5 Things Should Know In Developing Taiwan. 1st: Vast OPPORTUNITIES for Fund biz of Retail and Lifers
Plan to broaden your business in Taiwan Institution market? NIC, the experienced consultant in the industry, shares the critical 5 things you should know from this insight and the coming 4 ones.
You may hear or not. It’s well-known that Taiwanese people are keen to collect Insurance policies and fixed income products. Taiwanese people have a high savings rate and are among the top in the world. To give you an example, Taiwanese are used to save quarter of their income in to the saving account, basically for the use of retirement, investment, education, and overseas travel. Even the percentage is much less than that back to 1990th, the saving ratio of Taiwanese is much ahead of that of people in the United States and Europe. Even it’s a place with popularity just about 23 Million; the market size of fund investment is also notably famous globally. Taiwan has a disproportionately high insurance penetration rate, As of Dec 2018, the insurance sector in Taiwan has exceeded US$889,140 Million in asset size. Taiwan even claims the top place globally in insurance penetration rate (the ratio of premiums underwritten in a particular year to the GDP), according to statistics from the Taiwan Insurance Institute.
Taiwanese have very high acceptance towards offshore funds
According to Securities Investment Trust & Consulting Association (“SITCA”), the total market size of Taiwanese people investing into mutual funds (including onshore and offshore funds) are more than US$205 Billion. What interesting is the offshore fund size, since 2009, is far ahead of that of the onshore funds, which are issued by local Taiwan Securities Investment Trust Enterprises (“SITEs”), and the gap is bigger and bigger by years. The largest gap falls on 2014 while in the nearest year 2018, offshore fund size accounts for 1.2x of that of onshore funds. Up to 69 registered international fund management companies are selling 1,034 authorized offshore funds in Taiwan. Domestic Taiwan investors hold up to US$113 Billion of offshore funds as of January 2019.
Offshore fixed income products are much welcome by Taiwanese. Figures 3 above exhibit the market shares of various mutual funds categories in the Taiwanese offshore fund market as of January 2019. The fixed income category receives the largest market share of 48.27 percent in the offshore fund market in Taiwan.
Onshore asset managers cling to partner with offshore institutions to fulfill the increased demand on foreign investments
In the recent 2 years, onshore funds significantly increase in asset size. The reason shall come to the explosive growth of onshore bond funds and bond ETFs, enabling onshore SITEs finally get attention from local investors, particularly when ETF bond funds hit its record high in 2018 in terms of the total volume and accumulated rate of growth. (You can refer to our article of Why bond ETFs Are Popular in Taiwan)
The investors have different preference when they consider the onshore funds domiciled in the local currency. Equity funds ranked the first place, followed by bond ETFs and fixed income. Because local asset managers are lack of the capacity to conduct overseas market research due to limited resources, not only to sell the funds through the unique master agent scheme in Taiwan, but overseas fund managers are able to partner with local managers as the external investment advisor, which is so called sub-advisory business or white label funds.
Taiwan Insurance companies are big fans of foreign investments
Over the long time, on the ground that Taiwanese are fond of insurance policies, huge amount of capitals flood into insurance companies. The insurance penetration comes to almost 20%! Taiwan ranked No.1 in the world with its reputation of insurance lovers. Moreover, before the financial crisis, the average dividend rate of life insurances is above 2.69%, Taiwan lifers have the pressure to utilize their capitals in effective mood. Hence they for a long time have to seek the solutions from foreign investment, where the interest premium is better than that in Taiwan. The total amount that Taiwan insurance companies in foreign investment as of 2018 end is US$545 Billion, almost 2x of AUM in 2014. According to Taiwan Insurance Institute, insurance companies invested overseas US$81 Billion only in 2008. The yearly annual growth rate is around 18% in the past 10 years. Foreign investment assets of insurance companies surge rapidly; nowadays it reaches its peak to 68% of the total assets according to Taiwan Insurance Institute.
In conclusion, Taiwan is the mutual fund giant market by comparison to the rest of the world. Taiwanese are used to buy mutual funds and insurance policies. The volume invested into funds from retail investors and insurance institutions has increased substantially. The Taiwan mutual fund markets provide wide range of opportunities for fund mangers willing to enter into the market.
Next time we are going to talk about the Taiwan pension system, where more opportunities are deployed for fund managers, another channel to enter the Taiwan market.