(Bloomberg Businessweek) -- Taiwan’s position at the heart of the artificial intelligence boom—it makes some 90% of the advanced semiconductors crucial to the technology—is generating a dramatic increase in wealth. With the population’s financial and property assets reaching $6 trillion in 2023, up a third from 2019, at least a half-dozen global financial shops are beefing up their presence on the island.
Allianz Global Investors GmbH, a German company that manages more than NT$1 trillion ($31 billion) of local money, is introducing an AI-focused fund and is planning to build out its local investment team. Nashville-based asset manager AllianceBernstein LP says it’s considering expansion of its Taipei office to roll out new products. And PGIM, the investment management arm of Prudential Financial Inc., aims to offer exchange traded funds in Taiwan.
JPMorgan Chase & Co. in August introduced a mutual fund tailored to Taiwanese investors, holding hundreds of client meetings to promote it over the summer. It took just a week to raise NT$10 billion, the maximum first-round investment allowed by local regulations, according to Henry Tong, the firm’s local asset management chief. “We’ve been so busy preparing for the launch,” Ton says, “we barely had time for proper meals on some of the most hectic days.”
AllianzGI estimates that the AI industry could generate more than $370 billion of wealth in Taiwan by 2028. Since December 2022, Taiwan’s total assets under management have swelled by 50% to $509 billion, a local securities industry association says. Switzerland’s UBS Group AG predicts the number of millionaires in Taiwan will grow by half in the five years to 2028, the fastest pace of any global market, reaching almost 1.2 million.
Asset managers are looking at clients whose growing affluence has boosted their appetite to invest—often tech-savvy entrepreneurs worth $1 million to $30 million. And more risk-averse old-money clients, who have traditionally preferred time deposits or insurance policies, are gravitating toward bonds promising higher returns. “We’ve been seeing fixed-income products with lower volatility, decent income and potential capital gains getting more traction,” says Tony Chen, investment chief at UBS Asset Management in Taiwan.
With so much wealth tied to optimism about AI, sudden changes in sentiment can be a challenge. Many Taiwanese borrow money to buy stocks, so when share prices fall they often sell quickly, aggravating market downturns. In early August, a selloff led by AI stocks, coupled with the unwinding of a popular currency trade tied to the Japanese yen, hammered global markets. That sparked the biggest tumble in the Taiwan Stock Index’s 57-year history, though the market has bounced back and is up more than 20% for the year.
Global companies face strong competition from domestic money managers, some of them veterans of the kind of Wall Street firms that are now bulking up. The local players say their relationships and experience in Taiwan give them an edge. “We understand the market here better than foreign firms do,” says Jeff Chang, chairman of money manager Cathay Securities Investment Trust Co.
Even as the AI boom is creating new wealth, investors are shifting the makeup of their portfolios. Chang and other locals are busy creating actively managed ETFs—an investment vehicle recently greenlighted by Taiwanese regulators, which JPMorgan and Nomura Asset Management Co. say they’re also considering.
The firms are seeking ways to stand out in a crowded field. To introduce a Japan-focused ETF, managers at Fuh Hwa Securities Investment Trust Co. dressed in traditional Japanese robes and carried swords at a May event. KGI Securities Investment Trust Co. in July unveiled an equity fund with a quirky sci-fi YouTube clip featuring AI-generated characters in space suits. And JPMorgan introduced its fund, which is focused on US holdings, at a ballpark-themed event featuring baseball-shaped mochi cakes adorned with the company’s logo.
For both global firms and locals, the AI fever is boosting business. Their traditional wealthy customers are increasingly interested in ETFs—an asset class that typically has greater appeal for smaller, retail investors. And the buzz around AI is giving asset managers a chance to introduce themselves to a new generation of clients. “Those benefiting from the AI boom are younger digital natives,” says Weimin Chang, chief investment officer of AllianzGI’s Taiwan office. “And they have a bigger appetite for risk.”
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