Taiwan Lifts Single-Stock Cap for Active Funds to 25%, Unlocking Billions for TSMC

Taiwan's Financial Supervisory Commission has raised the investment cap on a single stock for domestic equity funds and active ETFs from 10% to 25% of net assets.

This change addresses the market dominance of mega-cap stocks like TSMC, as the previous 10% cap hindered fund managers from tracking benchmarks or expressing strong investment conviction.

The adjustment is expected to unlock roughly NT$210 billion in additional investment capacity, potentially driving substantial new demand for major companies, especially TSMC.

Taiwan's financial authorities have significantly raised the single-stock investment limit for domestic active funds and ETFs.

The core reason behind this decision is the immense presence of TSMC. With TSMC accounting for about 44.3% of the Taiwan stock market, the previous 10% investment cap became a major hurdle for fund managers. It was difficult for them to match the market's performance, or what's known as the 'benchmark', when they couldn't invest more in the market's single largest driver. This limitation often led to a performance gap, or 'tracking error', which frustrated both managers and investors.

This move wasn't a sudden change, but a logical progression. First, regulators addressed the same issue for passive, index-tracking ETFs back in May 2025 by lifting their concentration caps. With that bottleneck removed, the focus naturally shifted to active funds, which are managed based on the fund manager's own judgment. Today's announcement is the second step in aligning investment rules with market realities.

So, what's the potential impact? This rule change is estimated to unlock about NT$210 billion in new investment capacity. A large portion of these funds will likely flow into TSMC and other mega-cap stocks. This could create significant new demand, potentially supporting their stock prices and further solidifying their market leadership.

Ultimately, this decision reflects the Taiwanese regulator's consistent and pragmatic approach. Since the market shocks of 2025, the Financial Supervisory Commission (FSC) has been actively fine-tuning regulations to strike a balance between market stability and efficiency. Rather than imposing broad restrictions, they have opted for targeted, practical adjustments like this one, helping the market adapt to its evolving structure.

Glossary -
Active ETF: An exchange-traded fund where a manager actively picks stocks to try and beat the market, rather than simply tracking an index.
Tracking Error: A measure of how much a fund's performance deviates from the performance of its benchmark index. A lower tracking error means the fund is closely following its benchmark.
Benchmark: A standard or index, like the TAIEX, used as a point of reference for evaluating the performance of an investment portfolio.

Taiwan Lifts Single-Stock Cap for Active Funds to 25%, Unlocking Billions for TSMC

Taiwan's Financial Supervisory Commission has raised the investment cap on a single stock for domestic equity funds and active ETFs from 10% to 25% of net assets.

This change addresses the market dominance of mega-cap stocks like TSMC, as the previous 10% cap hindered fund managers from tracking benchmarks or expressing strong investment conviction.

The adjustment is expected to unlock roughly NT$210 billion in additional investment capacity, potentially driving substantial new demand for major companies, especially TSMC.

Taiwan's financial authorities have significantly raised the single-stock investment limit for domestic active funds and ETFs.

Glossary -
Active ETF: An exchange-traded fund where a manager actively picks stocks to try and beat the market, rather than simply tracking an index.
Tracking Error: A measure of how much a fund's performance deviates from the performance of its benchmark index. A lower tracking error means the fund is closely following its benchmark.
Benchmark: A standard or index, like the TAIEX, used as a point of reference for evaluating the performance of an investment portfolio.