Taiwan is calling on its asset-rich life insurers to give billions of investment mandates to domestic money managers in a government push to turn the chipmaking economy into a regional financial hub.
The Financial Supervisory Commission (FSC) expects insurers to move an initial NT$1 trillion (US$32.51 billion) to local asset management firms, as the government builds out a new special wealth management zone in Kaohsiung in a bid to compete with Singapore and Hong Kong.
Until recently, local regulations led life insurers to mandate only a small part of their aggregated US$1.2 trillion of funds to local asset managers, while a significant portion went to foreign firms. The majority of the rules restricting related-party transactions were relaxed last year.
Photo: An Rong Xu, Bloomberg
“We should take back the right to manage assets in Taiwan,” FSC Chairman Peng Jin-lung (彭金隆) said in an interview on Thursday last week. “Based on a rough estimate, around NT$1 trillion in assets should be transferred” to local managers in the near future, he said.
The regulator is seeking to double total assets booked in Taiwan to US$2 trillion in six years, Peng said, adding that it is a big challenge for the local financial sector.
Cathay Life Insurance Co (國泰人壽) is considering giving more mandates to its parent Cathay Financial Holding Co’s (國泰金控) asset management arm, people familiar with the matter said.
The company is planning to fold its life insurance division’s investment team into the asset management arm within several years, the people added.
Cathay Financial did not respond to a Bloomberg request for comment.
The practice that the FSC is encouraging is not uncommon globally for insurers, Taiwan Ratings Corp (中華信評) analyst Serene Hsieh (謝雅瑛) said.
“Based on the experience and long history of managing sizeable investment assets, we think Taiwan lifers have good capability to formulate investment mandates,” she said.
The move could help broaden Taiwan’s economy, which remains heavily dependent on manufacturing and advanced tech like semiconductors.
Redirecting the initial NT$1 trillion would serve as a cornerstone to draw in more assets, Peng said, adding that it signals the necessary scale to convince clients that Taiwan’s asset management industry can compete internationally.
To safeguard its relevance in the global economy amid increasing geopolitical pressure from China, the government is working to attract more foreign banks to its new wealth management zone by deepening integration with international financial markets.
Peng said the move would add a “financial shield” to the existing “silicon shield,” the notion that Taiwan’s dominance in producing cutting-edge semiconductors would persuade governments around the world to come to Taiwan’s defense in the event of a Chinese invasion.
The global boom in artificial intelligence has fueled rapid wealth creation in Taiwan as company profits and Taipei-listed shares have surged.
The local stock market has grown to become the eighth-largest in the world in terms of market capitalization, a huge change from just 20 years ago, Peng said.
As part of the wealth management push, regulators are also easing regulations, greenlighting new wealth products and loosening restrictions on banks.
To assist the transition, Peng said the FSC is open to any potential new financial instruments, including derivative-linked and bitcoin exchange-traded funds (ETFs).
Taiwan’s ETF market is gaining momentum, with the FSC estimating that active funds could reach NT$200 billion within three years following the first batch of issuances earlier this year.
The nation’s broader ETF market saw total assets surge 64 percent to NT$6.4 trillion last year and now ranks third in the region, according to industry data and Bloomberg Intelligence.
Despite the push to diversify its ETF offerings, Taiwan still lags behind other Asian markets, such as Japan, Singapore and China, in terms of product breadth.
However, Peng cautioned that regulators need to wait for the Taiwan market to be ready for further easing.
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