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Third asset manager joins Swiss-HK MRF

Despite the Hong Kong firm joining the cross-border distribution scheme, there is little interest from the industry.

Taikang Asset Management Hong Kong has been approved by the Swiss Financial Market Supervisory Authority (Finma) to participate in the Swiss-Hong Kong Mutual Recognition of Funds scheme, according to Finma documents.

Three products were authorised for sale through the cross-border scheme: the Taikang Kaitai China Corporate Bond Fund, the China New Opportunities Fund and the Overseas Short Tenor Bond Fund, according to a statement from the Swiss regulator.

FSA sought more information from the firm, but it was unable to comment before publication.

The Hong Kong firm is an affiliate of Shanghai-based Taikang Asset Management, which was established in 2007, according to the firm’s website.

The affiliate has been granted Qualified Foreign Institutional Investors quota and RMB Qualified Foreign Institutional Investors quota, according to China’s State Administration of Foreign Exchange.

The firm has also applied for the Hong Kong-China MRF, but hasn’t received approval yet.

Few participants

Back in 2016, Hong Kong’s Securities and Futures Commission and the Swiss regulator signed a memorandum of understanding to enable cross-border retail sales of funds between the two jurisdictions. Hong Kong funds applying for Finma authorisation must be established, domiciled and managed in Hong Kong.

Hong Kong has previously signed similar MRF agreements with mainland China, Francethe Netherlands and the UK. In January, the regulator signed an MoU with Luxembourg that agreed to reduce the timeline for approvals of cross-border fund authorisation.

The fund distribution tie-ups suggests that the SFC intends to enter into schemes that are mutually beneficial rather than making Hong Kong just a distribution hub, where offshore funds are authorised to be sold to the retail public, FSA previously reported.

However, the response to the Switzerland scheme from eligible managers has been cool, with only two fund management firms taking part. In 2018, Bea Union, the joint venture between Hong Kong-based Bank of East Asia and Germany’s Union Investment, registered its Asia-focused fixed income and multi-asset funds, with the aim of targeting private banks, family offices and wealth managers.

Harvest Global also has two funds distributed through the scheme. In total, only seven funds – two managed by Bea Union, two from Harvest Global and three from Taikang– have been registered for sale in Switzerland under the scheme, according to Finma records.

“Switzerland is quite an attractive location [for the MRF scheme] as there are a lot of private banks. Some of the big ones in Asia are also headquartered there. We have tried to approach these banks in Asia but it’s not very successful as we don’t have a presence in Europe,” Eleanor Wan, CEO of BEA Union Investment Management, told FSA earlier.

“Through the MRF, we hope the private bank headquarters [in Europe] will become more familiar with our products.”

However, private banks in Switzerland are crowded with products and the time difference adds to the difficulty in forging relationships with potential distribution partners, she added.

Taikang’s China Corporate Bond Fund vs the peer average

Source: FE. In US dollars, three-year cumulative returns. The fund did not specify a benchmark.

Part of the Mark Allen Group.