management plan was done by Blue Focus Communication Group. Some people questioned whether it might have been deliberately set up to gain attention. However, weighing the pros and cons, although this violation of promotional regulations was halted by the CSRC, both Bai Fu Bao and the number of accounts opened saw significant increases. "Baifah" gained popularity even before its launch. With the approach of the Double Eleven mega-sale, the synergistic effect of the Bai Fu Bao platform will gradually become evident.