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Distribution challenges in ASEAN CIS

The ASEAN collective investment scheme framework will take time to gain traction as the real challenge lies in penetrating the local distribution networks, according to research firm Cerulli Associates.

Launched in August, the ASEAN fund passporting framework is designed to allow investors in Singapore, Malaysia and Thailand access to cross-border financial products.

In its research, Cerulli highlighted the dominance of few large banks in fund distribution in Thailand. Kasikorn Bank, Siam Commercial Bank, Krung Thai Bank and Bangkok Bank focus on distributing fund products from their affiliated asset management arms.

In Malaysia, about 60% of unit trust assets are distributed directly or through tied agents in Malaysia. 

“Because some feeder funds in Malaysia and Thailand already feed into Singapore-domiciled funds, managers could potentially suffer some cannibalisation if master funds in Singapore are directly offered to local investors via the ASEAN CIS framework,” the research highlighted.

Furthermore, it will be challenging for a foreign fund management company without a wide network of agents or bank branches to gather retail assets.

Long-term positive

Even as Cerulli cited currency restriction and regulatory compliances as other potential hurdles, it believes the framework is a positive development that will prompt local managers to assess overseas opportunities.

Cerulli expects managers with a presence in Thailand, Malaysia, and Singapore to generate the most synergies for their operations from the framework.

To avoid direct competition with established local players and potential product mismatches, fund houses have also been looking to redefine value propositions by identifying product gaps and providing niche strategies, or beefing up their regional expertise in asset classes beyond equities.

Earlier, asset managers like Nikko Asset Management raised their concerns in the implementation of the Asean fund passporting scheme. 

Industry is widely concerned over tax implications as well as operational issues such as currency mismatches and different settlement times.

A few see the ASEAN CIS framework and the yet to be launched Asian Region Funds Passport to converge in the long run, presenting a threat to the current dominance of UCITs funds, which are predominantly sold in Asia.



Part of the Mark Allen Group.