The fragmented nature of Asia’s three proposed fund passport initiatives could help them to take root and flourish, as opposed to striving for a single regional passport that is too broad to begin with, an industry roundtable heard.
Organised by AsianInvestor and featuring panelists in Hong Kong, Singapore and Australia*, the debate heard that there was a valuable lesson to be learned from Europe: that it had managed to get a Ucits scheme in the first place.
“However, even though there is a commonality in currency and a political will, after 25 years they still don’t have the perfect system, which shows you how difficult it is do,” said Lieven Debruyne, Hong Kong chief executive of Schroder Investment Management.
He noted that the largest funds market in Asia Pacific – Japan – had not been an active part of the debate. “That indicates how challenging this will be,” he added.
“Perhaps the limited scale and scope of mutual recognition and the Asean passport might mean they have a greater chance of success, rather than trying to do this too broadly at first.” The third proposed fund passport in Asia is the ARFP scheme.
Masaki Taniguchi, head of product strategy and development for Asia Pacific at Goldman Sachs Asset Management, said it had been easier for Europe to develop its Ucits scheme. “They have one regulating body to discuss rules, whereas in Asia there is no single currency and no single forum to discuss the issues."
The reason Ucits products had expanded successfully, he suggested, was that authorities had been able to unify the rules across Europe, and asset management is a scale business, after all.
Wong Kok Hoi, CEO and CIO of APS Asset Management, took a more positive view, noting that while it was a “minor disappointment” that there were three passport schemes in Asia instead of one, at least regulators were now talking to each other.
“I recall a conference in Hong Kong 18 months ago when most participants said [passporting] would never take off,” he said. “We should give credit to the regulators for having come this far. But I believe eventually there should be just one scheme.”
Asked whether Luxembourg and Dublin would feel more threatened commercially if there were just one passport scheme in Asia instead of three, Diana Senanayake (pictured), managing director for Singapore and Malaysia at RBC Investor & Treasury Services, said the two European regimes would not be worried immediately.
“In Europe the feeling is [the three Asia passport schemes] will take time, we are at a very early stage,” she said. “However, they [Luxembourg and Dublin] also feel there has to be a true dialogue between Europe and Asia with regards to these initiatives.”
The two European fund centres are conscious that Asian products look set to be brought to market more quickly than before under the passporting arrangements, added Senanayake.
“Europe might not feel threatened immediately, but it understands the need to get involved if the role of Ucits [in Asia] is not to slow down in the future.”
But Nick Hadow, director of business development in Singapore at Aberdeen Asset Management, suggested the dominance of Luxembourg and Dublin is drawing to an end.
“For now Luxembourg is Europe’s fund centre. But other European nations want a slice of that pie,” he observed. “Luxembourg may have had 25 years, but I would only give it 25 more.”
The panelists had also heard how the ARFP scheme perhaps offered the best long-term hope of a truly pan-regional passport scheme to rival Europe's Ucits, as reported.
* A full transcript of the discussion 'The Future of Fund Passporting in Asia' will feature in the forthcoming April issue of AsianInvestor magazine. This event was sponsored by RBC Investor & Treasury Services.