Regulators aim to revive passporting scheme

The move is expected to attract more managers from the three participating markets to join the scheme.

“The revised framework, which incorporates feedback from extensive industry consultations, seeks to promote more cross-border offerings of Asean funds and allow fund managers to offer a broader range of fund products to investors in the region,” the regulators said in a statement released by the Asean Capital Markets Forum.

Launched in August 2014, the CIS fund passporting scheme connects the fund markets of Singapore, Malaysia and Thailand. In almost four years, there are around a dozen funds that have received approval from their home countries to be registered under the scheme.

However, only six funds have been approved for retail sale by both home and host countries. Those six funds are managed by Malaysia’s CIMB-Principal Asset Management, Nikko Asset Management (Asia) in Singapore and Thailand’s One Asset Management.

Asean CIS funds

Source: MAS, SC Malaysia and Thailand’s SEC

One of the difficulties why the passporting scheme has not gained enough traction is the difficulty of getting authorisation for a fund to be sold under the scheme, Andrew Gordon, managing director for Asia at RBC Investor and Treasury Services, told FSA previously.

“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 manager wants to sell its investment product.”

Another obstacle is gathering assets. For example, in Thailand banks typically sell locally-wrapped (offshore) funds through their asset management divisions. Passported funds would compete with the banks, but local investors tend to be more comfortable investing in funds offered by the asset management firms of their local banks.

Framework enhancements

The regulators have made various revisions in the framework, which are expected to provide wider access to fund managers across the three participating markets. These include lowering AUM requirements and shortening the fund application process.

According to the framework (PDF), the regulators have lowered the managers’ assets under management requirement to $350m globally from the previous $500m. The framework notes that the AUM may include discretionary funds but excludes property funds or real estate investment trusts (REITs).

The regulators also aim to shorten the time-to-market for the launch of funds, as they have committed to reviewing an application from fund managers for the authorisation of a fund within 21 calendar days.

In addition, the regulators are giving participating fund managers more flexibility to delegate the investment management of a fund by increasing the proportion of the fund’s assets that can be sub-managed by a manager to 100% from the previous 20%.

The revisions took effect on 23 February.

Another passporting framework, the Asia Regional Funds Passporting (ARFP) scheme, which connects the markets of Australia, Japan, Korea, New Zealand and Thailand, is expected to be launched this year. Japan and Australia have moved closest to full implementation.