Fixed income assets double in Taiwan

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The asset class now represents almost half of total assets in Taiwan, according to Morningstar Direct.

Investors in Taiwan poured NT$528.4bn ($17bn) into Taiwan-domiciled fixed income funds this year.

Taiwan had NT$483bn in terms of net inflows in 2019 year-to-date.

The huge inflows have nearly doubled fixed income assets to NT$1.42trn from NT$724 in November last year.

Major asset classes – net inflows and AUM

1H (NT$ bn)June 2019 AUM (NT$ bn)Market share (%)
Allocation (mixed-asset)

(26.5)

210

6.23

Alternative

(63.5)

180

5.33

Commodities

0.479

5

0.15

Equity

6.8

773

22.91

Fixed income

528.4

1,428

42.31

Miscellaneous

2.5

46

1.38

Money market

34.8

732

21.70

Total

483.01

3,374

100

Source: Morningstar Direct

Fixed income funds now outpace other asset classes in terms of market share by a huge gap and account for 42.31% of the total assets in locally-domiciled funds, which compares to just 28% in November last year.

Equity funds also saw net inflows this year, although it was just NT$ 6.7bn. On the flipside, mixed-asset and alternative funds collectively had net outflows of NT$90bn.

US fixed income, fixed term funds lead

Excluding money market funds, all of the 10 sub-asset classes that had the highest net inflows this year belong to the fixed-income category, with the exception of Taiwan large-cap equity funds.

Top 10 sub-asset classes by net inflows

1H inflows (NT$ bn)

June 2019 AUM (NT$ bn)

Market share (%)

USD Corporate Bond

146.6

234

6.92

Fixed Term Bond

96

249

7.39

RMB Bond – Onshore

93.7

171

5.06

Other Bond

90.3

344

10.19

Taiwan Large-Cap Equity

63.7

200

5.94

Global Emerging Markets Bond

56.2

128

3.81

USD Diversified Bond

26.4

31

0.91

USD High Yield Bond

9.9

35

1.04

Global High Yield Bond

8.7

28

0.83

USD Government Bond

4.2

94

2.78

Source: Morningstar Direct

US Corporate bond funds have become the most popular category this year, with net inflows of NT$146bn this year, which compares to just NT$32bn last year.

FMP fever

Fixed term bond funds continue to be popular among Taiwan investors. Assets have nearly doubled to NT$234bn from NT$125bn last year.

The fixed term bond category has also popular in other Asian markets and fund managers have started to take advantage of this with multiple products launched in the region.

For example, Invesco launched the Global Bond Fixed Maturity Fund 2022 in Hong Kong this week, according to a statement from the firm.

“We see increasing demand from investors for solutions which may provide a steady income stream,” Terry Pan, CEO for Greater China, Southeast Asia and Korea at Invesco, said in the statement.

“Fixed maturity products are well-suited to fit this purpose and have proven successful in other Asia-Pacific markets.”

Other fund managers that have launched fixed maturity products include HSBC Global Asset Management and Hang Seng Investment Management.

Eastspring also recently raised $417m for a fixed maturity product from investors based in Singapore, Hong Kong, the UK and the Middle East, following other fixed maturity product launches in Taiwan and Malaysia.

Outflows

On the other hand, most of the highest net outflows came from different equity and mixed-asset categories, led by leveraged and inverse products, according to Morningstar Direct.

L&I products, however, still account for nearly 5% of assets in the overall fund market.

Top 10 sub-asset classes by net outflows

1H inflows (NT$ bn)

June 2019 AUM (NT$ bn)

Market share (%)

Trading – Leveraged/Inverse Equity

(63.2)

150

4.45

China Equity – A Shares

(28.9)

113

3.33

TWD Moderate Allocation

(14.7)

124

3.68

US Large-Cap Blend Equity

(6.3)

5

0.15

Greater China Allocation

(6.2)

21

0.61

Sector Equity Technology

(3.7)

64

1.90

TWD Aggressive Allocation

(3.1)

45

1.34

China Equity

(2.8)

39

1.15

Sector Equity Consumer Goods & Services

(2.7)

11

0.34

Global Flexible Bond

(2.5)

20

0.60

Source: Morningstar Direct

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