Ucits funds on the up and up in Asia

Asian asset managers are reporting a growing appetite for marketing their funds in Ucits-compliant structures, which are generally based in Dublin or Luxembourg, according to a survey by RBC Dexia Investors.

Some believe regional investors prefer the Ucits structure over the so-called 'hurricane belt' products -- such as those that are domiciled in the Cayman Islands -- because it is 'safer', with managers required to operate under more stringent rules.

This latest report says Ucits fund structures are now the preferred option for Asia-Pacific investors, and the vast majority of asset managers are offering them already or intend to do so in the future.

In terms of key fund products, 65% of investment managers surveyed said Ucits funds will be a key focus in the coming year and another 12% intend to market them in the future.

Other products that will be a key focus in the next year are mainstream long-only funds (50%), hedge funds (24%), exchange-traded funds (21%), private equity (9%), real estate (9%) and limited partnerships (3%).

Economic signals have improved and market activity is gaining momentum, so investment managers have compelling reasons for optimism, says Scott McLaren, head of Asia-Pacific sales and distribution for RBC Dexia.

"As vast markets such as China open up to liberalisation, a growing number of international investment companies are establishing operations throughout Asia-Pacific," he says. "The success and burgeoning appeal of fund products such as Ucits is helping to energise and broaden regional investment markets."

The survey also indicates the widespread adoption of third-party services by 65% of asset managers, while only 20% are against the idea of outsourcing non-core functions as an option. The balance of 15% say they would be looking to use third-party providers for non-core functions in the near future.

The report also highlighted regulatory barriers to specific local market entry as a key concern of the Asia-Pacific funds industry.

Seventy-nine per cent of those surveyed were asset managers. Others included insurance companies, corporate investors and those from the private-banking sector. Sixty-two per cent of respondents had AUM of $1 billion or more.

Part of the popularity of Ucits fund-of-funds structures is that they allow managers to be invested in complex products, including derivatives or currency overlays, says John Murphy, managing director and Asia product executive at JP Morgan.

Other organisations have also cited the growing interest in Ucits funds. Aside from courting institutional business, international managers are focusing efforts on marketing Ucits-compliant funds in the region, says Cerulli Associates in a first-quarter review, as reported in AsianInvestor last month. 

The popularity of the Ucits brand in Asia is clear, says the Cerulli report. An estimated 70% of all authorised funds in Hong Kong, Singapore and Taiwan carry the Ucits brand, and Bank Sumitomo -- one of Japan's largest fund distributors -- allocates 80% of the money that goes into offshore funds into Ucits products.