Foreign fund managers circling Taiwan looking for potential acquisitions or joint ventures say the most appealing target at present is International Investment Trust (ITT), Taiwan's original domestic fund house. It was established 16 years ago as a joint venture including foreign and domestic partners. It runs the New York-listed Republic of China Fund, which was the first vehicle foreigners could use to invest in Taiwanese securities.

It has always been considered one of Taiwan's top four domestic houses, along with China Securities Investment Trust, Fubon Securities Investment Trust and Capital Investment Trust. Today, IIT is not even in the top 10, in terms of assets under management. But due to its pedigree, it is usually at the forefront of getting new products approved by the Securities and Futures Commission (SFC). The fund management industry in Taiwan is a cartel, with the early arrivals generally enjoying preferential treatment from the regulators. So IIT is a good name.

It is about to become an even better one. In a move to boost its fortunes, IIT has just announced a distribution arrangement with Bank SinoPac. While by no means Taiwan's biggest bank, foreign fund managers say SinoPac does broaden IIT's distribution capabilities domestically. It will make IIT all the more attractive.

Foreigners are scrambling to acquire a presence in Taiwan. Earlier this year, Invesco Global acquired Grand Pacific Securities Investment Trust, a sizeable fund manager, and HSBC Asset Management acquired China Securities Investment Trust – the biggest in the country, with nearly $4 billion under management. Last year, Fubon sold a stake to Citibank which was primarily interested in its insurance arm but also has designs on Fubon Securities Investment Trust. The acquisition frenzy was kicked off early last year when ABN Amro acquired Kwang Hwa Investment Trust Company.

Existing domestic businesses can offer a foreigner not only a thriving domestic mutual funds presence but also a securities investment trust enterprise (SITE) license, which allows marketing of approved funds to Taiwanese investors. Getting approval for SITEs from scratch and the waiting period to launch your first funds can take years, depending on the whims of the SFC. Furthermore, a new SITE requires a huge capital investment and your initial fund launch must raise a substantial sum from at least 1,000 local investors. If you fail, you lose your license. So buying a SITE circumnavigates this cumbersome and risky process.

Furthermore, Taiwan's institutional market is now interesting. Last year, the government passed legislation allowing for discretionary asset management, mainly as a vehicle to get state-owned pension funds to start pumping money into the flagging domestic market. But this also freed up corporations, insurance companies and other institutions to provide discretionary mandates to fund managers, including offshore mandates.

Local fund managers, in return, are keen to import foreign expertise, international best practices and eventually create their own global business.