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HK and France agree mutual recognition of funds

Hong Kong's Securities and Futures Commission (SFC) and France's Autorité des Marchés Financiers (AMF) have signed a memorandum of understanding linking their mutual fund markets.

The agreement will allow eligible Hong Kong-domiciled mutual funds and French Ucits funds to be distributed to retail investors in each other’s market, the SFC said in a statement yesterday.

The new link adds to the SAR’s existing mutual fund recognition agreements with China and Switzerland.

“This newly established bridge demonstrates that there is a demand from one of the leading markets in Asia for French asset management companies and products,” said Gérard Rameix, chairman of AMF.

It could potentially benefit some French asset managers, such as Amundi, Natixis and Axa Investment Managers.

In order to be approved for distribution in Hong Kong, each French fund must comply with addional requirements which the SFC specified in a circular.

The fund management company must be domiciled in France and authorised to manage collective investment schemes there. The fund must have at least 20% of its assets attributable to investors in France. 

Similar requirements applies to Hong Kong-domiciled funds applying for approval under MRF in France.

The agreement limits the range of eligible funds to general equity, bond and mixed assets funds. It excludes physical commodity, real estate and money-market funds. ETFs, index funds and funds based on structured products are also excluded. The funds must not use more than 100% leverage.

The French funds must provide documentation for Hong Kong investors in English and Chinese. Hong Kong funds must offer it in French for French investors. 

BNP Paribas Asset Management said it would explore the opportunities presented by the new MRF, although it had been focusing on the Luxembourg domiciled funds for global distribution in the past.

The French firm has 250 funds domiciled in France with about €90bn ($102.5bn) of assets under management. Most of them are Ucits products.

“Luxembourg Ucits is the only proven solution for a wide distribution in Europe, Asia and Latin America. So the registration of a French domiciled fund in a country outside Europe is very rare,” noted Cyril Pipaud, head of product strategy and development Asia Pacific, in an email to FSA.

“BNP Paribas Asset Management would be interested in registering some of its funds [through the MRF scheme] – especially given our large French product range. We will be looking at opportunities to bring new products to Hong Kong that do not exist in our Luxembourg fund range,” he wrote.

Part of the Mark Allen Group.