State Street Corporation, provider of financial services to institutional investors, has released its latest Vision Focus report that examines the case for creating a cross-border registered funds vehicle in the Asia-Pacific region. Entitled “Asian Funds Passport to Growth,” the report enumerates the benefits of developing such a vehicle and outlines ways it could be created.
The creation of an Asian funds passport was long considered impossible, due to the varying levels of development across the Asia-Pacific region, competition among local markets and the absence of a common currency and regulatory framework. The report notes, however, that expectations of further strong regional growth, more cross-border recognition initiatives and increased cooperation between regulators, as well as the continuing evolution of domestic capital markets have brought the region to a turning point, making the idea of Asian funds passporting more feasible than ever before.
“Asian financial markets and economies have evolved and grown over the past decade and the region’s resilience in the face of the global financial crisis suggests this growth will continue,” said Hon Cheung, regional director of State Street Global Advisors’ Official Institutions Group in Asia. “If a regional funds vehicle were created, it could potentially have numerous benefits, such as giving investors access to a greater range of products that are locally made and managed, helping to streamline cross-border recognition and encouraging the development of the funds industry across the region.”
“Differences in regulatory approaches throughout Asia Pacific help to explain the absence of a regional cross border fund market from the region’s capital markets,” said Chris Taylor, State Street senior managing director and head of sales for the Asia Pacific region. “In fact, given the region’s fragmented political and economic environment, overcoming differences in regulations in each jurisdiction is a key challenge in establishing an Asian Funds Passport.”
According to the report, the region’s regulators could draw upon lessons from UCITS and from recent regional cross-border initiatives such as the ABF Pan Asia Bond Index Fund, in creating a new vehicle. It cites these examples to illustrate the need for cooperation among countries in the region to bring an Asian Funds Passport to fruition, rather than any single country trying to set up such a vehicle on its own.
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