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Financial Services Council Asian Region Funds Passport
CURRENT ENVIRONMENT No equivalent UCITS regime in Asia-Pacific. Limited, inconsistent and inefficient regulatory regimes for recognition of foreign funds. Despite this, a high proportion of funds offered in Asia are domiciled outside the region: Hong Kong 91% Singapore 79% Taiwan 59% Over the past three years approximately 40% of all new sales into UCITS funds have been sourced from Asia. Patchwork of Mutual Recognition Agreements – arguably Australia leading the way.
ASIAN MARKETS – GROWTH DRIVERS • Low mutual fund penetration: USD2.757 trillion, 13% of global FUM • GDP growth/share: USD16,652 billion today, USD24,591 billion by 2015 • Low pension system coverage (less than 10%)
PASSPORT PROPOSAL A framework designed to facilitate the distribution across regional borders of funds manufactured, distributed and administered within the region. Requires the development of an agreed set of funds management regulations amongst a group of like-minded economies in the Asia region. Funds primarily regulated by their home country regulator and only subject to minor additional requirements imposed by the host country regulator, as appropriate.
PASSPORT REGULATIONS The common set of passport regulations would need cover a wide range of issues, including: Eligible investment asset classes Custody arrangements Offer document conditions Fund registration arrangements Licensing arrangements for the provider Any limits on leverage Any liquidity requirements; and Investor protection and dispute resolution procedures.
RATIONALE FOR AN ASIAN REGION FUND PASSPORT Lower the barriers to entry for Asian based fund managers wanting to offer funds in the region. Grow the regional managed funds market – size, capability, employment, etc. Improve the level of choice and competition in the region. Reduce operating costs for fund managers in the region. Lower the cost of capital within the region.
REGIONAL INTEREST 86% of regional industry bodies consider establishment of a passport important to their industry
REGIONAL INTEREST 100% of regional market participants consider establishment of a passport important to their industry
REGIONAL INTEREST 66% of wealth managers supportive of establishment of a passport, significant percentage unsure
FSC INVOLVEMENT Proposed the development of an Asian Region Funds Passport to the Johnson review Member of the Financial Centre Task Force’s Passport Working Group Ongoing dialogue with Treasury and ASIC Commissioned PwC Research attracting coverage throughout Asia and domestically Prime Minister Gillard launches FSC research at APEC in Japan, November 2010 Working with regional industry bodies to garner their support – potential Communiqué to be issued in April
NEXT STEPS Treasury leading discussions at APEC meeting in Hong Kong – March 2011 Attendees: Australia, Hong Kong, Japan, South Korea and Singapore Development of a ‘pilot’ by year end – seeking Australian based fund manager/s involvement APEC Finance Ministers meeting in November – objective is to demonstrate progress and obtain support to fast-track (Pathfinder concept) Separately, FSC to seek Mutual Recognition Agreement with South Korea
THANK YOU For a copy of the report visit: www.fsc.org.au/