Taiwan must scale up its largest asset managers if it hopes to compete as a regional financial hub against international rivals, according to the top financial regulator.
The island’s US$630 billion asset management industry needs to harness Taiwan’s dominance in the global technology sector and leverage the deep capital pools of domestic financial conglomerates to rapidly build scale, Financial Supervisory Commission (FSC) Chairman Peng Jin-lung (彭金隆) said in an interview on Thursday last week.
“If Taiwan does not develop multiple asset management firms with sufficient scale, it will be difficult to compete internationally,” Peng said. “That limits our ability to promote Taiwan’s investment opportunities around the world.”
Photo: CNA
The push is as much geopolitical as it is economic. Taipei has pledged to strengthen its financial sector to mirror its prowess in advanced semiconductor manufacturing to build greater economic resilience amid escalating pressure from Beijing.
A pillar of that strategy is expanding fund management. While reaching NT$1 trillion (US$32 billion) in assets under management was once considered a landmark achievement for local firms, that figure pales in comparison to rivals in hubs like Hong Kong, where the asset management industry oversees more than US$3.3 trillion.
To bridge the gap, the FSC is looking inward. “We’re urging more domestic institutional investors to directly mandate local asset managers — either within their own financial groups or to other domestic peers — to quickly grow the industry,” Peng said.
There are currently eight Taiwanese asset managers with more than NT$1 trillion assets under management, according to the FSC. Yuanta Securities Investment Trust Co (元大投信) and Cathay Securities Investment Trust Co (國泰投信) lead the sector each with more than NT$2 trillion in managed funds.
Cathay Financial Holding Co (國泰金控), Taiwan’s largest financial group, said in October last year that it plans to gradually entrust all of the more than NT$7 trillion assets held by its life insurance subsidiary to the group’s asset management unit. TS Financial Holding Co (台新新光金控) has a similar plan.
Taiwan’s US$1 trillion life insurance industry has structural advantages that have long dwarfed the asset management sector. Decades of low interest rates fueled a household obsession with insurance policies that offered higher returns than traditional bank deposits. The FSC is now actively calling on these insurers to allocate more investment mandates to domestic managers.
Scale is critical for global reach. Asset management firms are the primary conduit for investors ranging from retail buyers of mutual funds and exchange-traded funds (ETFs) to corporations seeking institutional solutions. Without size, Peng said that “even listing overseas funds can be difficult.”
Local firms are also up against global competitors, who have been expanding their presence in Taiwan to tap into the island’s growing retail wealth market. Firms including BlackRock Inc, JPMorgan Chase & Co and AllianceBernstein Holding LP have joined a battle with local rivals in the market for domestically listed ETFs. That’s a shift from their legacy strategy of largely using Taiwan as a distribution base for offshore fund products.
Peng said he personally visited several global asset managers to encourage them to expand their footprint in Taiwan, saying that “the response was overwhelmingly positive.”
“They are hiring in Taiwan at a scale we hadn’t really seen before,” he said. “Some have also started establishing functional regional centers in Taiwan, which are steadily taking shape. They, too, have come to realize that Taiwan is an important base in the region.”
Taiwan has a unique edge: the high visibility and global appeal of its tech-manufacturing giants. Foreign demand for financial exposure to the island’s capital markets is surging, and Peng believes local asset managers are best positioned to act as the primary gateway for those inflows.
Regulators are moving to capture the rapid accumulation of local wealth minted by the artificial intelligence (AI) boom. Initiatives include establishing a dedicated wealth management zone and drafting legislation to overhaul money-management businesses across banks, asset managers and brokerages.
Earlier this month, Taiwan said it would exempt certain family trusts from multiple layers of gift and estate taxes, an effort to attract wealthy individuals and spur the growth of family offices. The regulator is also looking to lift the cap on the number of investors allowed in private equity funds, a long-awaited change sought by fund houses as alternative assets become a staple of high-net-worth portfolios.
“Strengthening Taiwan’s capital markets is a key part of our overall strategy, as asset management ultimately needs investable assets,” Peng said. He aims to broaden the sector’s capabilities beyond listed equities into a wider array of asset classes, including private equity, infrastructure funds and real estate.
Ultimately, Peng wants Taiwanese managers to win mandates from foreign clients. “We are working on retaining domestic wealth and attracting foreign capital simultaneously,” he said. “The two cannot be separated.”
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