Regulation is shaping the agenda for fund passporting and not always for the best, according to industry experts at a forum. And with the rise of Asian digital fund platforms, passporting may become irrelevant.
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.
The cross-border funds initiative will be launched on July 1, the SFC and CSRC said in a statement, laying the foundation for the two sides to jointly develop a fund regulatory standard.
Hong Kong's securities regulator sees mutual recognition as a way of increasing the number of funds domiciled in the city and raising its profile as a regional centre. It also aims to attract more investment to the city.
Industry welcomes long-awaited launch date and raises prospect of expansion, but ponders who’s best placed to benefit and whether compromises are being made.
Foreign managers with a joint venture in China are likely to leverage the partnerships to their advantage under mutual recognition. But analysts say the quality of the cross-border relationships will be tested.
The first six months of mutual recognition could see northbound fund managers generate $30 billion in inflows from mainland China, according to estimates. But high set-up costs are likely to lead to small profits.
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Hong Kong subsidiaries may have to redesign their RQFII product offerings as a result of upcoming mutual recognition, as they face direct competition with funds offered by their mainland China parent firms.
Operational issues and uncertainties over marketing and disclosure on both sides of the border underline why this is no get-rich-quick scheme, says lawyer Effie Vasilopoulos.
The Japanese asset manager is looking at alternative ways of distributing its products in Asia such as through private banks, its Hong Kong head tells AsianInvestor. It also has plans to boost its headcount.
The appeal of Ucits and other fund structures remains strong among investors despite the lure of the upcoming Hong Kong-China mutual recognition scheme, say asset managers.
Hong Kong fund managers have laid out their plans to distribute funds in China, with the launch of mutual recognition just days away. Equity products are expected to be first-movers under the cross-border scheme.
Mutual recognition opened for business yesterday, but fund managers still have a range of operational issues to overcome. These include differences in Hong Kong and mainland China's approach to fund processing.
