In China, Investors Drain Mutual Funds Slated For Failed Ant IPO

The fallout from Ant Group’s failed initial public offering (IPO) continues, as millions of investors have piled out of five mutual funds that had pitched themselves as a way to get onboard as the FinTech went public.

The Wall Street Journal reported Tuesday (Jan. 19) that investors have drained $3 billion from the funds, dramatically reducing them after regulators trimmed Ant’s sails. The eCommerce company is known for its Alipay payments service.

Alibaba Group, which billionaire Jack Ma founded in 1999, owns about one-third of Ant, a spinoff company. He then created Alipay in 2004.

The WSJ said the five mutual funds, overseen by some of the country’s largest investment firms, had raised about $9 billion from more than 10 million investors. Ant had earlier struck agreements to allocate a certain portion of the planned IPO’s proceeds to the funds.

Early on in the IPO process, Ant had taken steps to bring small-time investors into the IPO game. In fact, many individuals bought the funds via Alipay.

After the IPO was canceled, the $34 billion investors had ponied up was returned.

Investors in the five mutual funds, however, had already agreed to lock up their money in the funds for 18 months. The WSJ said that there was a public outcry after the IPO failed — and the mutual funds then gave investors one month (Nov. 23 to Dec. 22) to pull their money out without getting hit by transaction fees.

The subsequent withdrawals indicated that many investors had put their money in the mutual funds to get onboard the Ant IPO train.

“Chinese retail investors are often less impressed by diversification, instead prizing access to hot IPOs,” Brock Silvers, chief investment officer of Hong Kong-based Kaiyuan Capital, told the Journal.

Since having its estimated $37 billion IPO derailed by Beijing early in November, Ant Group has sought to overhaul operations to comply with government regulations. Ant, based in Hangzhou, China, has established a task force to deal with the issues identified by regulators.