Foreign managers expand in Taiwan

In the first nine months of 2017, Taiwan’s CTBC Investments was top in terms of asset growth for its locally-domiciled equity, fixed income and balanced funds with total AUM up 132%. Following CTBC were international fund managers, according to a recent study published by Boston-based research firm Cerulli Associates.

Alliance Bernstein Investments’ equity, fixed income and balanced funds’ AUM grew 113.5% to NT$ 37.1bn ($1.25bn), while Paradigm Asset Management’s AUM in the same fund categories rose 104% to NT$5.8bn, according to Ivan Han, senior analyst at Cerulli Associates.

The study also noted that investors in Taiwan are also increasingly receptive to onshore vehicles (or locally-domiciled funds) that invest overseas. Two of these funds, which are managed by foreign players, dominated net new flows in such funds: AB’s ABITL Global High Yield Fund with net new flows of NT$ 9.9bn during the first nine months of last year, followed by Pinebridge’s Preferred Securities Income Fund, with NT$ 8.1bn in net new flows.

Previously, investors in Taiwan relied on offshore funds (such as Ucits) for their international exposure.

Besides their growing assets, a number of foreign fund managers are also moving on-the-ground by getting their Securities Investment Trust Enterprise (SITE) licences. One such firm is Neuberger Berman, which received a licence in March last year.

Since the firm entered the market, Neuberger Berman Taiwan (SITE) now manages NT$1.72bn in assets, according to data from Taiwan’s Securities and Investment Trust Consulting Association (Sitca).

Han said there are now 21 foreign managers that operate onshore. They account for at least 32% of locally-domiciled fund assets, Sitca data shows.

Of the top 10 fund managers that manage locally-domiciled funds, four of them are foreign players: JP Morgan Asset Management, Pinebridge Investments, Allianz Global Investors and Eastspring.

Source: Securities and Investment Trust Association

In total, there are about 39 firms in Taiwan’s locally-domiciled market, managing NT$ 2.32trn in assets.

Taiwan’s incentives

Foreign managers are also putting extra effort into expanding their businesses in Taiwan, according to the Cerulli report.

Six foreign managers – Alliance Bernstein, Allianz GI, Eastspring, Franklin Templeton, JP Morgan Asset Management and Schroders – qualified for incentives in the latest phase of Taiwan’s “Deep Cultivation Plan” in October last year, which rewards global fund firms for committing resources to their Taiwan operations.

The rewards include introducing new types of funds, faster approval of funds or a higher allowance for taking exposure to mainland Chinese securities, according to an announcement by Taiwan’s Financial Supervisory Commission at the time.

The FSC launched the Deep Cultivation Plan in 2013 to further develop the domestic fund industry and narrow the gap between the onshore (locally-domiciled) and offshore (such as Ucits funds) markets.

But offshore funds still dominate Taiwan’s fund industry. As of the end of 2017, the offshore market had 1,045 funds with NT$ 3.49trn in assets, according to Sitca data. By comparison, there are 800 onshore funds with NT$ 2.32trn in assets.

In addition, offshore fund assets grew faster in 2017 even though more onshore funds were launched.

Source: Securities and Investment Trust Association