AllianzGI unrattled by surge in ETF popularity in Taiwan

Many established global managers in Taiwan have been left on the sidelines of an explosion in appetite for exchange traded funds, which have driven the onshore market to new highs and swept up new hordes of younger investors via online channels.

But the largest foreign asset management firm in Taiwan has said it is still confident in the future of the domestic actively managed equities funds market.

Amid the investment boom in locally listed passively managed ETFs, Ivy Chen, general manager and head of Taiwan at Allianz Global Investors, said her company “still believes in the value of active investment”.

Active Taiwan equities strategies, including multi-asset and income mutual funds, can provide investors with choices under different environments and “fulfil investors’ needs beyond beta”, Chen said.

This article was previously published by Ignites Asia, a title owned by the FT Group.

AllianzGI, one of the first global managers to enter the Taiwanese market in 1990, is very much focused on building strong local teams needed for active equities strategies, according to Chen.

The firm has qualified for special privileges under the Taiwan financial regulator’s annual Deep Cultivation Plan for 10 consecutive years, which requires foreign asset managers to make a certain level of financial and resource commitment to the local market.

However, ETF assets have been growing faster than any other investment product in the Taiwan market over the past few years.

Since 2018, Taiwan’s onshore ETF assets have grown more than eight-fold from NT$333bn ($10.3bn) to NT$3.21tn in August, according to Securities Investment Trust & Consulting Association data, with local giants such as Yuanta Funds and Cathay Securities Investment Trust among the biggest beneficiaries.

ETFs account for more than 50 per cent of assets in Taiwan’s open-ended fund market as of July, compared with 38 per cent at the end of 2020, according to data from the Taiwan Stock Exchange.

Growth in onshore active mutual fund assets has been strong but not as impressive as ETFs.

AllianzGI ranked as the third most profitable fund firm in Taiwan last year, with NT$1.05bn of net income, recording a 25 per cent increase compared with 2021 — the highest growth among the top 10 firms, according to analysis from Keystone Intelligence.

The German asset manager also ranked as the largest among 35 fund houses in terms of onshore equities assets in Taiwan by the end of August, with NT$70.02bn in assets and over 30,000 beneficiaries in three funds.

While some global investors have expressed concerns about the impact of geopolitical tensions on Taiwan’s asset management industry, Chen said Taiwan had benefited from the US-China trade war, for example.

She added that AllianzGI saw Taiwan as a “very important, promising market” that still benefited from on-the-ground, bottom-up equities research.

Investment-oriented key opinion leaders, or influencers, have been a key to the local ETF boom in recent years, especially when it comes to younger Taiwanese retail investors via online channels.

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Chen argued, however, that even though some influencers were “really professional”, some may have been providing misleading investment information to inexperienced retail investors.

“Taiwan’s fund market is booming and rising so fast that lots of inexperienced investors are diving in without fully understanding the situation and the risks,” she said.

“Many influencers are teaching amateur investors about asset management in an overly black and white way, which sometimes we are worried to hear,” she explained, adding that investor education was essential for Taiwanese investors to understand their investment needs.

“The industry needs to work together for better investor education, only by doing so that we can go a long way,” said Chen.

*Ignites Asia is a news service published by FT Specialist for professionals working in the asset management industry. Trials and subscriptions are available at ignitesasia.com.