Like its European counterpart, the Hong Kong mutual fund industry is having to adapt to the implementation of the UCITS III Directive by the member states of the European Union in the first half of this year.
It is estimated that 85 per cent of the mutual funds distributed in Hong Kong are domiciled in foreign jurisdictions, and especially in the Luxembourg (which has already implemented UCITS III) and Dublin fund administration centres that must comply with the UCITS III Directive by the middle of this year.
This means the local regulatory framework in Hong Kong has had to embrace the changes authorised by the UCITS III Directive, which include broadening the investment scope of funds to include derivatives as an investment instrument in their own right, and not just for hedging purposes.
The Securities and Futures Commission (SFC) in Hong Kong has already started authorising UCITS III-compliant funds for distribution to local investors.
The regulator has also confirmed its commitment to work with the local mutual fund industry to facilitate the authorisation of UCITS III-compliant funds, and to consult market practitioners on any adjustments to local regulations that are necessary to ensure the distribution of funds in Hong Kong is not held up.