Regulator hopes active ETFs will boost Taiwan’s standing in Asia

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Taiwan’s Financial Supervisory Commission expects the first active and multi-asset exchange traded funds to be listed next year and hopes a “butterfly effect” will boost Taiwan’s standing as a major asset management hub in Asia.

The move is likely to usher more global managers into Taiwan’s booming onshore ETF market, with JPMorgan Asset Management and Nomura Asset Management already confirming their intention to enter the active ETF space.

Actively managed equities or bond ETFs, as well as multi-asset ETFs with fixed proportions of equities and bonds, will be added to the fast-growing local ETF market at the earliest next year after legislative changes and technical arrangements are completed.

Chen Yen-liang, vice chair of the FSC, said during a press conference that the introduction of new types of ETFs was like “opening a new door” for Taiwan’s asset management industry.

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

“In the past, investors bought passive ETFs, which are similar to getting a ready-made lunch box, but in the future it will be like a new restaurant where talented chefs buy the food and cook it for investors,” he said.

He hoped the launch of active and multi-asset ETFs would create a butterfly effect that would help Taiwan achieve its goal of becoming a major Asian asset management hub.

The introduction of active ETFs in Taiwan is expected to open the door for global asset managers to enter the booming local ETF market, which has grown rapidly compared with active funds in recent years.

Global asset managers not currently involved in the Taiwan onshore ETF market have expressed interest in listing active ETFs.

Henry Tong, chief executive and head of JPMAM Taiwan, told Ignites Asia in June that it was preparing to enter the local ETF market with active ETFs.

He described the decision to enter Taiwan’s booming ETF sector as an “unavoidable challenge” every asset manager in the market needs to face.

Japan’s Nomura Asset Management, which has two onshore ETFs in the Taiwan market, has also said that it plans to launch active ETFs.

Kao Ching-ping, deputy director of the FSC’s Securities and Futures Bureau, confirmed during the press conference that Taiwan-listed active ETFs will be “fully transparent” with detailed holdings from the previous trading day published before the market opens the next day.

Benchmarks will not be required for active ETFs, she added.

Despite concerns from local asset managers that a “fully transparent” active ETF could lead to copy trading or speculation, Kao argued that such an approach is in line with international practice and could also reduce information asymmetry.

“The exchange has an established mechanism to deal with improper trading,” she added.

According to data from the FSC, 238 Taiwan-listed ETFs had total assets of NT$5.28tn ($160.7bn) at the end of June, accounting for 63 per cent of the NT$8.41tn onshore fund market.

The FSC said in June that it had surveyed fund firms’ interest in launching active ETFs in the market and 15 were interested in issuing the products, with the market estimated to be worth more than NT$200bn by the end 2025.

*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.