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Global managers poised to benefit from Taiwan's private equity push

By Liz Mak   
August 4, 2017

Global managers with onshore asset management licences in Taiwan are expected to benefit from the latest private equity (PE) push by the Financial Supervisory Commission (FSC), as the regulator appears to have changed its stance on the asset class, and now wants to encourage such investments into the local economy.

In an announcement Tuesday, the FSC says mutual fund managers in Taiwan are now allowed to set up onshore vehicles for PE investments.

To prevent conflicts of interests, managers should set up dedicated PE departments, with revenues booked separately from the main mutual fund business.

The PE funds are still barred from being marketed publicly, although managers will now be able to raise and manage them under a limited partnership setup.

The FSC hopes the new venture will boost the assets of locally managed funds. According to the Securities Investment Trust & Consulting Association, the fund industry’s locally managed funds had assets of NT$3.8 trillion (US$126.7 billion) as at end-June 2017.

"This new development is definitely a positive for the industry. Taiwanese institutional investors have been looking at alternative assets for higher yields and diversification purposes,” Ay Rui Ming, a senior analyst covering the Taiwan market at Cerulli Associates in Singapore, tells Asia Asset Management (AAM).

“Global firms with onshore presence will have an advantage over the domestic players, as they can tap into their existing global network to better manage (the) funds. Some domestic players may lack the capabilities, so there might be potential partnership (opportunities) with global alternative fund managers for their expertise,” according to Mr. Ay.

The FSC says it will encourage PE fund investments in infrastructure, green energy, assisted living facilities, and innovative businesses – sectors that will boost the “real economy”. Taiwan’s second quarter gross domestic product grew 2.1% year-on-year.

"I think the fundamental issue would be still whether there are attractive investment opportunities," Janet Li, director of investments, Greater China at Willis Towers Watson tells AAM.

Taiwan has not been known to have lacked interests from global PE players, but the regulator can become unfriendly when it deems deals to be speculative.

For example, The Carlyle Group's local appointees are currently under criminal investigation for alleged leaks for a past deal. And after years of trying, MBK Partners’ application to exit China Network Systems, a cable TV business, was turned down for the third time this February.

In 2011, regulators blocked a $1.6 billion takeover that KKR had planned for Yageo, a semiconductor business.