The European Fund and Asset Management Association (Efama) is lobbying governments in Asia to adopt pan-European fund standards more quickly. Senior executives of the European funds industry group are meeting with regulators in Hong Kong, Singapore and Taipei to press their case.

Asia is an increasingly important market for Ucits-3 funds, and these three markets now account for 70% of cross-border sales beyond European borders. Cross-border registrations in 2006 increased 19% from 2005, according to the latest data available from Efama.

The Ucits (Undertaking for Collective Investments in Transferable Securities) code is a set of directives aimed at setting uniform regulations for funds and simplifying cross-border marketing and sales. The original version of this æfund passportÆ was implemented in 1985, and allows manufacturers to consolidate regulatory approvals in member countries.

The latest version, Ucits-3, allows an array of investment possibilities, including the use of derivatives for purposes other than hedging, but in turn fund managers must adhere to more stringent risk management practices as well as reporting measures to allow investors to understand underlying risks.

Ucits-3 funds are big business for many manufacturers.

Lipper, for example, calculates that the greatest user is UBS Global Asset Management, which sells 237 Ucits funds across 28 countries. Other significant users include ABN Amro Asset Management, Allianz Global Investors, Credit Suisse, Fidelity Investments, ING Investment Management, JPMorgan Asset Management, Pioneer Investments and Schroder Investment Management.

ôWeÆve introduced a faster car but with more airbags,ö says Mathias Bauer, president of Efama. ôHong Kong for us is of particular importance because it is a gateway to China for the industry.ö

Bauer hopes to see the legal environment improved in order to create a level playing field between Ucits funds and competing products, especially with regard to the China market, which at present remains closed to offshore funds. But the new qualified domestic institutional investor program allows Chinese mutual funds and bank products to invest in Hong Kong-authorised funds, including those under the Ucits code.

The biggest hurdle to Ucits acceptance among Asian regulators is its liberal stance on derivatives. Ucits-3 funds, for example, allow for 130/30 strategies that many regional regulators prohibit.

Steffan Mathias, secretary general at Efama, complains the regulatory environment in many Asian markets is the same as EuropeÆs in 1985. ôItÆs 2008 but the legal framework hasnÆt changed. What is missing is ideas about how to enable fund management companies to work more efficiently. The Ucits directive is about investor protection."