Emerging markets Asia: Taiwan’s mutual funds open the door to PE

Mutual funds in Taiwan can launch domestic private equity vehicles, but are they ready?

Taiwan’s Financial Supervisory Commission allowed securities investment trusts and enterprises to set up onshore private equity funds in August. “Before this action was taken, there was no real, viable way to have a Taiwan-domiciled private equity fund, the legal system just did not accommodate it,” says Thomas McGowan, a Taipei-based partner at law firm Russin & Vecchi.

Cathay Securities Investment Trust, Taiwan’s largest fund house, is already gearing up for its first raise, seeking NT$10 billion ($330 million; €280 million) to invest in renewable energy. Andy Chang, its president and chief executive, tells PEI a final close is expected in April 2018 and the majority of the commitments will come from domestic insurers, pension funds and high-net-worth individuals. The fund is aligned with the government’s push for renewable energy, which is set to account for 20 percent of Taiwan’s power supply by 2025, Chang adds.

JPMorgan Asset Management Taiwan is also said to be readying its first private equity fund. The FSC hopes investors will pour money into green energy, public infrastructure projects and innovative industries in a bid to diversify the economy. Export-dependent Taiwan, known for its hardware manufacturing and assembly companies, has suffered from languishing exports and slow wage growth in recent years.

“The challenge is that the skillsets that go into managing retail mutual funds and the skill sets for managing private equity funds are fairly different,” McGowan points out.

Whether traditional retail managers can build the infrastructure to be able to do this other business – raising capital, finding projects and putting money in deals with 10-year time horizons – is probably. something that has yet to be learned.”