A study of the Asian country's funds market says the trend is for a move onshore, and that while still relatively thin on the ground, foreign firms have an opportunity to exploit the change.

It is becoming increasingly difficult to bring offshore funds into Taiwan as newly-tightened regulations bite, according to an analysis of the market by Cerulli Associates, the analytics firm. However, it says that some non-domestic managers are starting to break into the onshore sector.

In a briefing about the Asian country, Cerulli noted that Taiwan’s financial watchdog, the Financial Supervisory Commission, has introduced a series of new policy measures, such as incentives for foreign asset managers to operate onshore and restrictions for offshore offerings, to boost the domestic asset management industry. The comments come from a report entitled The Cerulli Edge - Asian Monthly Product Trends Edition, September 2016 Issue.

“As the FSC continues to tighten regulations on the offshore fund space, it will be harder for smaller, boutique foreign asset managers with niche investment products to enter the Taiwanese market,” the report said. “This might have an impact on the diversity of products available to Taiwanese investors,” it said. 

As far as the onshore sector is concerned, the fund industry is dominated by domestic fund managers, with only two foreign managers, JP Morgan Asset Management and Franklin Templeton SinoAM Securities Investment Management, breaking into the top-10 list of SITE managers in terms of assets under management.

However, foreign asset managers are beginning to make some inroads, Cerulli said.

“First, there are some promising signs for the onshore funds that they have launched. In the first seven months of 2016, nine out of the top-20 funds in Taiwan in terms of new net flows were managed by foreign asset managers. Second, foreign asset managers are introducing a raft of new products onshore in order to break into the space. For example, Schroder Investment Management launched Taiwan's first target-maturity bond fund in August that aims to promote longer-term investing among Taiwanese investors,” it continued.

A third point is that funds of funds managed by foreign asset managers have become popular in Taiwan, as they oversee seven of the top-10 funds of funds in terms of inflows year-to-date July 2016, it added.
In August, it was reported that Canada’s Bank of Nova Scotia has asked Taiwan's financial regulator for permission to exit the local market, amid a change to the lender’s strategy for the Asian region.

As far as offshore trends are concerned, Boston Consulting Group said in June this year that private wealth held in offshore centres stood at almost $10 trillion in 2015, a rise of 3 per cent on a year earlier. One trend is that there has been a shift to the developing world from developed world as being primary sources of offshore wealth. At present, 65 per cent of offshore wealth comes from developing nations, up from 57 per cent five years ago.