How fund managers get an edge in Taiwan

Industry Interviews

Some foreign managers have exited Taiwan’s growing fund market, but others have found ways to compete.

Eddy Wong, JP Morgan Asset Management

Offshore mutual funds continue to be popular among Taiwan’s domestic investors. As of January, offshore mutual fund assets were at NT$3.4trn ($110bn), which compares to NT$2.77trn ($90b) for locally-domiciled funds, according to data from Taiwan’s Securities Investment Trust and Consulting Association (Sitca).

The data suggests that offering only offshore funds should suffice for foreign managers considering Taiwan distribution. Yet some foreign managers have found advantages in developing onshore platforms as well, according to Eddy Wong, Taiwan CEO at JP Morgan Asset Management.

“It depends on client needs. If a client is more domestically-driven in their investments, then they would invest on our onshore platform. But if the client is a bit more dynamic and has US dollars, then they would go to our offshore platform,” Wong told FSA.

A dual platform also helps address some regulatory requirements. Locally-domiciled funds can sell offshore funds with a Taiwan dollar share class. But foreign managers with offshore funds cannot. An off- and onshore platform allows for dual currency share classes of the same fund.

Because of the growing popularity of offshore funds, Taiwan regulators have made efforts to control them.

For example, launching an offshore fund could take up to 12 months for regulatory approval, Stewart Aldcroft, chairman at Cititrust, said in a previous briefing organised by the Hong Kong Investment Funds Association (HKIFA).

“You can also submit only one product application at a time,” he added.

JP Morgan AM is Taiwan’s largest foreign provider of offshore funds (and sixth overall, including domestic players), with $3.2bn in locally-domiciled funds and offshore fund assets of $10.46bn, according to data from Citi.

Taiwan difficulties

Not all foreign fund managers have been successful in Taiwan, with a number of them only attracting a few million US dollars in assets for their offshore funds, according to Aldcroft.

“Why do they keep on going, with no funds or no AUM? The key reason has been and will continue to be the opportunity for M&A activity.”

Aldcroft explained that a number of foreign firms have been attracted to the Taiwan market. However, the difficulties in setting up a presence from scratch have caused some players to seek the M&A route.

Amundi Asset Management, for example, acquired the Taiwan business of Mirae Asset Global Investments in February. Although the firm has already previously offered offshore funds to Taiwanese investors, the acquisition enables the firm to offer onshore funds in Taiwan.

Value Partners Concord Asset Management was also sold to Aberdeen Standard Investments in June last year. Value Partners Concord was set up in Taiwan in 2011, after Hong Kong-based Value Partners acquired KBC Asset Management’s entire stake (55.46%) in KBC Concord Asset Management.

Principal Global Investors plans to have a physical presence in Taiwan, but is still undecided whether it would set up a fully-owned subsidiary or form a joint venture.

In 2018, Columbia Threadneedle announced in was ending its master agent relationship and make a full exit from Taiwan. The firm managed 13 funds and $352.4m in aggregate assets in Taiwan and local reports suggested a failure to gather adequate assets was the reason for exiting.

 

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