Regulatory challenges
Asia-based managers expanding into Europe should be aware of regulatory challenges.
Europe’s regulators may give Asia-based players a more difficult time than their Western counterparts, according to Ripperda-Cosyn.
“A manager coming from Asia or Latin America will always have to prove a little bit more when it comes to corporate governance and transparency than maybe a manager from Australia or America. In some cases it may not be fair, in some cases it might not be very understandable, but it is a fact in life.
“We just need to be very clear and very transparent and meet all the regulatory expectations that a European investor expects from any Western manager,” he said.
Ripperda-Cosyn believes that being a Hong Kong-listed company (Value Partners is listed on the Hong Kong Stock Exchange) is viewed favourably by regulators, who see an “extra layer of transparency” that unlisted companies do not have. Hong Kong rules and regulations are internationally recognised as “strict and right up there” with US and European standards, he said.
Another challenge is having funds registered in individual European markets. Ripperda-Cosyn said that it is a common mistake to think that a Ucits-compliant fund falls under one regulatory regime.
“Having a Ucits fund does kind of open doors and it is the lowest common denominator in terms of the kind of fund structure that investors are looking for. But if you actually want to distribute actively in any particular country, you will need to register the fund locally for local distribution.”
Fund registration differs across Europe. For example, some countries require asset managers to appoint paying agents and others require certain share classes, such as a clean rebate-free share class. Individual markets also have different standards for tax transparency.
“Unfortunately, the European market is a very fragmented and diversified market, and unlike the US for instance, it is not that clear-cut from a regulatory perspective.
“This is why it helps to have a local presence. It is very difficult to run something like that and have proper insight when you’re doing it from Hong Kong or Singapore.”
Brand unknown
Asset managers coming from a different region will always face challenges with brand recognition, especially in Europe.
“To come in as a new name, however interesting the history of the firm might be, is very difficult because Europe has a super competitive environment.”
Ripperda-Cosyn believes that having strong relationships with global banks is key when entering the European market. “That clearly gave us a head-start compared to many of our competitors.”
In addition, European investors will always prefer a well-known brand name, which are usually global giants. However, he believes there is a growing demand in Europe for specialist or niche Asia managers such as Value Partners.
The firm has ambitions beyond Europe and is in the process of setting up a US office. “It has not yet happened, but it is happening soon,” he said, without elaborating.
The Value Partners Classic fund versus its sector and the MSCI AC Emerging Markets (ex-Japan) Index
