This feature originally appeared in the December 2009 edition of AsianInvestor magazine. To subscribe to our premium content, please email Stephen Tang or call +852 2122 5239.

A global financial crisis has come and gone, but you wouldn't know it looking at Taiwan's mutual funds industry.

Globally, the banking parents of fund houses have suffered from reduced profits, performance issues and lost assets under management. This has led to consolidation - think of BlackRock's acquiring Barclays Global Investors from Barclays Group, or BNP Paribas taking over Fortis Investments from Fortis Group.

Nothing of the sort has occurred in Taiwan, despite a market that everyone seems to agree is in dire need of consolidation. Since the collapse of Lehman Brothers in September 2008, there remain the same 39 securities investment trust enterprises (Sites) active in Taiwan's $60 billion onshore funds business. Of these, 17 Sites run fewer than $1 billion assets and lack economies of scale.

The universal financial holding company model in Taiwan, in which Sites are arms of banking, brokerage or insurance parents, remains the norm. There is no sign of a rethink.

Of course, Taiwan's financial groups have not suffered from over leverage or excessive amounts of daft exposures compared to peers in the United States and Europe. Despite Taipei regulators' calls for financial groups to strengthen capital, and a roughly 10% loss of investment staff across the industry, no parent has felt pressure to sell a Site business.

There is no visible appetite for mergers and acquisitions among Sites. Francis Tu, CEO at Yuanta Funds, a top-five fund house, says the market share of the bottom 17 Sites is too small, and their investment strategies too commonplace, to justify the cost and added headcount for potential buyers.

Nor have foreign-owned Sites been keen to add scale through acquisition.

The two acquisitions of recent years by foreign players have been about market entry, not building scale via M&A. Deutsche Asset Management bought out AllianceBernstein and Sun Hung Kai's stakes from a joint venture with Far Eastern in April 2008, while Manulife acquired Fuhwa Securities Investment Trust in January 2009 and rebranded it Manulife Asset Management.

The names changed but the number of participants remained the same.

This is an excerpt; the full article is in the December 2009 edition of AsianInvestor magazine. To subscribe to our premium content, please email Stephen Tang or call +852 2122 5239.