An uncertain regulatory environment is deterring Asian alternatives funds from investing in the UK, according to new research.

With Europe-wide passporting rules still in flux, Asian managers appear to be staying away until the EU decides how they can market their products.

However, new data suggests US funds are determined to stay in the UK despite the uncertainty, which has been explained by the fact that many of them have been in the British market far longer than their Asian counterparts.

Next month, the European Union is set to deliberate whether non-EU alternatives fund managers can passport their funds across its 28 member states under the upcoming alternative investment fund managers directive (AIFMD) regime.

In the meantime, foreign funds can be marketed in EU member states under individual national private placement regime (NPPR) laws.

Of the 552 foreign funds that last year became registered for distribution in the UK under the NPPR, which allows foreign fund managers to sell directly to institutional investors, only 14 came from Hong Kong, another 14 from Singapore and 13 from Japan. No funds applied from the United Arab Emirates, despite containing the financial centre of Dubai.

The figures are in contrast to applicants from US, which make up 263 or half of the fund managers outside the EU looking to market in the UK.

Bovill, the UK regulatory consultant which compiled the figures, said that uncertainty over regulation may be deterring those from Asia and elsewhere to market in the UK.

“The small number of applications from areas like Hong Kong, Singapore and the UAE is particularly striking, but not necessarily surprising,” said Ed O’Bree, Bovill’s head of funds.

“These are major financial centres in their own right, which means that investors throughout the region are more likely to invest their money locally rather than looking further afield.

“So far Asian fund managers have mostly been waiting to see how the new rules work in practice but we are gradually seeing more interest.”

As to why there were still a large number of applications from US investors, O’Bree explained: “Most major New York and Boston-based hedge and private equity fund managers will have been active here for some time - making registering under NPPR a necessary and logical move.”

But other studies question how effective AIFMD will be in luring Asian investors to marketing products in the UK and elsewhere in the EU, given the estimated minimum $300,000 price tag BNY Mellon estimates it costs for a fund manager to be AIFMD-compliant.

So far, just 13% of Asia and rest of world-based fund managers are already AIFMD-compliant, according to research group Preqin, while 27% will not actively market in the EU.

One Hong Kong-based hedge fund manager, who asked not to be named, said that its funds, as well as many of its peers in the industry, will not be looking for AIFMD compliance due to the high cost, given that only 10% of its investor base is from Europe.

Instead, it will rely more on US investors which continue to make up the bulk of its inflows. The hedge fund sees greater US enthusiasm for Asian investments than from Europe, partly because American investors face relatively less restrictions in investing abroad than their European counterparts.

But the Hong Kong fund will not be closing the door on European investors and will instead rely on reverse solicitation to sell its funds. This bypasses onerous marketing regulations as it involves European investors actively taking the initiative to learn about their products.

As of September 2014, US investors accounted for 43.6% of Hong Kong’s $120.9 billion hedge fund assets, as compared to 17.7% for European Union investors, according to figures from the city’s Securities and Futures Commission.