Taiwan to open trust business to fund players
Under the proposed rules, Taiwanese banks will no longer have a monopoly on the $232 billion trust industry.
August 2008 has been a truly auspicious month for the Taiwanese fund management scene. Never mind that global markets continue to slide.
In yet another move towards deregulation, TaiwanÆs Financial Supervisory Commission (FSC) is about to end the monopoly of Taiwanese banks on the trust business and open up the industry to the islandÆs fund players. Towards this end, the FSC has published Wednesday a set of 14 draft rules for industry consultation.
Under the proposed new framework, fund product manufacturers and fund distributor agents will both be allowed into the industry, provided that they meet the regulatorÆs licensing requirements, operational experience and investment manager qualifications.
Trust products were previously the exclusive domain of Taiwan's commercial banks, and the concept itself is taken from the trust model in the US. Trust managers can offer discretionary asset management and anonymity to clients. The industryÆs business is valued at NT$7.32 billion ($231.98 billion), according to the latest statistics from the Trust Association.
TaiwanÆs trust business is still growing steadily. The associationÆs data suggests that over the past quarter, about $1.9 billion poured into trusts. About NT$6.45 trillion, or 88.1% of the total, went to money trusts; NT$226.2 billion or 3.1% to securities trusts; and about NT$206.1 billion or 2.8% to real estate trusts.
Eddie Chang, managing director and country head of JPMorgan Asset Management Taiwan, lauds the regulatorÆs proactive stance towards modernising the asset management industry. While the rules are still in the consultation stage, he anticipates the trust business will be a force in reshaping the fund industryÆs offerings on the island.
Chang notes that under trusts, fund houses can compete on grounds of innovative product design, investment performance and superior customer services. Anonymity, financial protection and even product features such as fund management under special purpose vehicles will appeal to high-end customersÆ needs.
Steven Billiet, CEO at ING Securities Investment & Trust in Taipei, also welcomes the proposed rules for bringing the fund industry a more equal footing with the island's banking industry by allowing a broader business scope for the fund houses and fixing past handicaps such as the compulsory outsourcing of custodian and trust business to banking competitors.
The FSCÆs efforts to reinvigorate TaiwanÆs asset management industry this year have been praiseworthy. Of the many plans the FSC has announced this year, Chang notes the removal of restrictions to China investments and the introduction of UCIT III-compliant fund codes (no more restrictions on derivatives) have been the two biggest landmark announcements so far this year.
Meanwhile, the FSC has also recently announced that it is allowing foreign-registered exchange traded funds (ETFs) to raise assets in Taiwan.
Opening up trust funds to TaiwanÆs fund players will not only create a level playing field between bankers and asset managers, but ultimately attract a lot of the Taiwanese wealth that is stashed offshore back to the island.
But fund execs in Taipei note the FSC still has a long list of æto-dosÆ to work on. Reits, private equity trusts, freeing up best execution requirements and order routing outsourcing so far are still concepts, not reality. The islandÆs visions of becoming a financial service hub for Asia-Pacific is admirable, industry players say, but the reinvigoration will remain an ongoing project that still has a long way to go.
In yet another move towards deregulation, TaiwanÆs Financial Supervisory Commission (FSC) is about to end the monopoly of Taiwanese banks on the trust business and open up the industry to the islandÆs fund players. Towards this end, the FSC has published Wednesday a set of 14 draft rules for industry consultation.
Under the proposed new framework, fund product manufacturers and fund distributor agents will both be allowed into the industry, provided that they meet the regulatorÆs licensing requirements, operational experience and investment manager qualifications.
Trust products were previously the exclusive domain of Taiwan's commercial banks, and the concept itself is taken from the trust model in the US. Trust managers can offer discretionary asset management and anonymity to clients. The industryÆs business is valued at NT$7.32 billion ($231.98 billion), according to the latest statistics from the Trust Association.
TaiwanÆs trust business is still growing steadily. The associationÆs data suggests that over the past quarter, about $1.9 billion poured into trusts. About NT$6.45 trillion, or 88.1% of the total, went to money trusts; NT$226.2 billion or 3.1% to securities trusts; and about NT$206.1 billion or 2.8% to real estate trusts.
Eddie Chang, managing director and country head of JPMorgan Asset Management Taiwan, lauds the regulatorÆs proactive stance towards modernising the asset management industry. While the rules are still in the consultation stage, he anticipates the trust business will be a force in reshaping the fund industryÆs offerings on the island.
Chang notes that under trusts, fund houses can compete on grounds of innovative product design, investment performance and superior customer services. Anonymity, financial protection and even product features such as fund management under special purpose vehicles will appeal to high-end customersÆ needs.
Steven Billiet, CEO at ING Securities Investment & Trust in Taipei, also welcomes the proposed rules for bringing the fund industry a more equal footing with the island's banking industry by allowing a broader business scope for the fund houses and fixing past handicaps such as the compulsory outsourcing of custodian and trust business to banking competitors.
The FSCÆs efforts to reinvigorate TaiwanÆs asset management industry this year have been praiseworthy. Of the many plans the FSC has announced this year, Chang notes the removal of restrictions to China investments and the introduction of UCIT III-compliant fund codes (no more restrictions on derivatives) have been the two biggest landmark announcements so far this year.
Meanwhile, the FSC has also recently announced that it is allowing foreign-registered exchange traded funds (ETFs) to raise assets in Taiwan.
Opening up trust funds to TaiwanÆs fund players will not only create a level playing field between bankers and asset managers, but ultimately attract a lot of the Taiwanese wealth that is stashed offshore back to the island.
But fund execs in Taipei note the FSC still has a long list of æto-dosÆ to work on. Reits, private equity trusts, freeing up best execution requirements and order routing outsourcing so far are still concepts, not reality. The islandÆs visions of becoming a financial service hub for Asia-Pacific is admirable, industry players say, but the reinvigoration will remain an ongoing project that still has a long way to go.
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