The use of smart-beta strategies in Taiwan is in its infancy, but it is expected that sophisticated and retail investors will take up the opportunities offered by products featuring smart-beta strategies, according to Takashi Shibuya, a director within the trust assets planning division at Mitsubishi UFJ Trust and Banking (MUTB).

Stoxx and Yuanta, the biggest mutual fund provider in Taiwan, signed a memorandum of understanding (MoU) in July with MUTB with the intention to collaborate in expanding the smart-beta footprint in Taiwan. Stoxx and MUTB will co-develop indices, which Yuanta plans to license.

The collaboration, which is still at a planning stage, is aimed at developing a nascent niche of demand for indices that incorporate asset management expertise.

"[We] expect that smart-beta indices and related products will draw the attention of many Taiwanese investors, especially ones who pursue goals of both reducing risks and gaining alpha, considering the volatility of the market and the prospect of the advancement of Taiwanese aging society," Shibuya said.

Shirley Low (pictured), head of Asia Pacific at Stoxx, said that the whole Asia-Pacific regions suffers from an underdeveloped smart-beta market, and that Taiwanese investors, in particular, can benefit from a broader smart-beta portfolio, considering the imbalances in sectorial weighting in the local Taiwan 50 benchmark, which has 40% in IT, and none in healthcare.

"There are many ways we can help investors diversify, and even though many are very home-biased we can offer a lot of options for them to improve their risk-return profiles," said Low.

MUTB has collaborated with Stoxx since then end of 2015, with the partnership producing three smart-beta indices that launched in Japan, under the iStoxx MUTB brand. Shibuya noted that MUTB has been growing the assets linked to these indices.

"An index was launched in May contributing to the Bank of Japan's monetary easing policy of purchasing ETFs, and as a result the number of Japanese institutional investors using the iStoxx MUTB indices is increasing," said Shibuya. "[In addition to the three indices launched in Japan], MUTB produced related financial products for corporate pension plans, ETFs, and mutual funds."

Japanese investors' interest on smart-beta indices continues to grow, and assets under management (AUM) linked to smart-beta investments are growing 'satisfactorily', according to Shibuya. "MUTB and Stoxx are committed to continuously providing indices that can meet investors' needs," said Shibuya.

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