Cross-Border Distribution of UCITS

A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2011

CONTEXT

The attention of the European regulators today, when tackling the Asian distribution issue, shifts toward two crucial points: The proposals of the creation of a pan-Asian fund product and socio-demographic trends in the region. International asset managers as well as Eu- ropean regulators and industry bodies currently question themselves: What would happen to the distribution pattern if a truly pan-Asian product were to be launched? Would it be the end of UCITS distribution in the region? Experts tend to predict that most probably, such a product, if and when it would become available, will take time to make its way to success as UCITS endured many years ago. In any case, should this happen in a relatively short ti- meframe, competition would be fiercer in the region and most probably also back in Europe, as European regulators would allow the pan-Asian funds to be distributed in the European Union as well. Secondly, asset managers tend to analyse the macro-economic and socio-demographic changes currently happening in the region to try and capture growth where it is happening or foreseen to happen. Asia accounts for more than 4 billion people, and forecasts predict a further 25% increase by the end of 2050. This alone should already drive the attention of most asset managers. However, achieving a deep understanding of the region is a hard task as Asian markets are far from being at the same development stage, on quite a few sides: From regulatory, to demographical, fiscal, legal, economic aspects and so forth.

Achieving a deep understanding of the region is a hard task as Asian markets are far from being at the same development stage, on quite a few sides: From regulatory, to demographical, fiscal, legal, economic aspects and so forth.

Graph 17 is a NICSA’s summary of numerous factors influencing investing in many Asian markets, which have been classified by their level of maturity.

Graph 17: Asian markets maturity levels overview

Emerging

> Wealth increasing rapidly > Heavily populated countries > Developing capital markets > Currency inconvertibility > Entrepreneurs have the ability to invest abroad

Hong Kong

Singapore

Japan

Mature

Taiwan

> High wealth density > Highly developed capital markets > Complex wealth management needs

Indonesia

South Korea

Developing

> Established base of wealth and strengthening capital markets > Selectively restrictive regulations > More experienced investors

China

India

> Emergence of 2nd generation HNWIs > HNWIs seek wealth accumulation onshore and wealth preservation offshore

Least Mature

Most Mature

Source: NICSA, 2011

Although the sales of UCITS in Asia are already strong in the more mature markets and Taiwan, there are still many other national markets to target, among which the two big and booming Eastern economies: China and India.

Across the Pacific, distribution in the American continent is also very dynamic, particularly in South America. In countries such as Chile and Peru, UCITS are considered the foreign

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