In Taiwan, distributing offshore funds requires a partnership with a registered master agent, which can be either domestic or global firms. Pinebridge Investments has been CTI’s master agent since 2015.
Apart from CTI, the firm has also entered a master agent pact with BNP Paribas Asset Managemet, Eurizon Capital, Investec Asset Management and Robeco, helping them sell funds domiciled elsewhere to Taiwan investors.
In May, Pinebridge filed a request to Taiwan’s Financial Supervisory Commission (FSC) asking to terminate the master agent partnership with CTI, according to a statement from Pinebridge.
The official date of termination of fund subscription will be subject to FSC’s decision, the firm added.
At the end of April, CTI managed a total of 13 funds and $352.4m in aggregate assets in Taiwan, according to the fund documents. Their available fund products are mainly domiciled in Luxembourg. The firm distributes eight equity funds, four fixed income funds and one multi-assets product. Among the asset classes offered by CTI’s funds, investors in Taiwan generally prefer emerging market fixed income products (see chart below).
The funds are still for sale until the completion of the regulatory proceedings. Existing investors are not obliged to redeem their investments as Pinebridge will continue to service the investors even after CTI’s departure, the statement said.
A question of fees?
Local media, citing internal sources at CTI, reported that the firm’s decision to depart Taiwan is mainly due to the disappointing sales of products that use an unfavourable fee structure, specifically, the front-loaded model.
Taiwan investors are typically interested in income-generating products with a back-end load share class, also commonly known as Class B, according to local media. The fee model allows investors to pay the sales fee upon redemption instead of at the subscription like the front-end load model.
According to Pinebridge Taiwan, which is handling enquiries about the funds, CTI is fully exiting the Taiwan market. FSA contacted CTI to seek more information, but they did not respond in time for publication.
Columbia Threadneedle Investments managed $495bn globally at the end of 2017. After closing down the business in Taiwan, its Asia presence will cover Hong Kong, Singapore, Korea and Malaysia, according to its website.
Offshore funds sold in Taiwan collectively had assets of NT$3.5trn ($117.37bn) at the end of April, compared with NT$2.5trn in onshore products, data from the Securities Investment Trust and Consulting Association (Sitca) shows.
Assets in high yield bond funds totalled NT$875.1bn while emerging market bond funds had NT$452.1b over the same period.
The CTI funds distributed in Taiwan (as of end of April)