Taiwan

Regulatory changes to help boost Taiwan's rapid ETF market growth

Taiwan's regulators are taking steps to promote further growth in ETF Assets Under Management (AUM), along with a wider variety of ETFs, such as feeder funds and smart beta ETFs.

Taipei’s ETF market has continued to grow in terms of AUM during the past year, while also seeing more innovative products, according to a recent investment forum held in the city.

One of the most fundamental changes in Taiwan’s ETF market are the regulatory updates. The new rules will allow ETF providers to introduce a wider range of products, thus changing their profile from simple product providers and manufacturers to advisory services.

Taiwan’s ETF providers had been developing ETFs but were not allowed distribute the products. Looking to alter the ETF business model and products, some ETF providers launched ETF feeder funds after the upgraded regulation. This kind of product combines ETFs with active mutual funds. As a result, investors can have both passive and active funds within the same portfolio.

Going forward, there could be products that will use one ETF to capture multiple ETFs. Although there are still some technical difficulties in developing such offerings, the advantage is they can better control risk, cost and volatility. A number of ETF providers have been in discussions with regulators about making such products available.

Smart beta ETF is another area that has been gaining popularity but remains very new in Asia. Smart beta in a hybrid format but most fund managers are taking a wait-and-see approach regarding performance.