Analysis | Tianhong's Alibaba mutual fund grows to second largest in China

Tianhong Asset Management, the sole partner of online giant Alibaba in the sale of money market funds on the company's e-commerce platform, is on its way to overtaking China Asset Management to become the mainland's biggest mutual fund manager.

But rivals may already be waiting in the wings.

Tianhong's total assets under management now stand at about 260 billion yuan (HK$330.7 billion), and the upstart could soon surpass the industry's long-time leader, China Asset Management - which oversees about 306.1 billion yuan - thanks to the growing popularity of online shopping.

China Asset Management has been the country's biggest asset management firm since 2007.

"Tianhong's success is not the end of innovation but a beginning, to look at the combination of investors and distributors in China and how such an online distribution model could be applied to more specific products," said Howhow Zhang, head of research at Shanghai-based consultancy firm Z-Ben Advisors.

"The success of such an initiative would depend on what kind of scale you could achieve, since this is a low-fee business model."

Tianhong charges only a 0.3 per cent management fee for its money market fund, a fifth of the 1.5 per cent on average that a mainland equity fund manager charges.