In December 2016, Hong Kong’s Securities and Futures Commission signed an MRF agreement with Switzerland to allow domestically- domiciled funds to sell cross-border.
BEA Union is one of the first managers to take advantage of the cross-border arrangement.
The two Hong Kong-domiciled BEA Union funds recently approved by the Swiss Financial Market Supervisory Authority (FINMA) are the Asian Bond and Currency Fund, a fixed income fund that invests across government, investment grade and high yields in Asia, and the Asia Pacific Multi Income Fund, a multi-asset product with a 60-40 split in Asia bonds and equities.
The firm hopes the relatively high yield environment in the region will appeal to investors in Europe.
“We want to tap investors that have less understanding of Asian markets,” Wan told FSA. The firm is targeting distribution through private banks, family offices and other wealth managers.
“Switzerland is quite an attractive location [for the MRF scheme] as there are a lot of private banks. Some of the big ones in Asia are also headquartered there. We have tried to approach these banks in Asia but it’s not very successful as we don’t have a presence in Europe. Through the MRF, we hope the private bank headquarters [in Europe] will become more familiar with our products,” she added.
Still, she believes it will take time for Hong Kong-domiciled funds to gain traction in Europe.
“Germany and the UK are on our wishlist,” Wan noted. “But it takes time for us to study each initiative, for instance, [analysing] the demand in each market.”
BEA Union is a joint venture between SAR-based Bank of East Asia (51%) and Germany’s Union Investment (49%). The whole team is based in Hong Kong. Union Investment provides input on global macro analysis.
Harvest Global Investments, the international arm of the Chinese fund manager in which Deutsche Bank holds a minority stake, has also been granted approval to sell two funds through the Swiss-HK MRF.
This month, the SFC signed an MRF agreement with France. More European countries are expected to join, as reported earlier.
China approvals
After a 16-month freeze, there appears to be a thaw in Chinese regulatory approvals for new MRF funds to sell onshore. Funds from Schroders and Amundi were recently approved.
BEA Union in 2015 applied to the CSRC for approval of two MRF funds, but no action has been taken.
“We understand that the Chinese regulators will handle the applications accordingly from now on,” Wan said. She expected the 11 pending funds will be gradually approved.
Three-year performance of BEA Union’s Asian Bond and Currency Fund and the Asia Pacific Multi Income Fund, versus their respective sectors, according to FE. The funds do not have a benchmark.
