If Taiwan’s biggest asset manager is anything to go by, the country’s funds industry is not best pleased about losing first-mover status to London and Singapore in terms of the renminbi qualified foreign institutional investor (RQFII) scheme.
“We are a bit worried and disappointed,” says Julian Liu, president and chief executive of Yuanta Securities Investment Trust. “Taiwan was the priority, but now we wonder if the best time [for product launches] has passed.” He feels that product differentiation is now even more crucial and says Yuanta has various funds in the pipeline.
Taiwan had looked to be a frontrunner in terms of becoming the next RQFII hub when Chinese regulators said in January the scheme would be expanded to Taiwan with Rmb100 billion in quota. (RQFII quota would allow them to invest in onshore mainland securities.)
Fund managers had felt that being RQFII first-movers (after Hong Kong) would help them to boost their domestic business as well as tap foreign capital. But while London and Singapore both received quota last month – Rmb80 billion and Rmb50 billion respectively – the Taiwan government has not yet given final approval.
Being a late mover into the RQFII market puts Taiwan at a disadvantage not only at home, but also with regard to attracting foreign clients, says Liu. Taiwan-based institutional investors may also seek to invest in London and Singapore, he adds, so offering different types of product than those elsewhere will probably be necessary.
“The existing RQFII exchange-traded funds have covered most of the benchmark index, so we want to have something different, such as fixed income ETFs,” he notes. But first the plan is to launch an RQFII bond fund, says Liu, and the firm will then look to list new ETFs.
Yuanta – the biggest mutual fund house and ETF provider in Taiwan, with AUM of NT$297 billion ($10.11 billion) – is working on ETFs with new types of underlying. These may include leveraged, inverse and commodity ETFs, as well as more products tracking overseas stock markets.
Taiwan’s ETF AUM has almost doubled to around $5 billion in 2013 from $3 billion in 2010, and Liu expects the market to grow by 10% next year. In light of such growth, he expects firms that manage funds actively increasingly to step into the ETF market.