The Philippines is not ready to participate in any cross-border funds scheme, according to the president of the country’s investment funds association.

The fear is that given the state of the country’s funds industry, participation in such a scheme would result in a one-sided trade in favour of foreign managers.

It comes amid continued efforts to launch and make a success out of regional passporting schemes in Asia, which despite high hopes have been criticised frequently in recent years.

Phillip Frederick Hagedorn, president of the Philippine Investment Funds Association (PIFA), told AsianInvestor that passporting in the country could turn into a one-sided deal.

“In my opinion, we are not ready. The risk of fund passporting under the current guidelines and considering the state of the development of the Philippines fund industry is that it will result in a one-way trade,” said Hagedorn, who is also the investment director of ATR KimEng Asset Management in the Philippines.

The Philippines has committed to the Asia Region Funds Passport (ARFP) scheme, which will launch in 2016. It is one of the three cross-border schemes proposed or in operation in the region, and the one with the largest number of countries to have significant participation, comprising Singapore, Australia, Korea, New Zealand and Thailand.

The ARFP is getting closer to launch - it released draft rules and operational guidelines last month, when it asked participating economies to provide feedback, as reported

While the 59-member PIFA sent their views before the deadline on April 10, Hagedorn told AsianInvestor that a clear concern of the fund managers was the fragmented local industry which needs to be resolved before considering an Asia fund passporting scheme.

The industry has been pushing for the Collective Investment Bill to be passed into law.

“This is a bill that would level the playing field between products regulated by three separate regulators in the country,” Hagedorn said. These products are unit investment trust funds (UITFs) which are regulated by the Bangko Sentral ng Pilipinas (Philippines central bank), mutual funds which are regulated by the Securities and Exchange Commission (SEC), and insurance products regulated by the Insurance Commission.

“Step one must be to make the proposed Collective Investment Schemes bill into law.  Regulation must be aligned locally before we can expect to align internationally,” he added.

The CIS bill was filed in the Philippine Congress in April last year, aiming to establish a comprehensive regulatory and tax framework for all forms of CIS that will eliminate differences in regulatory and tax treatment, which are seen as detrimental to the growth of the investment industry. Under the bill, the lead agency will be the Philippine SEC.

AsianInvestor reached out to SEC commissioner Manuel Huberto Gaite for comments but did not receive a response by press time.

When asked if ATR KimEng Asset Management will participate in the ARFP when it is launched next year, Hagedorn said:  “Our firm will remain focused on developing the Philippine market.  The Philippines is in the very early stage of growth with regards to demand for investment products and we will remain committed and focused on this in the short term.”

Mike Ferrer, managing director at ATR KimEng, added: “The concept of Philippine investors having access to offshore markets makes absolute sense. We are for it. At the moment the feeder fund structure is playing that role. There’s still a lot of work to be done to put our house in order and even for the [ARFP] scheme to work.”