Asian regulatory barriers are delaying the growth of UCITS in the region, according to a RBC Dexia industry poll.
Of the 34 Asian Pacific fund promoters and distributors surveyed, 85% saw diversity of cultures, languages and local regulations as the most significant hurdles to the growth of UCITS in the region. As a consequence, third party support and local expertise is of vital importance.
This poll suggests that third-party support is needed for a fund manager to better understand the complexities of local markets and to provide detailed local knowledge and expertise to guide them through the sometimes murky waters of cross-border or regional distribution, said Scott McLaren, head of Asia-Pacific Sales and Distribution at RBC Dexia. It will become increasingly important for service providers to become catalysts in market evolution with the introduction of UCITS IV and increased technology and automation becoming the standard.
While the majority of respondents saw significant challenges due to market fragmentation, regulation, product transparency and investor caution, financial risk was not deemed a problem for the Asia Pacific fund industry – a possible indication on how the recent financial crisis was not as global as European and American commentators like to postulate.
Despite the aforementioned regional difficulties, the success of UCITS within the Asia-Pacific region continues to grow, with 65% or respondents seeing UCITS as the key product focus in 2010. Non UCITS ‘long only’ products and hedge funds also garnered strong interest from respondents, but the flexibility and transparency of UCITS bolstered the product’s popularity and only 33% of respondents believed that UCITS IV would make the UCITS brand a more viable investment option.