Taiwanese Warming to Overseas Fund Managers

Taipei 101

Taipei 101

The onshore fund industry in Taiwan is dominated by domestic fund managers, however, foreign asset managers are beginning to make their presence felt. So how are they appealing to local investors?

It hasn't been easy for foreign asset managers to gain traction in the lucrative Taiwanese market. Introducing offshore funds into Taiwan has become increasingly difficult, due to tightened regulations. But according to a new report from global analytics firm Cerulli, Taiwanese investors are embracing foreign asset managers who are now making inroads in the onshore fund space.

Up until now the onshore fund industry has been dominated by domestic fund managers, with only two foreign managers, J.P. Morgan Asset Management and Franklin Templeton SinoAM Securities Investment Management, breaking into the top-10 list of SITE managers in terms of assets under management.

Diversity of Products Welcomed

In the first seven months of 2016, nine out of the top-20 funds in Taiwan in terms of new net flows were managed by foreign asset managers.  

Overseas asset managers are introducing a host of new products onshore in order to break into the space. For example, Schroder Investment Management launched Taiwan's first target-maturity bond fund in August that aims to promote longer-term investing among Taiwanese investors.

Also growing in popularity in Taiwan are funds of funds managed by foreign asset managers, as they oversee seven of the top-10 funds of funds in terms of inflows year-to-date July 2016.

More Restrictions to Come?

Cerulli believes Taiwanese investors are very keen for international exposure. This also provides foreign asset managers with the opportunity to leverage their reputation and expertise to make greater inroads onshore.

Meanwhile, as the FSC continues to tighten regulations on the offshore fund space, it will be harder for smaller, boutique foreign asset managers with niche investment products to enter the Taiwanese market. 

The Taiwanese regulator, Financial Supervisory Commission (FSC), has introduced a series of new policy measures, such as incentives for foreign asset managers to operate onshore and restrictions for offshore offerings, in order to boost the domestic asset management industry.

This might have an impact on the diversity of products available to Taiwanese investors, and Cerulli notes that it will be ideal for offshore and onshore fund management to co-exist so as not to potentially stifle further product innovation.

 

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