As part of AsianInvestor’s series on how distributors choose and onboard funds, we spoke to Juan Li, senior vice president of the wealth management product division at Taipei-based CTBC Bank.
CTBC is the biggest distributor of investment funds in Taiwan by sales, with about 2,300 funds (1,500 offshore and 800 onshore) on its shelves and some NT$200 billion ($6.3 billion) invested in them.
The bank’s wealth management division has about 250 staff across three departments – financial planning, insurance agency and personal trust – and about 1,000 relationship managers.
CTBC screens new fund houses whenever they enter the local market, reviews managers already on its platform every three years and assesses funds on a monthly basis.
It takes three to six months to introduce a new fund series, said Juan, and there is no significant difference for the launch time between onshore and offshore products.
CTBC uses qualitative and quantitative criteria to evaluate whether to add a manager to its platform. Among other things, it takes into account a firm’s assets under management and whether it has a complete product range and sufficient resources to support distribution, such as staff training and client service in Taiwan.
The evaluation is done by a committee, whose members cover functions such as risk management, marketing and sales.
Normally, CTBC reviews its fund houses every three years, but news that negatively affects the fund house, such as significant losses or regulatory penalties, may spark more frequent scrutiny, Juan said.
When it comes to individual funds, CTBC comes up with house views on recommended markets on a monthly basis.
Track record is viewed as important, noted Juan, because while past performance does not necessarily guarantee future outperformance, it can reflect the manager’s capability. CTBC usually selects funds that rank in the top quartile over the short, medium and long term.
The bank also assesses the fund’s portfolio, to ensure it is not overweight industries that it is not optimistic about. It avoids funds with very high volatility, even if they have provided good performance, because they represent huge risk, Juan said.
Morever, CTBC only picks funds that meet its evaluation criteria. Hence, even if it is optimistic about a certain market, it will not select a product for that market if nothing meets its standards.
Juan said the recommendation list was screened every month, and will also be reviewed after major events – such as Britain’s June 23 vote to leave the EU – with the sales team and clients informed of any changes.