Technology, ESG, High Dividend and Domestic equity themes are chased heavily by Taiwan investors
2020 was an unprecedented year, with pandemic breakout starting from China but overwhelmed almost US and European markets. All our lives are influenced with lockdown measures and global business activities came to a standstill in large extent; but it turns to raise the alternative opportunities for several emerging sectors and widen our insights toward health, environment, and policies, etc., totally. We believe that asset management industry is not an exception. The overall ecosystem will completely turn to the new page. Investors’ preference and portfolio construction will lean to market trends and our awareness about the trending themes.
Before heading to the new challenges in the coming 2021, let us quickly overviewed the onshore fund launches over 2020, in Taiwan. Out of 39 licensed Securities Investment Trust Enterprises (SITE) in Taiwan, 26 SITEs launched 71 onshore funds with USD 9.26Bn asset inflows from these new funds as of Dec 2020.
Exhibition 1: Types of New onshore funds in 2020
Taiwan stock market soars. Domestic equity funds win investors' preference
In regional wise, 25 new funds invest in emerging markets, among them 7 funds are Asian emerging markets related. Out of 13 new single country funds, 11 funds concentrate on the domestic market where local investors are familiar with. We believe strong surge of Taiwan broad equity market is one of the drivers; UOB Asset Management relied on its group resources in Singapore, launched the firs Singapore REITs fund in Taiwan. We smell institutional investors tend to look at Singapore REITs given its high dividend yield. UOB AM took the advantage of this favorable tailwind to retail markets and the fund acquired outstanding sales results; To pursue the attractive economic growth of Vietnam, CTBC SITE dealt with a local asset manager, to launch a Vietnam equity fund, becoming another spotlight over the year. Above two funds are ranked as top 10 funds in terms of December asset under management.
Fund types rotate. Bond ETF loses flavors
Though regulators urged constrains to avoid SITEs’ concentrically offering Target Maturity Funds, the whole year we still see 23 TMFs were issued in the market, raised up USD 1.87Bn according to the funds’ assets of SITCA records. Bond ETFs were silent during the year. The market was too crowed thus supply turns to halt. Over the whole year, merely two bond ETF funds launched. Compared to the issuance scale, which are 61 and 28 Bond ETFs in 2019 and 2018 respectively, the launch boom is ceased.
Specific themes are in demand. Yuanta/Cathay and Pinebridge are the winners
Accompanying with quick recovery of equity market after the first quarter of 2020 amid COVID-19, unique thematic equity funds caught investors eyeballs, with expectation to capture the risk-on opportunities in the continuous low interest rate era. Yuanta Taiwan High Yield Leading Company Fund, an equity fund invests in listed Taiwan companies offering prominent equity dividends, was the most successful fund, with USD 1,613 Mn raised up in Mar 2020. Though suffering significant asset outflows after Q3 of the year, till end of 2020, the fund was still ranked top one in terms of assets of new funds launched in 2020. The fund plays outstandingly to earn investors’ favor given integration of multiple advantages appealing to local investors’ appetite, i.e. Taiwan, high yield and growth stocks. Another success of Yuanta SITE in 2020 was Yuanta Global NexGen Communication Innovative Technology ETF. This ETF swept USD 523.30Mn when it’s launched in June; however its asset was down in a fast phase to USD268Mn as of Dec 2020. Launched nearly in the same period, Cathay SITE’s MSCI Taiwan ESG Sustainability High Dividend Yield ETF, closed in very similar scale of capital raising, but its asset scale was organically growing up during the months. Cathay MSCI Taiwan ESG Sustainability High Dividend Yield ETF was 3rd largest new fund as of Dec 2020. Cathay SITE very precisely catches investors’ favors with good marketing position and tap on the right market trend. In total, Cathay SITE grasped three seats of the largest 10 funds launched in 2020. Besides this great successful ETF, Cathay Taiwan 5G Plus ETF was very notable, with asset raising over USD 550Mn before closing the year. With regard to the funds closing over the NTD 10Bn mark, the other two new funds were Pinebridge Global ESG Quant Bond Fund and Franklin Templeton SinoAm AI Hi-Tech Fund. After the astonishing success in the launching period, Pinebridge applied additional quota from the regulator to tap on the tailwind. Pinebridge Global ESG Quant Bond Fund’s assets are doubled hereinafter, to USD 843.86Mn as of Dec 2020, becoming the largest onshore investment grade bond fund. It is obvious to sense from the above successful stories that Taiwanese favored high-dividend/yield products so two out of top three funds are with high dividend theme. Also, more ESG-focused funds will be expected to come since more and more investors aware the theme and the benefits that corporates with cautiousness, awareness and actions on ESG principles bring along to the investment portfolio. We expect both the demand and supply will grow simultaneously since investors care, are willing to invest in such territory, and desire to contribute, forcing relevant products come along this awakening wave.
Exhibition 2 : Top 10 New onshore funds (as of Dec 2020)
In terms of the largest scale of new funds that over NTD 10Bn mark over 2020, there are totally six funds.
Exhibition 3: New launched onshore funds over NTD 10Bn mark
NIC continues to source out market intelligence and hand-to-hand integrate strategies from offshore advisors and local players, i.e. SITEs and Banks for instance. We are open for new partners. Please come to us and together exploit the opportunities!