Pimco is seeking regulatory approval and hiring staff for the new operation it is setting up in Taiwan as it eyes increasing distribution of its funds in the country.
The US asset manager, which recently secured office space in Taipei, plans to become a master agent so it can sell its own offshore funds locally, Michael Thompson, head of Asia ex-Japan, told AsianInvestor.
This will mean it no longer has to share profits with Allianz Global Investors, its sister firm and master agent since 2008, which currently handles sales and investor subscriptions and redemptions for Pimco’s funds. Pimco will then also be able to distribute products for other fund houses.
The firm has submitted its application for a Securities Investment Consulting Enterprise (Sice) licence, said Thompson. This will allow it to sell products onshore but not manufacture its own funds locally. The approval and master agent transition will be completed some time in 2018, he said, declining to be more specific.
The Sice application process usually takes about six months, Donna Chen, founder and president of Taipei-based consultancy Keystone Intelligence, told AsianInvestor.
The 81 Sices in Taiwan cannot manufacture onshore funds and have their discretionary portfolios capped at 20 times their net asset value, while the 39 Securities Investment Trust Enterprises are not subject to such limits, said Chen.
Pimco's move comes as the Financial Supervisory Commission (FSC) has tightened the rules in recent years for foreign fund houses operating onshore in Taiwan, which has made the market more challenging for new and smaller players in particular.
On the institutional side, Pimco runs two global fixed income mandates for the Bureau of Labor Funds, the largest state pension manager. It also manages one for the Labor Insurance Fund, said Chen.
Pimco is progressing with hiring staff for client servicing and other support functions for the new office, noted Thompson.
The move reflects a trend in recent years for international asset managers to expand, or start building, retail and/or wealth management client bases in Asia, having previously focused their efforts on marketing to institutional investors. Examples include Axa Investment Managers, Goldman Sachs Asset Management and Neuberger Berman.
But retail businesses require a bigger local staff presence than institutional ones. Pimco is targeting a headcount of 30 for the new office, a Taiwan-based senior executive at a European fund house told AsianInvestor. A Pimco spokeswoman declined to comment on the size of the team or who would be heading the office.
Headhunters in Taiwan have been approaching people in the industry since early this year with a view to recruiting for Pimco’s new office, and Thompson has visited Taipei several times to conduct interviews, said the unnamed executive.
This will be Pimco's fifth office in Asia, alongside Hong Kong, Singapore, Sydney and Tokyo. The firm also announced this week that it would open an office in Austin, Texas in summer this year.
A senior executive at a pension fund in Taiwan told AsianInvestor that the new operation would not have any implications for Pimco’s institutional business in the country, as Pimco has always pitched for mandates using its own brand name.
Institutional investors rarely issue local fixed income mandates because the domestic bond market is too small to warrant them, so fixed income mandates are mostly global, the pension executive said on condition of anonymity.
In the retail space, fixed income products are the most popular offshore funds among investors in Taiwan. Domestic investors held NT$1.69 trillion ($46.8 billion) of fixed income funds as of March 31, accounting for half of all fund types, according to the Securities Investment Trust and Consulting Association in Taiwan.
Local investors like the interest income that fixed income funds provide, said Keystone’s Chen.