Overview of Taiwan Authorized Offshore Funds in 2020
Updated: Apr 28, 2021
The Overall Asset Scale of Taiwan Registered Offshore Funds is Organically Growing
According to the data of Securities Investment Trust & Consulting Association (“SITCA”) as of 2020 Dec, there are totally 63 offshore fund Institutions, and 1,010 authorized Offshore Funds in Taiwan. The asset under management of authorized offshore funds in Taiwan accounts for over than USD 127 billion as of Dec 2020, YOY 6.49 %. If taking into consideration the year’s good market sentiment with overall market performance growth, we have to say more precisely there is slight outflows of authorized offshore funds in Taiwan. In 2020, the “Deep Cultivation Scheme Program” promoted by Taiwan Financial Supervision Commission (“FSC”) has been the 8th year, and there are 9 asset management groups qualified to grant special privileges, including Alliance Bernstein (“AB”), Allianz, Schroder, Invesco, Morgan, Fidelity, Nomura, Franklin and NNIP. Compared to the previous year, Nomura is the only new management group in 2020. According to the regulator, the upper limit of the investment ratio of overseas funds raised and sold in Taiwan by these 9 management groups can be up to 70% instead of 50%. The preferential measures are valid for one year, from October 1, 2020 to September 30, 2021. FSC emphasized that in the future, they will continue to encourage overseas fund managers to apply in accordance with the deep cultivation scheme program, to combine the resources of the domestic and overseas fund management groups to enhance the overall competitiveness of Taiwan’s asset management industry.
Top 10 Popular Fund Houses by Taiwan Domestic Investors
Out of the 63 fund houses, 10 fund houses with the largest amount hold by Taiwanese in 2020 are illustrated in below graph. Same as last year, Alliance Bernstein is the most popular offshore fund house by Taiwanese, with its assets hold by domestic investors exceeding USD26,070 million as of Dec 2020. The 2nd largest fund house turns to be JPMorgan, which was ranked 4th in 2019. Similarly, Allianz beats Franklin and squeezes into top 3 this year. In comparison to 2019, Franklin and Amundi were seen asset volume decline during the whole year. Except for these two, other 8 fund houses had asset growth in 2020 in terms of the amount hold by Taiwanese investors. To make a conclusion, the overall top 10 ranking is not far different from last year and the average growth of top 10’s total AUM is about 5.7%.
Exhibit 1: 2019/2020 Top 10 Popular Offshore Fund Houses
Top 5 Fund Houses with Asset Inflow and Outflows by Taiwan Domestic Investors
If we look at the top 5 net asset inflows and outflows of offshore fund houses, NN Investment Partners generated the most net inflows, USD2,295 million, pushing its AUM in Taiwan grows about 49.6%, followed by JPMorgan and PIMCO. Alliance Bernstein, the champion in 2019, didn’t squeeze into top 5 this year. The yearly inflow amount of Alliance Bernstein fell from USD 3,084 million to USD 456 million, making 2019 winner take 6th seat only in 2020. Also, what surprised us here is Franklin Templeton, which suffered the most severe asset outflows. Total net outflow of Franklin funds from Taiwan domestic investors were USD2,522 million; Franklin was seen its sharp asset decline in Taiwan hereby. The primary reason goes to Franklin Emerging Market Bond Fund, Franklin’s flagship fund, is the offshore fund with the most outflows by Taiwan investors in 2020. This draw back makes Franklin lost the seat of No.2 in Top 10 fund houses ranking to place No.4 in 2020.
Exhibit 2: 2020 Top 5 Asset Inflow/Outflow Fund Houses
Top 10 Funds Appealing to Taiwan Domestic Investors
We summarized top 10 registered offshore funds with statistics of amount hold by domestic investors. Alliance Bernstein, Amundi and JP Moran accounts 2 seats separately, while Allianz, Franklin, NN and PIMCO each has one seat. It is not new anymore that fixed income and high yield bond are the most preferred asset class by Taiwanese investors. In regional wise, emerging market is still largely favored by domestic investors. 8 out of top 10 funds are fixed income type and there are three emerging market bond funds in total. AB Global High Yield and Allianz Income and Growth continue to seat top 2 largest offshore funds in Taiwan. Allianz Income and Growth particularly draws attention that it delivered 21.91% YTD in 2020, outstanding than other top funds in large extent. On the contrary, AB Global High Yield, the champion in terms of assets in Taiwan, post merely 1.87%. Franklin Emerging Market Bond Fund continued to suffer outflows, given its net asset value continued to decline since March 2020 to end up in the 6th seat of top 10 registered offshore funds. On the contrary, NN (L) Emerging Markets Debt Hard Currency grant satisfied performance in 2020, YTD 5.63%. Though NN EMD fund was also hit by market sell-off in March 2020, it gained back assets along with market recovery. NN (L) Emerging Markets Debt Hard Currency climbed three seats to become No.4, with the investment ration by Taiwan domestic investors up to 55.27%. According to the yearly rate of return, Allianz Income and Growth largely outperform all other 9 funds, delivering YTD 21.91% as of Dec 2020, Amundi Funds Pioneer Strategic Income and PIMCO Global Investors Series Plc Diversified Income Fund, new to the top 10 fund list, were followed with YTD 7.13% and 6.89% separately, defeating majority of top funds. From this statistic, we notice fund performance would be one of the factors when Taiwanese investors decide a fund investment; however, the effect is not that clear. In general, the brand name accounts much more in terms of investors’ preference.
Exhibition 3 : Top 10 Offshore funds (as of Dec 2020)
NIC continues to keep an eye out of the asset flows of offshore funds and preference of local investors. If you are interested in finding out more, stay tuned to see what’s coming up!