Both Chinese and foreign banks may prefer to sell QDII products than Hong Kong-domiciled funds, says the consultancy – for a number of reasons.
Fund passporting
Asia has three fund passport schemes in the pipeline - HK-China mutual recognition, Asean and ARFP - which promise to change the landscape of the region's funds industry.
Stewart Aldcroft of Citi says Ucits funds will not be allowed to participate in Hong Kong-China mutual recognition in the next few years, despite a Luxembourg lobbyist's argument to the contrary.
The Alfi chairman says Chinese investors remain inward-looking, while only Singapore in the other proposed passport schemes is a big Ucits market. Critical mass may be an issue.
The number of Cayman Islands funds authorised in the city has fallen 30% this year against a rise in HK-domiciled funds. Retail structured product volumes have also dropped heavily.
The firm is proposing to launch a range of locally domiciled funds by early 2015 to capitalise on the pending HK-China mutual recognition scheme. We talk to regional CEO Gerry Ng.
Whether regulators can reduce fund failures quickly to inspire confidence is more important to the success of Asia's fund passport initiatives than flows or the number of participants, says Paul Khoury of State Street.
Hong Kong should replace its unit trust fund-raising structure with an open-ended fund company structure if it wants to attract Chinese hedge funds to domicile in the city, says the CFA's Paul Smith.
The head of asset management at the European Commission reveals talks over a mutual recognition accord with China, but denies that would be counterproductive to Hong Kong.
Fund firms have lodged requests with the regulator on product eligibility, investment quota, distribution channels and advertising under the pending China-Hong Kong mutual recognition scheme.
With the big banks calling the shots on fund distribution in China and joint ventures losing favour, some asset managers may look to white-label products, says the Asia head of Oliver Wyman.
The US fund giant will continue using its direct online sales model, whereby it does not pay fees to distributors. Given banks' dominance as fund channels in China, this could present an obstacle.
But it may be some time before China inks its own cross-border funds agreement with another country.
