Overview of Taiwan authorized offshore funds in 2019 - Alliance Bernstein was the big winner
Updated: Mar 9, 2021
According to the data of Securities Investment Trust & Consulting Association (“SITCA”) as of 2019 Dec, there are totally 40 Master Agents, 64 Offshore Fund Institutions, and 1,009 authorized Offshore Funds in Taiwan. The asset under management of authorized offshore funds in Taiwan accounts for USD120 billion as of Dec 2019, YOY 14.5%. In Sep 2019, Taiwan’s financial regulator has selected nine foreign fund managers that grants special privileges according to so-called deep cultivation scheme. The privileges are valid from Oct. 1, 2019 to Sep 30, 2020. The deep cultivation scheme is to encourage foreign managers to commit more to Taiwan asset management market for the long term. Every year the scheme will be renewed and select new managers. It provides up to two privileges, such as the ability to submit more fund products for approval at one go and launching new offshore fund types for domestic investors. According to the regulator, one of the most popular privileges chosen by the nine managers in 2019 is the ability to launch a single fund that can invest up to 40% in Chinese securities. This came after the Financial Supervision Commission (“FSC”) raised the limit late last year from 30%.
TOP 10 Popular fund houses by Taiwan domestic investors
Alliance Bernstein (“AB”) is the most popular offshore fund house by Taiwanese, with its assets hold by Taiwan domestic investors exceeded USD26,035 million as of Dec 2019. The ranking of Franklin Templeton was still the 2nd out of 64 offshore asset management companies however its slight net asset outflow makes Franklin and Blackrock became the only two, out of the top 10 offshore asset management companies, which had asset outflows in 2019. Amundi SITE accumulated USD7,093 million assets from domestic investors as of Dec 2019. Because of the merge activities of Pioneer and Amundi, and the group’s decision to implement acquisition of Mirae Asset Management Taiwan in the end of 2018, the assets of Amundi and Pioneer funds hold by Taiwanese investors seem not relevant to its actual figures according to the statistics of authorized offshore fund data, leading the YOY AUM of Amuni funds likely a big difference. The group’s assets hold by domestic investors after Apr 2019 shall be more reliable since Amundi SITE and SICE completed the merge in that month. The overall top 10 ranking is not far different from the ranking in the previous year.
Top 5 fund houses with asset inflow and outflows by Taiwan domestic investors
If we look at the top 5 net asset inflow and outflows of offshore fund houses, AB generated the most net inflows, USD3,084 million in a single year, followed by Amundi and PIMCO. On the contrary, Blackrock suffered the most severer asset outflows. In 2019, total net flows of Taiwan domestic investors redeemed USD1,282 million of Blackrock funds. Blackrock has totally 52 offshore funds authorized in Taiwan, 42 out of which have been net sold by domestic investors during the year; however, we didn’t see the company’s AUM change large differently.
Top 10 funds appealing to Taiwan domestic investors
With statistics of amount hold by domestic investors, the top 10 popular funds are listed as below. AB/Franklin/JP Moran accounts 2 seats separately while Allianz, Amundi, NN and Blackrock each has one seat. Fixed income is Taiwanese lover. Seven out of top 10 funds are fixed income type. Except for Blackrock Global Fund- World Mining Fund, all of the funds distribute high dividends, up to 11% annually in monthly pattern, targeting the notable preference of high dividend payout by Taiwan investors. The average investment ratio of the top 10 funds by Taiwanese in terms of their global AUM is 38.53%. Even astonishingly, 64% of both AB Global High Yield and Franklin Emerging Market Bond Fund are hold by Taiwan domestic investors, very close to the legal limitation of 70%. Almost these funds generated net asset inflows also in 2019, average USD1,124 million during the year. Franklin EM Bond fund and Blackrock World Mining Fund are the only two funds exceptionally suffered asset loss, marked in light gray in the table, out of the top 10 largest funds hold by domestic investors. It’s notably that Franklin has large exposure on Argentina government bonds. Damaged by the default of Argentina government bonds started from Aug 2019, Franklin’s bond funds suffered big loss in the second half year in 2019. The max performance drawdown of Franklin EM bond fund over the second half year of 2019 is 8%. Taiwanese investors turned to redeem the relevant Franklin bond funds in Q3 and Q4 2019; however, the net inflow over the year of Franklin EM bond fund is still positive. The fund accumulated the 5th largest net inflow, USD746 million over the year. With regard to Blackrock World Mining Fund, the very famous fund listed in the TOP 10 funds hold by Taiwan investors over the long time since its inception in 2014, despite its looking-bad performances, the fund still gained over 36% assets from Taiwanese. In 2019, the fund was redeemed badly with net outflows USD324 million, equal to 17.5% of its AUM hold by Taiwan investors year ago, making Blackrock World Ming Fund the second largest outflow fund of authorized offshore funds in Taiwan.
Top 10 funds occupy the general asset inflows of authorized offshore funds
In 2019, authorized offshore funds generated USD6,105 million net asset inflows from Taiwanese. Top 10 funds with positive net inflows totally attracted USD10,010 million from the market, more than that of all offshore funds. It shows the high concentration of popular funds in the market.
NIC continues to watch out the asset flows of offshore funds and preference of local investors. If you are interested to find out more, please contact us soon!