Pay attention to Asia’s demands

Asia_business_friendlyAsia is demanding more control over the Ucits brand and questioning whether it should continue to import a concept designed for Europe. Stefanie Eschenbacher talks to Sally Wong, chief executive officer at the Hong Kong Investment Fund Association.

With Asia accounting for nearly a third of Ucits fund sales worldwide, investors, regulators and fund associations in the region are demanding more control over the brand.

“Since the global financial crisis, there have been more discussions in Asia as to whether we need to develop something that can better reflect the needs, profiles and characteristics of the Asian investor base; and enable us to have greater ownership of the process,” says Sally Wong, the chief executive officer of the Hong Kong Investment Funds Association.

“The perception is that Ucits is Europe-centric and Europe’s interests and concerns would always comes first, which is fully understandable.”

Asian investors are also questioning whether they should continue to import a concept that has been designed and developed for the European investor base.

“When we talk to some of our members, we get the impression that there is a need to develop something Asian,” says Wong.

“We are now revisiting the idea of Asian Ucits or an Asian passport. At this stage there are only discussions, no concrete plans, but Europe should pay attention to this.”

Asia is not a homogenous market and has different regulations, which would make the development of a common brand challenging.

Though innovation from Europe is generally welcome, the development of alternative Ucits has been controversial.

Labelling funds as complex or non-complex, she says, would provide more clarity for investors and prevent potential mis-selling. “There are more and more questions to be asked as to what Ucits represents and how to position alternative Ucits for retail investors.”.

Another major concern is the sovereign debt crisis in Europe and the various regulatory changes it triggered.

Wong acknowledges that there is no relationship between the sovereign rating of a fund domicile and the safety of assets, but says some investors do not have this level of understanding.

“Some investors and media have asked how does the eurozone crisis impact on fund investment – both from a market risk and a domicile perspective,” she says.

Europe has recently initiated a dialogue and encouraged the exchange of ideas.

In the aftermath of the Lehman minibond crisis, the Securities and Futures Commission in Hong Kong has stepped up its efforts to improve disclosure of fund details.

One example is the a new fund fact sheet, similar to the key investor information document (Kiid) in Europe and, therefore, often nicknamed Kiid cousin.

There are currently 27 different pieces of regulation – most notably the Foreign Account Tax Compliance Act and the Volcker Rule, a part of the Dodd Frank Act – affecting the European Ucits market. Most of them will have an impact on Asia, too.

©2012 funds global

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