Regulatory change in the Philippines
In December, Philippine investment companies were given permission to sell feeder funds, a move that is likely to increase feeder fund assets. Previously, only banks were permitted to sell them.
The recent development is a huge step in developing the country’s fund industry, as local players have been anticipating the regulatory change since 2016, Valerie Pama, Manila-based president of Sun Life Asset Management in the Philippines, said previously.
However, even before the SEC relaxed the rules late last year, a number of foreign managers had approached local firms for collaboration opportunities, according to Ye Kangting, Singapore-based Cerulli analyst.
Philippine asset managers would like to partner with foreign firms that have funds investing in global or developed markets and emerging markets, she added.
However, the Philippines has two financial industry regulators, creating market inefficiency. A mutual fund is categorised differently depending on the distribution channel.
Collective investment schemes (mutual funds) managed by banks are called unit investment trust funds (UITFs), which are regulated by the country’s central bank, the Bangko Sentral ng Pilipinas.
Mutual funds that are managed by investment companies are regulated by the Securities and Exchange Commission.
For several years, the government has pledged to consolidate the two regulators into one.
Indonesia opening?
In Indonesia, regulators do not allow feeder fund and fund-of-fund structures.
Foreign asset managers may find the easiest way to enter the market is through a buyout of a local firm, Tan said.
He explained that there are no ownership limits for foreign firms buying domestic fund management firms. Indonesia has 18 foreign-owned asset management firms. For example, Schroders owns 99% of Schroders Indonesia.
Regulators are also expected to relax rules when investing offshore. Currently only shariah funds are allowed to invest 100% of its assets outside of Indonesia, according to Tan. For other funds, the offshore investment cap is set to 15%.
The plan is to allow non-shariah funds to invest up to 100% of their assets offshore. It is expected that the new regulation will be implemented by the second quarter this year and Tan believes it will enlarge opportunities for foreign asset managers.
Regulators also plan to allow fund of fund structures in the country, but that is pending government approval, he added.
