Chinese fintech Ant sidelines banks in distribution of funds targeting its IPO

[September 25, 2020]  SHANGHAI (Reuters) - As five Chinese mutual funds targeting Ant Group's hotly-anticipated IPO kicked off subscriptions on Friday, retail investors found the only non-direct channel through which to buy the products was online payment platform Alipay.

Alipay is controlled by the Chinese fintech giant itself, so the unprecedented arrangement, which sidelines banks and brokerages, highlights Ant's clout in online sales and threatens to disrupt traditional fund sales models.

"This is the first time banks are being excluded from mutual fund sales," one bank official said, speaking on condition of anonymity.

"For banks, it really hurts. Ant is attempting to break the dominance of banks in fund sales."

Ant <IPO-ANTG.HK>, backed by Alibaba Group <BABA.N>, plans a dual listing in Hong Kong and Shanghai's STAR Market to raise about $35 billion in what could be the world's largest initial public offering.

On Friday, money managers including China Asset Management Co, E Fund Management Co and Penghua Fund Management started raising as much as a combined 60 billion yuan in five funds that will participate in the Ant IPO as strategic investors, with a lock-up period of 18 months.

But Ant's fund sales subsidiary is the sole distributor of the five funds, according to the sales documents.

Ant did not immediately reply to a Reuters request for comment.

By bypassing traditional sales channels, Ant is throwing down the gauntlet to banks, analysts said.

"Increasingly, tech-savvy young people are moving money away from bank deposits, into wealth management products being sold online," said Liu Yun, an analyst at Chasing Securities.

By the close of business, Ant's advertisement promoting the newly-launched funds drew more than 3 million clicks on its super-app Alipay.

An investor who gave only his surname, Han, bought 10,000 yuan worth of the Penghua fund, saying investing in Ant entailed little risk.

But others balked at the funds' 18-month lock-up period.

"If I buy the funds now, I can only take out the money in 2022," said retail investor Liu Xiaobing. "That's not efficient use of capital."

(Reporting by Samuel Shen, Luoyan Liu and Andrew Galbraith; Editing by Clarence Fernandez)

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