Taiwan private placement funds, which are domiciled in Taiwan and launched by local asset managers, in short of SITEs (Securities Investment Trust Enterprise, SITE) formally, enjoyed continuous capital inflows from 2017 till end of 2021, almost reaching the peak of accumulated asset volumes a decade ago before GFC in 2008. The global headwind in 2022, including the worries of interest rate hike and inflation concerns for all asset classes, essentially impacts fundraising of Taiwan private placement market. In total, there are 18 SITEs participating in this sector at present. There are two new SITEs stepping into the territory in 2022, while the total assets in the category slumped 35% YTD as of Oct 2022, a combination result of fund NAV drop and big client redemption, according to the statistics of Securities Investment Trust & Consulting Association (SITCA). The asset outflows in 2022, a single year, retreated the whole private placement fund asset scales back to 2016, giving back the recovered assets over the past five years.
Exhibit 1: Taiwan SITE private Placement Fund AUM
Likewise, the average fund size of SITE private placement funds was ever blooming from 2016 and surged to above USD20mn per fund averagely in the era of 2017 to 2021, boosting by optimistic equity market sentiment and regulators’ further lift on applicable investor numbers per each private placement fund in 2018, where the relevant regulation allows 99 qualified professional investors for each fund. Average SITE private placement fund size is slight trimmed down to the level of USD 15mn during 2022, implying clear message that investors turn to hold clam for investments.
Exhibit 2: Average fund assets and numbers
Semi-liquid private real estate funds got embraced
The theme overwhelmed Taiwan market was certainly private real estate related. After end of 2020, when both FSITC and Cathay SITE launched UBS private real estate fund and fund of REIT funds separately, Cathay issued fund 2 and fund 3 over the course of 2021 and 2022 separately, assuming the industry giant look very optimistically toward this asset class. On top of product characteristics of private REIT fund being favored by HNW clients, i.e. constant and stable income, transparent forward-looking of underlying assets and coverage of different real estate sector and regions, the type of private REIT obtains regulator’s assent to be circulated in traditional wealth management market by means of a private market oriented products.
Fuh Hwa and Mega took turns as fund scale champion over the past three years in private placement category, while Mega has largest average size per fund, followed by Cathay. Uni-President is emerging to play standing out in the market, the SITE launching the most funds in 2022.
In terms of development of each SITE specifically in private placement sector, Fuh Hwa performed most dramatically given it closed 4 private placement funds in the year, with fund scales in this category trimmed down almost USD 700mn. Though it still holds the most assets as of Oct 2022, Fuh Hwa’s market share was decreased sharply from 38.6% to 25.7%. Mega also received big redemption order in early 2022, suffering more than USD 285mn YTD as of October. Cathay SITE is one of the most active asset managers with driving force from its group affiliate, Cathay United bank. Upon storming global equity market, Cathay SITE launched another two funds in the year, accumulating more than USD 45mn over the course of this ten months in the year. Uni-President was quite new in the category but proactively rolling with ambition to catch up with the elders. It launched 4 funds so far as of Oct 2022.
Taiwan SITE private placement fund’s outlook is in chaos nevertheless the main channels, for instance banks, are seeking to explore the opportunities out of traditional SITE private placement fund structure. Alongside the direct and efficient access to offshore funds, Taiwan SITE private placement is still the most favorable option. Navigate works independently with several SITEs to identify the most applicable solutions. We navigate market players and import innovative products to domestic SITEs. Please come to us to explore more.