Year-to-date outflows for the 14 Hong Kong-domiciled funds for sale in mainland China (northbound MRF) is RMB 3.3bn ($480.4bn), according to data from the State Administration of Foreign Exchange.
By contrast, there was a net inflow of RMB 2.92bn during the same period in 2017.
This means there has been a net outflow for nine months in a row since December 2017 for this cross-border fund passporting scheme between the two jurisdictions.
However, the poor sales performance does not deter asset managers from backing Hong Kong-domiciled funds from applying for distributing products to mainland investors via the programme.
According to the China Securities Regulatory Commission (CSRC), six managers have MRF applications in the pipeline.
Pending MRF applications
| Firm | Fund |
| Bosera / Aberdeen Standard Investments | Emerging Opportunities Bond Fund |
| JP Morgan Asset Management | Asia Equity Dividend Fund |
| Global Bond Fund | |
| Pacific Technology Fund | |
| Haitong International Asset Management | Asian High Yield Bond Fund |
| Hong Kong Equity Investment Fund | |
| Korea Equity Investment Fund | |
| Global RMB Fixed Income Fund | |
| HSBC Global Asset Management | Asia Pacific ex Japan Equity Volatility Focused Fund |
| Taikang Asset Management | Kaitai China New Opportunities Fund |
| Value Partners | Classic Fund |
| High-dividend Stocks Fund |
Source: CSRC, as of 21 September
UBS Asset Management told FSA previously that it intends to register at least three new products in Hong Kong as part of the firm’s preparation to sell its first batch of funds on the MRF platform, FSA reported earlier.
Earlier this year, China’s watchdog started to speed up its review of applications submitted in 2016; it had taken some of the northbound funds approximately 2.5 years to receive a green light from the CSRC. Moreover, Ashley Alder, chief executive officer of Hong Kong’s Securities and Futures Commission (SFC), confirmed in a recent speech that the mainland regulator had accelerated the approval process.
At the same event, Alder noted that the SFC has considered some modifications to facilitate asset managers in the scheme. One possible change is to allow delegating investment management functions to anyone outside of Hong Kong.
“We are well aware that the [overseas] delegation model could be more efficient, particularly for large fund houses with a global presence,” noted Alder, adding that the SFC is discussing the topic with the CSRC. “We are now actively re-evaluating the delegation policy, including whether it might be allowed for these global and non-Asian funds.”
Another change involves inflows from mainland investors. The MRF scheme allows managers to gather up to 50% of each fund’s total assets from mainland investors. Alder said the SFC is aware of arguments in favour of relaxing this limit, but as of now, the total value of funds sold to mainland investors under MRF is still well below 50%.
Any changes of rules would be subject to the decision of the CSRC, which has the authority in approving the distribution of northbound funds on the mainland.
