Influencers help drive Taiwan ETF assets to record highs

Taiwanese exchange traded fund assets have reached record highs as investors continue to pile assets into the products, with younger investors, spurred by online influencers, leading the charge.

Local investors were also drawn to the higher dividends available through ETFs, with total ETF assets growing from NT$146bn ($4.8bn) in February 2018 to a record high of NT$945bn as of the end of February, according to data from the Securities Investment Trust & Consulting Association.

ETFs are now the most popular fund type in Taiwan, accounting for 39.8 per cent of all onshore domestic public funds’ assets under management.

The surge in interest from younger investors is a key factor behind the rise of ETF investing in Taiwan. In 2022, nearly 50 per cent of young people aged 25 to 34 were found to invest in such instruments, up from about 10 per cent in 2018-2020, making them the age group with most interest in ETF investing, according to a survey published by Taiwanese think-tank the Chung-Hua Institution for Economic Research.

This allocation of capital from the younger demographic is partly to do with the rise in online financial influencers who have been recommending ETFs as appropriate vehicles for longer-term investing.

Peter Hong, fund manager at Capital Investment Trust, said fund marketing channels had changed significantly since 2020 with influencers unaffiliated with any fund firms independently providing investment advice on digital platforms.

“They promote ETFs by saying investors do not have to study the stock market every day, they can slowly accumulate wealth by regularly investing,” said Hong.

“Taiwanese investors like the concept a lot, they do not want to make fast money from investing anymore but value long-term investment,” he said.

Donna Chen, Taipei-based founder and president of Keystone Intelligence, noted that investors in general were drawn to the fact that “management fees of ETFs are cheaper than active funds, and it’s easier to track and predict investment outcome for ETFs”.

“A lot of ETFs, even bond ETFs, are distributing dividends, and fund companies are promoting ETFs as a saving plan for investors to make regular investments while receiving higher dividends, this is appealing to retail investors,” Chen said.

“As the retail base becomes strong, the steady monthly inflow will contribute to the continuous growth of the ETF market,” she added.

Liu Tsung Sheng, chair of Yuanta Funds, argued that the Taiwan ETF market had passed a “tipping point” due to growing investor awareness and acceptance of ETFs, particularly among younger investors.

“As the stock market was tough last year, it became more difficult for investors to choose stocks to invest in, so many investors then switched to ETFs with high dividend,” said Liu.

While assets under Taiwan mutual funds have dropped by 18.2 per cent last year, equities ETFs recorded significant growth of 60.4 per cent, reaching NT$297.5bn in assets by the end of 2022.

There are currently 6mn Taiwanese investors investing in ETFs.

*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.