Yuanta eyes regional expansion through tie-ups, new teams

Taiwan's biggest fund house is moving to build its business across Asia with the help of partner firms or staff expansion in markets including Hong Kong, Indonesia, Korea and Japan.
Yuanta eyes regional expansion through tie-ups, new teams

Yuanta Securities Investment Trust Company, Taiwan’s biggest fund house by assets, has several projects in the pipeline as it strives to build a regional exchange-traded funds platform, AsianInvestor can reveal.

The firm plans to work with partner firms in Hong Kong to develop L&I ETFs next year, may set up ETF teams in Korea and Indonesia and intends to launch more commodity- and bond-focused ETFs in Taipei. 

Yuanta is also working on its first smart-beta products, which it aims to launch in 2017, having last week signed agreements with European index provider Stoxx and Japan’s Mitsubishi UFJ Trust and Banking Corporation to this end.

The firm plans to launch ETFs linked to agricultural commodities and silver, and to US government bonds. The new funds, which Yuanta expects to list next year, will including leveraged and inverse (L&I) products.

International ambitions

Meanwhile, it would be logical for the firm to put ETF-focused teams in Jakarta and Seoul, because it has local licences in both Indonesia and Korea. 

With regard to its other regional tie-ups, Yuanta advises Thailand’s Krung Thai Asset Management on nine ETFs listed in Bangkok and has partnered Korea’s Mirae Asset to cross-list ETFs on the Korean and Taiwan stock exchanges by the fourth quarter of this year. 

Beyond Asia, Yuanta’s president and chief executive Julian Liu told AsianInvestor that it did not have plans to expand physically into Europe or the US but would instead seek to collaborate with a local partner.

The firm is the biggest player in Taiwan’s fast-growing ETF market, which saw 13 new ETFs launched in the first half of this year, compared to 11 for the whole of 2015. Eight of the new launches were leveraged and inverse (L&I) ETFs.

Yuanta didn’t launch L&I ETFs in the first half, but will do so in the third quarter. It had launched Taiwan’s first such products in late 2014.

In the first half, Yuanta saw assets of its inverse ETFs jump 238% to $1.7 billion, while its leveraged ETF AUM grew 41% to $713 million. Its total ETF assets grew 36% to $6 billion in the same period, helping boost its total AUM by 12.4% to $10.2 billion.

Smart beta

Meanwhile, Yuanta aims to develop a cutting edge in smart beta over the next year or two by combining the capabilities of its active and passive teams, Liu said.

The firm is still gauging client appetite and will soon settle on which types of smart-beta products it will launch first, said Liu. He expects to decide by the end of this year and put out the first product in 2017.

Stoxx and Mitsubishi UFJ Trust and Banking Corporation (MUTB) will advise Yuanta on smart-beta development. Taiwan and Japan are quite similar in terms of demographics and financial market development, said Liu. Yuanta wants to learn from MUTB about how to develop smart-beta products that cater to the demands of retirement savers and pension funds.

Lius expects these strategies to appeal particularly to conservative institutional investors, such as pension funds and insurance companies.

Yuanta set up a smart-beta team in late 2014, which now has 15 people, including Liu, the respective heads of the active and index teams, and seven quantitative investment staff.

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