Deep cultivation plan
In 2013, Taiwan’s Financial Supervisory Council (FSC) introduced the “deep cultivation plan”, which is aimed at nurturing a the domestic asset management industry, in some cases by slowing the increase in foreign funds, according to a Citi report.
“That doesn’t mean the regulator would only support Taiwan-owned businesses, it means they want global firms [to hire locals] for significant jobs,” Citi’s Aldcroft said, adding that the programme has actually helped Taiwan’s local fund industry to grow since its introduction.
The deep cultivation plan requires foreign managers to fulfill certain commitments, such as growing the number of locally hired investment team members and not just sales, as well as hitting specified AUM targets.
In exchange, managers receive the scheme’s incentives such as the permission to submit up to three offshore funds for approval at any one time; introducing new fund types; faster than typical fund approvals; and freedom to invest up to 30% in onshore mainland China securities, Aldcroft explained.
Under the current regulation, only Taiwan-domiciled funds can invest 100% of their assets in mainland securities, while the maximum for offshore funds is 20%, Aldcroft added.
According to JPM’s Wong, his firm has used the scheme’s incentives for six years.
“We have used a number of ways to leverage on this scheme,” Wong said. “There was one year we chose to submit more than one fund and there was one year where we introduced a special structured fund that normally requires special approval.”
Fulfilling the programme’s commitments may be difficult, however. Last year, out of 69 offshore managers in Taiwan, only seven were awarded incentives, according to the FSC.