Overview of Taiwan Registered Offshore Funds in 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 2021 Dec, there are 64 offshore fund Institutions, and 1,008 registered Offshore Funds in total in Taiwan. The asset under management of registered offshore funds in Taiwan accounts for around USD 140.8 billion as of Dec 2021, YoY +11%. In 2021, the “Deep Cultivation Plan” promoted by Taiwan Financial Supervision Commission (“FSC”) has been the 9th year, and there are 8 asset management groups qualified to grant special privileges, including Alliance Bernstein (“AB”), Allianz, Schroders, Invesco, JPMorgan, Nomura, Franklin and NNIP. Compared to the previous year, Fidelity is not qualified for this year, but other groups remained the same. Under the plan, all the privileges chosen which could include the ability to introduce new types of funds to Taiwan, faster approval of funds, the ability to submit more products for approval at one time or the granting of higher fund exposure to the Mainland Chinese securities, the most importantly, an offshore fund can have Taiwanese investors accounting for up to 70% of fund from these 8 groups, and the cap for other overseas players is 50%. The preferential measures are valid for one year, from October 1, 2021 to September 30, 2022. FSC emphasized that it will continue to encourage overseas fund managers to apply in accordance with the deep cultivation plan, 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 Fund Houses for Taiwan Domestic Investors
Compared with 2020, the top 10 asset management groups in 2021 remained the same but in a slightly different order. Same as last year, Alliance Bernstein (AB) is the largest offshore fund house based on its asset held by domestic investors exceeding USD27.2 billion as of Dec. 2021. Allianz surpassed JPMorgan to the 2nd largest fund house in 2021 with its amount largely progressed 49% yoy thanks to Allianz Income and Growth Fund. Although JPMorgan slid to the 3rd place, its asset held by domestic investors grew by 20% yoy. Franklin, Fidelity, and BlackRock remained the same order as 2020, but Franklin with amount held by domestic investors declined by 9%, Fidelity grew by 10%, and BlackRock grew by 12%, compared to the last year. Amundi and Pimco dropped from 7th to 9th and from 9th to 10th, respectively, both with cash outflow mainly from fixed income fund. Overall, the top 10 fund houses are the same as last year and with the total AUM grew by 10%.
Exhibit 1: 2020/2021 Top 10 Popular Offshore Fund Houses by Domestic Investors
Source: Fund Clear. Consolidated by NIC
Top 5 Fund Houses with Asset Inflow and Outflow by Taiwan Domestic Investors
In 2021, Allianz gained the most net inflows, USD $6,826 million, YoY +49.6%, as mentioned above, the inflows mainly generated by specific income fund, followed by JPMorgan, USD $2,488 million, and BNP Paribas, USD $806 million, although BNP Paribas is not on the top 10 list of the year. Relatively, Amundi suffered from the largest asset outflows in 2021, due to the large amount of redemption from its flagship fund, Emerging Markets High Yield Bond Fund. Similarly, Franklin continually faced net asset outflows from its Emerging Market Bond Fund although the amount of outflow decreased than the last year, still drove it becoming the 2nd largest outflow fund house of 2021.
Exhibit 2: 2021 Top 5 Asset Inflow/Outflow Fund Houses
Source: Fund Clear. Consolidated by NIC
Top 10 Funds Appealing to Taiwan Domestic Investors
We summarized top 10 registered offshore funds with statistics of amount held by domestic investors in 2021. As you can see, 9 out of top 10 funds are income-oriented investment strategy with 7 are fixed income funds and 2 are balanced funds. It is not surprised that the investors favor income with stable cash inflow, but Taiwanese investors even prefer higher yield and willing to take more risks. Based on the list of amount held by Taiwan domestic investor, Allianz Income and Growth fund became the top 1 fund with largest amount, grew by 36% yoy. We believe that the strategy combined fixed income investment with consistent cash inflows (12M dividend yield: 7.0%) and equity investment in some well-known big tech names with growth theme is the main reason to attract Taiwanese investors joining in. There is another balanced fund, JPMorgan Global Income Fund, also enjoyed asset inflow with amount grew by 8% yoy. Relatively, several funds on the list were suffered from outflow especially Amundi and Franklin Emerging Markets Bond Funds with amount both decreased by 41% yoy, and NN (L) Emerging Markets Debt Fund also decreased by 19% yoy. As you can see on Exhibit 3, Franklin Emerging Markets Bond Fund enjoyed the highest dividend yield among the list, in fact that the dividend might be partially from the invested capital. The price return from the fund in 2021 was -14.7% though the total return was -6.9%. Lastly, it is worth noting that BlackRock World Mining Fund was new on the list as the 10th largest but not with much inflow, less than 1% yoy. It is also the only one equity fund and with no dividend payout share class on the list. Taiwanese investors favor mutual fund as the vehicle investing in high yield bonds and emerging market bonds, we believe, for several reasons: 1.) both institutional and individual investors are willing to leverage asset management companies’ professional investment expertise and research platform, 2.) it is easier to access lower rating bonds with risk diversified, 3.) some institutional investors under stricter regulation are not able to directly invest in high yield bonds. Overall, there is no significant difference between the list of top 10 largest amount held by Taiwanese domestic investors for 2021 and the previous year.
Exhibit 3: Top 10 offshore Funds (as of Dec. 2021)
Source: Fund Clear, Bloomberg. Consolidated by NIC
NIC continues to keep an eye on 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!