IIMI, the boutique asset management think tank, is calling for the development of a UK fund structure that could compete with UCITS and AIFs in Asia-Pacific (APAC), in order to strengthen the global distribution footprint of UK funds and their position in the region. The full paper, entitled “Facilitating Connectivity: Strengthening UK- APAC Fund Ties”, can be found here.
IIMI also proposes that the UK should further leverage the Mutual Recognition of Funds (MRF) scheme with Hong Kong while negotiating further MRFs with other critical markets, most notably China. In addition, the UK should become a signatory to at least one or both of the Asia Region Funds Passport (ARFP) or ASEAN Collective Investment Scheme (CIS).
The UK’s asset management industry manages around £400 billion on behalf of clients in APAC. Currently, many of the UK investment products that are sold to institutional and retail clients in APAC are regulated under EU law, principally either UCITS or the Alternative Investment Fund Managers Directive (AIFMD).
Previous uncertainty about the future of delegation and the EU’s ongoing refusal to extend the much vaunted AIFMD marketing passport to core APAC jurisdictions (namely Hong Kong and Singapore) have damaged the EU’s reputation in APAC circles.
As a result, some experts see this impasse as an opportunity on which the UK can capitalise. In addition, should post-Brexit equivalence fall short in trade negotiations, the impetus for the UK to create its own fund regime and to build in mutual links with APAC, and the rest of the world, becomes greater.
IIMI believes that there are several ways in which the UK funds industry could strengthen its distribution footprint in key APAC markets, where many of IIMI’s members see a large growth opportunity:
- UK policymakers/regulators should capitalise on the UK funds industry’s opportunity to further cement itself in APAC by developing a UK-own fund brand to compete with UCITS and AIFs in the region.
- The establishment of such a UK fund brand will require input from industry and government, and this is something the IIMI is willing to facilitate in coalition with other associations and market participants. The process of setting up this new fund structure will not be easy, but IIMI believes it is certainly achievable.
- The UK should further leverage the MRF scheme with Hong Kong, and regulators ought to negotiate further MRFs with other critical markets, most notably China.
- The UK should become a signatory to a regional fund passporting regime such as the ARFP or ASEAN CIS in order to maximise its APAC distribution footprint.
“IIMI believes the UK funds industry has an excellent opportunity to further embed itself in APAC, where a number of our members see the largest growth potential. Developing a UK fund brand to compete with UCITS and AIFs in the region would be one way of doing this, and would be beneficial for the UK and Asian economies. As the representative of leading owner managed firms in the UK and Europe, IIMI has already extended the UK fund management community’s links with APAC through the 2019 launch of IIMI Singapore, and we are keen to build on this.”Nick Mottram, Chairman of IIMI