Asia regulation growth tipped to exceed global average

Fund industry players see Asia's regulatory environment going through a good deal more change than global rules over the next five years, a survey shows. And they have tipped one passporting scheme for success.
Asia regulation growth tipped to exceed global average

Asia’s regulatory environment is expected to see significant developments over the next five years, according to fund industry players.

The pace of change in Asia is expected to outstrip the global average, but the lack of regional coordinating bodies are likely to add to the complexity.

Meanwhile the industry executives overwhelmingly believe that Hong Kong-China mutual recognition will see the greatest success out of all the Asia passporting schemes.

At the FundForum Asia in Hong Kong last week, RBC Investor & Treasury Services conducted a survey* of fund industry participants to gauge their views on passporting and regulation.

The audience at a panel session were asked how they saw the global regulatory agenda moving forward over the next five years. A total of 70% said the global regulatory agenda would increase, while 26% believed it would stay the same and a mere 4% said it would decrease.

When asked the same question regarding Asia, those polled were much more emphatic, with 83% saying the regional pace of change would accelerate, 12% believing it would stay the same and only 5% forecasting reduced regulation.

On the subject of fund passporting, those surveyed came out clearly in favour of one scheme.

There are three planned or live passporting schemes in Asia: the Asean Collective Investment Scheme (CIS) between Singapore, Malaysia and Thailand, which was launched last August; cross-border mutual fund recognition between Hong Kong and mainland China, which is still in the planning stage; and the Asia Region Fund Passport (ARFP) scheme agreed by Australia, New Zealand, Singapore and Korea, which was agreed in September 2013 but is yet to go live.

When asked which Asian passporting scheme they expected to be most successful in five years from now, 71% said mutual recognition; 16% said CIS; and a mere 13% put their money on ARFP.

“Ultimately, however, the success of any passporting initiative will lie not in the number of markets it includes but the assets that it is able to attract, and retain,” said Andrew Gordon, managing director for Asia at RBC. “A successful passporting scheme will need to have a significant advantage in terms of ease of access, cost, automation and technology, in order to be an efficient platform able to distribute products to investors across countries.”

* Those polled were comprised of 120 fund industry participants including: institutional investors (60%), solution providers (15%), advisors (10%), regulators (5%) and lawyers (5%). Geographically the majority of attendees were from across Asia (70%) with others attending from Europe (25%) and the US (5%).

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