-2019 Jan.- Jul. Taiwan Offshore Funds Review-
The total amount domestic investors holding, of the offshore funds approved by FSC (“registered offshore funds”), at the end of July 2019 is over USD $120 billion, 13.8% increase compared to last year end. NIC Insight this month will provide our reader with updated trend about Taiwan registered offshore funds, including what are the assets and themes preferred by the clients, how have the market been changing, and what’s our view regarding to current market.
More Uncertainty, More Fixed Income
If you ask me what are the driving forces of 13.8% increase in first 7 months in 2019, I would say the threats from uncertainty among trade war has definitely played an important role. Investors holding of fixed income funds have increased by 24%, while the holding of equity funds only increased by 3.9%. We noticed that investors tend to allocate their asset in global funds rather than regional or single country funds. We believe this reflects investors’ intention and awareness in risk diversification. Given the current circumstances, it is very likely that the uncertainties remain, and investors would be more willing to invest in less volatile assets. However, this does not indicate the investors are willing to sacrifice returns, well in some extent they do, but we have observed an 35.5% increase in holdings of EM fixed income funds. We believe Taiwan investors are valuing managers expertise in selecting good names that provide relative safer downside risks at a certain return level.
Investor Holding- by Investment Geography
Investor Holding- by Asset Type
Fixed Income Fund Dominates
An interesting observation came to us when we look into the top 10 net inflow. In the first 7 months in 2019, there’s only one Equity fund that’s on the top 10 list, Morgan Stanley Investment Funds - Global Brands Fund (with $236mn net inflow). Top 10 is dominated by fixed income funds as usual. I believe many of our readers have learned from NIC’s first Insight at Feb. 2019 that in recent years, Taiwan investors prefer high dividend payout/ low volatility funds.
AB Global HY Bond Fund Back to Glory
We’ve brought up in Feb. that it took Allianz Income and Growth Fund 3.5 years to get the first place in domestic investor holdings, which AB Global HY Bond Fund has been in for 10+ years. At the end of July 2019, AB Global HY Bond Fund gets back to glory with investor holding of $13,924mn, and net inflow of $1,309mn. Allianz Income and Growth Fund followed closely by $12,973mn of investor holding with $345mn of net out flow. The difference is due to different amount in redemption, both of the funds present similar submission amount with around $3-3.2bn, however Allianz Income and Growth Fund present a $3.4bn redemption, while AB Global HY Bond Fund with only $2bn redemption. We believe it is due to profit taking by the investors. Allianz Income and Growth Fund, with a return of 9.06% in first 7 months, would be put in priority to sell when investors take profit.
2019 Jan.- Jul. Top 10 Offshore Funds - by Net Inflow
Future Demand on Fixed Income Fund
As the market fluctuation is expected to continue for quite some time, it is expected that fixed income and balanced funds would continue be favored by the market. NIC have been frequently visiting lifers, banks, SITEs for the past several weeks, all of these buy-sides and channels have good feedback on the demand for fixed income funds. Investors are now more risk adverse and looking for investment ideas that can deliver a more stable and promising return.
If you are interested in more details of offshore funds market in Taiwan, feel free to contact us directly.