ASIAN REGION FUNDS PASSPORT
Target Live Launch Period:- Late 2015/ Early 2016
Participating Pilot Group Countries:- Australia, Korea, New Zealand, Philippines, Singapore and Thailand.
Subsequent potential countries still in discussions:- Hong Kong, China, Indonesia, Japan, Malaysia, Taiwan and Vietnam
The Asian Region Funds Passport (ARFP) resembles the European Union's UCITS Directive which has become the standard to allow European fund managers to gain access to Asia's saving though cross-border distribution of funds and fund management service.
The ARFP provides investors with a diverse range of opportunities enabling them to manage portfolios with a higher degree of risk diversification which in return attracts and grow the pool of funds AFI in the region.
FRAMEWORK KEYNOTES
To encourage the fund to operate in a fair and transparent environment, the signatories agreed to each countries' frameworks with host economy having the option to impose additional rules. The fund's basic framework has the following specifications:-
1. Host economy (Passport Fund offered outside its home economy) laws (ie, distribution, disclosure, complaints and product materials) will apply relating to the interaction between investors and the passport funds
2. Home economy (domiciled location) laws will regulate the authorisation, registration, approval or licensing of the collective investment scheme.
3. Home economy laws will regulate outsourcing service providers, risk managements requirements and interaction of Passport funds members.
MARKET POTENTIAL
1. AT Kearney reports that more than $600 billion of assets could be managed in Asia within 15 years but full benefits only realised if competing schemes are consolidated.
2. $US20 billion in fund management fees can be saved annually for asian investors.
3. The funds are expected to create 170,000 jobs in APEC economies within five years.
4. Nevertheless the asset management industry in asian economies are not big enough to support the different competing schemes.
Source:- http://www.smh.com.au/
5. Fund supermarket are available and maturing in South Korea which is a vital move towards an open system across the regions with high barriers to entries due to banks and local securities houses playing a big role in some countries and exposure is granted only with their support at a costs.
COMPETING FUNDS
1. ASEAN Collective Investment Scheme (CIS)
- Malaysia
- Singapore
- Thailand
2. HK-CHINA Mutual Recognition Agreement
3.UCITS
- EU Members
- Only 1 approval required from 1 EU member for the fund to be sold in other EU members.
ARFP COULD THREATEN UCITS
1. UCITS has 2 asian hubs being Singapore and HK.
2. Asia Pacific accounted for 16% of european funds in 2014 Q2 with HK alone making up 6% of total funds with growth at 88%.
3. Local Regulators prefers domestic fund industries with Taiwan regulators making foreign funds harder to be approved causing its growth slowed to a 4.8% from a year earlier.
Source:-http://www.fundweb.co.uk/
RISKS AND CONCERNS
Risk and concerns associated with ARPF and similar schemes will be discussed in subsequent posts.
