Launched in August 2014, the fund passporting scheme connects the fund markets of Singapore, Malaysia and Thailand. In total, there are 12 funds that have received approvals from their home countries to be registered under the scheme.
But so far, only six funds have been approved for retail sale by both home and host countries, according to records from the Monetary Authority of Singapore, Securities Commission Malaysia and Thailand’s Securities and Exchange Commission. (Both approvals are needed for a fund to be sold.)
Those six funds are managed by Malaysia’s CIMB-Principal Asset Management, Nikko Asset Management (Asia) in Singapore and Thailand’s One Asset Management.
“It has been harder than expected to get the registration or approval [under Asean CIS] from both the host country and the country where a fund manager wants to sell its investment product,” Gordon told FSA.
Low demand from investors further deters fund providers from joining the scheme.
“In Singapore, Malaysia and Thailand, local investors can already purchase a diverse range of different investment strategies,” Gordon said. In particular, foreign fund managers can sell their Ucits products to Malaysian or Thai investors through local feeder funds.
Asean CIS would become much more attractive for fund managers if Indonesia were to join, said Gordon. “That market is not easily accessible by foreign managers as they cannot sell global products [there]” he said.
Asia Regional Funds Passport
Another Asian passporting scheme, the Asia Regional Funds Passport (ARFP), connecting Australia, Japan, Korea, New Zealand and Thailand, is yet to be launched.
According to Gordon, the main challenges preventing AFRP from launching are issues around taxation and creating a level-playing field for domestic and passported funds.
New countries joining AFRP could boost the potential advantages of the scheme and speed up the process.
India has been in discussion with the ARFP officials about joining the scheme, said Remi Toucheboeuf, head of products, asset and fund services for Asia at BNP Paribas Securities Services, speaking at Fund Forum Asia.
Addition of Indonesia or Taiwan as members of the scheme would also be a game-changer for ARFP, he added.
Mutual Recognition of Funds
Even though the Hong Kong and China’s Mutual Recognition of Funds scheme (MRF) was launched almost a year later than Asean CIS, it has already seen six Hong Kong-domiciled and 49 China-domiciled funds authorised for cross-border sale.
Unlike Asean CIS, the MRF scheme aims to solve an existing problem, said Elliot Shadford, Asia-Pacific wealth and asset management leader at EY, a panelist at Fund Forum Asia.
“I definitely see the MRF in Hong Kong and China has been more successful as it solves problems in access to China, and it solves the problem with China’s access to [offshore investments],” he said.
Ucits
Given the concerns over taxation and demand, fund managers still prefer Ucits over the different Asian passporting schemes for their cross-border sales.
Today, Ucits funds account for around 65% of the combined AUM of funds in Hong Kong, Singapore and Taiwan, according to BNP Paribas’ Toucheboeuf.
In a polling session during the forum, none of the 59 respondents indicated they believed that the Asean passporting scheme would achieve the highest level of cross-border sales in Asia in the next three years.
According to RBC’s Gordon, Ucits remains popular among Asia’s fund managers because it is a single platform that can help build scale and give access to multiple markets. In contrast with the regional passporting schemes, firms do not need to set up a separate fund domiciled in a new jurisdiction, establish local investment capabilities or employ local service providers.
