You’ve heard “Internet Finance” is booming in China, but what exactly is it? It all began from the inception of Alibaba’s Yu’E Bao (literally means balance treasure) in 2013. Metaphorically speaking, it’s like your Paypal account balance which is as liquid as your checking account, but EBay is paying you 5% interest yearly. Wait, what?! I know what you are thinking, no, I did NOT miss a decimal point. Since I was away from the country for years, I haven’t really paid close attention to this business model until recently.
It was about two months ago, one family friend from China asked me about investing in real estate in US. A REIT name – Inland Real Estate Corporation [NYSE: IRC] looked very attractive to me then and I recommended it to him (see my older post here). The company then hit the 52 week low at around $8 with yield of 6~% and FFO multiple of 8, and seems to be oversold compared to its still solid property portfolio and operation. As we are speaking now, it was announced to be bought private by DRA Advisor in a $2.3 million deal, paying $10.6 per share. However, my friend decided to pass on this would-be 20+% in two months opportunity because he wasn’t interested in investing in a non-principal-guaranteed asset for 6% yield. “I’d better off put my money in my XX Bao, which gives me up to 10%.” he said. Well, that is very impressive, especially they “guarantee” principal, so basically making it a “risk free” investment. I then asked two question: who are they, and what type of asset they have to invest in to give you that return? “I don’t know, why do I care when they guarantee my principal?” replied my friend.
After some research, I think I find some clue.