Overseas managers gaining traction with Taiwan onshore funds
Taiwan has proved fertile ground for foreign asset managers' offshore funds, but it has been challenging for them to build share in onshore products in this competitive NT$2.2 trillion ($70 billion) market. But those that have made major, long-standing commitments are finding they are paying off, according to a new report.
This year, as of end July, nine out of the top 20 onshore funds in Taiwan in terms of net new flows (NNF) were run by foreign asset managers, according to research house Cerulli Associates. This is a promising sign of foreign players’ inroads in the country’s fund industry, which has been dominated by domestic fund managers, said the report. However, Cerulli did not provide historical figures for this article for the purposes of comparison.
Moreove, two foreign houses – JP Morgan Asset Management and Franklin Templeton SinoAM Securities Investment Management – were in the top 10 by onshore assets under management as of July 31.
Rising flows
One driver of this trend is that Taiwanese investors are increasingly keen for international exposure.
The top nine onshore funds managed by foreign firms by NNF this year as of end-July are invested in global markets or China A-shares, according to Cerulli. They are run by six houses: AllianceBernstein (one fund), Eastspring (one), Franklin Templeton SinoAm (two), JP Morgan (two), Nomura (two) and PineBridge (one).
The top 20 funds by NNF combined attracted NT$56 billion this year as of end-July, of which 31% went into the nine funds mentioned above. Onshore funds brought in a total of NT$68.7 billion in NNF during the period.
Foreign firms’ onshore funds of funds have also become popular in Taiwan, as they accounted for seven of the top 10 FoFs by NNF this year as of end-July, Cerulli said. In this period, the top 10 funds attracted total NNF of NT$17 billion, of which the seven managed by foreign houses accounted for NT$7.4 billion.
The seven FoFs were managed by five foreign players, namely AllianceBernstein (one fund), Allianz Global Investors (three funds), JP Morgan AM (one fund), PineBridge (one fund) and Prudential Financial (one fund).
One thing that will have helped certain foreign managers build their onshore businesses are the privileges handed to them by Taiwan's Financial Supervisory Commission (FSC), recognising their commitment to developing the local industry, as reported. This year six overseas players were awarded privileges as part of the ‘deep-cultivation plan’, including faster approval of funds and the ability to submit more products for approval.
Product diversification
Another sign that foreign asset managers are making inroads in Taiwan is that they are introducing a raft of new products to the market, said Cerulli. For example, Schroders launched the country's first target-maturity bond fund in August.
However, the FSC’s tightening of regulations around offshore funds will make it harder for smaller, boutique foreign asset managers with niche investment products to enter the Taiwanese market, as reported. This might have an impact on the diversity of products available to local investors, Cerulli noted.
At least the established foreign players are working to expand the range of available products. Among the privileges selected by the six fund houses receiving ‘deep-cultivation’ awards this year, four of the firms – AllianceBernstein, AllianzGI, Franklin Templeton and Schroders – chose to introduce new types of foreign funds to Taiwan.
Investor appetite
Of the top 20 funds by NNF, global equity funds received the biggest flows this year as of end-July (NT$19.1 billion), followed by global bond funds (NT$13.4 billion), global multi-asset funds (NT$13.1 billion) and global real estate investment trust (Reit) funds (NT$10.3 billion).
In the FoF space, the top 10 funds by NNF were categorised into two types: global multi-asset (NT$13 billion of NNF as of end-July) and global bond funds (NT$4 billion).