It would make little sense for China to accept Ucits funds or to merge with other Asian passport schemes, says Sean Tuffy, head of regulatory intelligence at custody bank BBH.
Fund passporting
Asia has three fund passport schemes in the pipeline - HK-China mutual recognition, Asean and ARFP - which promise to change the landscape of the region's funds industry.
Beijing's market intervention has hit confidence in the cross-border fund scheme, with products being registered more as a PR exercise than a business prospect right now.
An Asean version featuring Malaysia, Singapore and Thailand has been put forward. That is the third Asian passport scheme in eight months as sources see regional rivalry intensify.
The SFC’s Alexa Lam and CSRC’s Xu Hao discuss the timing of the HK-China passport scheme, indicating the launch will follow the RQFII model and could be imminent.
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Asset managers will be able to sell Hong Kong-domiciled funds into Europe under the Alternative Investment Fund Managers Directive. But they face a number of issues.
The Swiss firm has just won RQFII approval, but has no current plans to set up Hong Kong-domiciled funds, says Asia-Pacific head Kai Sotorp.
The product range on HK fund platforms must diversify beyond Asian underlyings to boost Chinese interest in mutual recognition, say asset servicers. That will mean more locally based capabilities.
China said mulling Fatca-like scheme; QFII/RQFII ownership rules eased; mutual recognition requirements "agreed"; HK SFC warns on Fatca; UK tax to hit foreign property investors; ICI Global publishes research.
Aberdeen Asset Management's Australia COO says his home market is well prepared on funds automation, but raises this as a consideration under current passporting proposals.
Stewart Aldcroft of Citi says Ucits funds will not be allowed to participate in Hong Kong-China mutual recognition in the next few years, despite a Luxembourg lobbyist's argument to the contrary.
The proposed scheme will fail to live up to the hype initially because the size of the opportunity needs to be put into perspective, says Shiv Taneja of Cerulli.
Mutual funds will be the primary focus of the proposed cross-border fund scheme, although China could be receptive to participation by private equity, says Ernst & Young.
