Foreign asset managers see Taiwan as the best market in Asia for distributing funds through insurance firms’ investment-linked products (ILPs) over the next three years, according to Cerulli Associates.
Overall, seven out of 19 global fund houses surveyed by the research house said the country provided the best opportunity for raising assets through ILPs. The $45.8 billion ILP market represents one of the main distribution channels for many global fund houses that operate there.
However, despite strong demand for these products, the market is highly competitive and difficult for latecomers or small fund houses to access.
“Taiwan insurers put major emphasis on a fund house’s brand name, particularly for types of ILPs in strong demand, such as discretionary investment account [DIA] ILPs,” said Manuelita Contreras, a Singapore-based senior analyst at Cerulli. “Foreign fund houses' brand names must be big enough in the Taiwanese market to be considered.”
AllianceBernstein, Blackrock, JP Morgan Asset Management and Schroders are among the big names that local insurers tend to use for their ILP businesses, noted Contreras.
The top five Taiwanese insurers – Cathay Life, Allianz Taiwan Life, BNP Paribas Cardif, Fubon Life and Nanshan Life – account for 70% of the ILP market between them, according to Cerulli.
While increased competition has made things tougher, particularly for new foreign managers and boutique players, Contreras sees ample scope for asset gathering if international firms can offer new and innovative funds. Cerulli also expects DIA ILPs – under which a portfolio manager makes buying and selling decisions for the policyholders’ accounts – to remain popular among local investors.
Sales of DIA ILPs reached TW$281 billion ($8.6 billion) as of September, their peak since the financial crisis in 2007/2008, according to the Life Insurance Association of Taiwan. Fund houses like DIA ILP assets because they can invest them in their proprietary funds, said Contreras.