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Asia’s local fund centres take aim at Ucits success

The ambitions of Asian countries to build local fund capabilities is competing with Ucits, the traditional cross-border fund vehicle. Industry experts discuss the ramifications in a webinar.
Asia’s local fund centres take aim at Ucits success

Asia’s growing economies continue to attract the interest of yield-hungry international investors, even as they lead more regional investors to seek investing opportunities across the region.

The traditional means of expressing such investments has been via Ucits, the workhorse of the international funds market. But this structure is increasingly seeing competition, as a number of Asian countries seek to generate their own fund centres.

AsianInvestor teamed up with Euroclear to host a webinar focusing on this subject. Entitled ‘Cross Border Fund Distribution; changing dynamics between Asia and Europe’, the discussion focused on how fund flows between Asia and Europe are evolving, as centres such as Hong Kong and Singapore seek to establish themselves as fund hubs and China’s onshore fund market gains pace.

The webinar included three presentations from participating speakers. Terry Pan, head of greater China at Invesco, delved into a comparison of the assets under management of Asia-targeted Ucits versus domestic regional funds, and drew some conclusions over the level of volatility both fund types have seen across the past 18 months.

He was followed by Euroclear’s Isaac Wong, director of product management and investment funds for Asia at Euroclear. He discussed the evolution of regional fund centres such as Hong Kong and Singapore, and how much the Ucits structure continues to dominate even in these centres, which aspire to become strong international arenas for local fund creation and distribution.

Wong argued that regulatory differences are causing a level of 'diseconomies of scale', limiting the ability of Asia fund centres to both recognise the products of other jurisdictions and spread their own, while some markets also face a lack of automisation that limits their efficiencies (something Ucits funds have long overcome). However, a mixture of protectionism and rapid asset growth could help to overcome this, raising the appeal of local funds and slowly eating into the market share enjoyed by Ucits to date.

Last to speak was Mostapha Tahiri, regional head of Southeast Asia at BNP Paribas Securities Services. His presentation reached into the nuts and bolts of fund distribution, discussing the key restrictions hobbling the growth of Asia fund centres, which include factors such as foreign currency and tax treatment of international investors buying into local funds.

Tahiri also delved into the technological developments being seen in China, a market that has in many ways used a level of regulatory encouragement and a lack of entrenched fund distributors to leapfrog neighbouring and European countries.

The presentation was followed by a lively Q&A, which further explored the topics raised. An audience of around 200 market professionals listened to the entire event and posed questions to the speakers, as well as offering their opinions via snap polls conducted during the webinar.

To listen to the webinar, see the speaker's slides and both view and vote in the snap polls, please click here

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