A vast array of issues were tackled head on at Fund Forum Asia this year. To help you digest it all, we’ve compiled our list of key issues covered during the event.
Robo Advice
The seemingly unstoppable rise of robo-advice dominated proceedings at Fund Forum Asia 2016 in Hong Kong. This technology, which provides algorithmic advice to end clients, is attracting interest (and some fear) from asset managers and distributors. Proponents argue it is cost-effective with a user-friendly technology interface and appeals to younger investors, a growing market segment. It could also deployed to provide a generalist service for small investors. However, regulators have yet to develop rules for cyber-advisers. It is also crucial that cyber-advisors are compliant with existing regulations such as the Markets in Financial Instruments Directive II (MiFID II) and the know-your-client (KYC) provisions under FATCA. Detractors point out this technology is impersonal and unlikely to go down well with high-net-worth investors who value relationships.
Liberalisation
Market liberalisation in China continues to gather steam in these choppy markets as the government seeks to bring in more international investment. The People’s Bank of China (PBOC) widened the investor pool for entry into China’s Interbank Bond Market (CBIM). CBIM was primarily available to large institutions such as central banks and sovereign wealth funds, but it has now been afforded to asset managers, securities firms and commercial banks. Hedge funds are prohibited as these have not been designated as long-term investors. The introduction of same day delivery versus payment (DVP) on Stock Connect will ease counterparty risk concerns for regulated funds hoping to transact in China A Shares. Mutual Recognition of Funds (MRF) has had a slow start with very few regulatory authorisations because of the volatility. Delegates at Fund Forum Asia are confident this will take off.
Outbound capital
Chinese government attempts to stem outflows have resulted in caps for the Qualified Domestic Institutional Investor (QDII) not being increased. QDII allows domestic investors to gain overseas exposures. The Qualified Domestic Limited Partnership (QDLP) has also seen a slowdown. QDLP permits a handful of foreign hedge funds to market to HNWIs in Shanghai and it has enjoyed mixed success so far. Government restrictions on outbound capital, however, has hindered QDLP.
Extraterritoriality
APAC managers must remember global regulations can have a local impact. Rules such as FATCA have only just hit home with APAC managers. Meanwhile, some managers are looking to market into the EU by setting up UCITS or becoming an AIFM and soliciting institutions through national private placement regimes. Fund managers were warned that they need to recognise Europe is not a harmonised regulatory environment, and this can upset distribution. Domestic passport schemes such as the Asia Region Funds Passport (ARFP) and the ASEAN CIS have yet to take off. However, anecdotal mutterings suggest Hong Kong and Singapore regulators are hurt that the European Securities and Markets Authority (ESMA) did not grant them regulatory equivalence under AIFMD. This may give regulators in Hong Kong and Singapore impetus to encourage the development of these regional fund brands.