Six foreign asset managers have received awards giving them improved access to Taiwan’s funds market this year, treble the number in 2015. Some industry observers expect the extra privileges the firms can select as a result to boost their local business ahead of other overseas players, potentially creating a more polarised industry.
This year’s beneficiaries, unveiled last week, are AllianceBernstein, Allianz Global Investors, Eastspring, Franklin Templeton, JP Morgan Asset Management and Schroders.
JP Morgan AM has now won the award in all four years they have been handed out since 2013, while AllianzGI was successful in 2014 and 2015. The other four have been handed privileges for the first time this year.
The awards programme is part of Taiwan’s Financial Supervisory Commission’s 'deep-cultivation plan', which it started in 2013 to encourage stronger commitment to the local investment industry by foreign managers.
All the privileges chosen – which could include faster approval of funds and the ability to submit more products for approval at a time – will be valid from October 1 to September 30.
There are eight criteria by which the deep-cultlvation award is judged, covering three broad categories: Taiwan onshore presence, local assets under management (AUM) and cultivation of local talent.
To receive an award and be granted one incentive, a fund manager must qualify for at least four of the criteria. Those that meet five criteria or more can choose two benefits – the maximum number a firm can hold at one time – from a choice of six.
This year US-based AllianceBernstein met six of the eight criteria, while Germany’s AllianzGI and UK-based Schroders met five. For their privileges, these three firms all chose to be able to submit three offshore funds for approval at a time; overseas firms without an award can only submit one at a time. The other option they chose is to introduce new types of funds to the Taiwanese market.
Eastspring, Franklin Templeton and JP Morgan each met four criteria, so could select one privilege. Eastspring and JP Morgan AM each chose to be able to submit three funds for approval a time. Franklin Templeton chose to introduce new types of funds to the Taiwanese market, such as principal-protected or offshore index products, or fixed income strategies that invest in convertible bonds.
Another benefit of the award is that a foreign manager can have Taiwanese investors accounting for up to 70% of a single one of their funds. The cap for other overseas players is 50%.
Such privileges are likely to drive award-holders' AUM growth, thereby creating a more polarised industry, said Donna Chen, founder and president of Taipei-based market research house Keystone Intelligence.
The business of offshore asset managers in Taiwan is already fairly concentrated. As of August 31, the biggest 10* foreign fund houses held an 82% market share of offshore funds sold in Taiwan with $81 billion in combined AUM, and the five biggest account for 62% of the market, with $61 billion, according to Keystone data.
The deep-cultivation regime will come into force on October 15, making it tougher for overseas players to access the local market, particularly for smaller fund houses lacking an onshore business. As a result, some of them are shifting to bigger master agents in the hope of boosting their sales, as reported.
Meanwhile, foreign asset managers have been rushing to submit offshore fund applications in Taiwan since the new rules were clarified on October 15 last year and ahead of the new regime coming in, Chen told AsianInvestor in late July.
Award winners must pass the basic criteria for the three main aspects, and four criteria in total, to enjoy one incentive. The six incentives are:
- the submission of three offshore funds for approval a time;
- introduction of new types of funds into Taiwan market;
- faster approval for offshore fund applications;
- faster approval for funds that involve derivatives;
- a lower required number of product analysts at a fund manager’s master agent; and
- a lower number of master agent staff required to serve distributors.
The six award winners this year all passed the basic criteria for the first two aspects – Taiwan onshore presence and local AUM – while AllianceBernstein was also given credit for its cultivation of local talent. The firm had sent staff to work at its US headquarters and set up an Asia-wide fund servicing centre in Taiwan.
AllianzGI was also credited for its cultivation of local investment research talent and setting up a regional fund-servicing centre.
Eastspring and Franklin Templeton received recognition for their talent-cultivation plans and cooperation with universities. JP Morgan and Schroders were credited for their cultivation of investment research talent in Taiwan.
*According to Keystone Intelligence, as of August 31 the top 10 offshore fund houses in Taiwan, in descending order by AUM, were: AllianceBernstein, JP Morgan AM, Franklin Templeton, Fidelity, BlackRock, Allianz GI, Schroders, NN, Pioneer and Pimco.