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Asian Funds Passport pilot proposal heading for a decision

March 31, 2013

The proposed Asia Pacific version of Europe’s UCITS funds, an Asian Funds Passport, was given a positive airing last week at the annual ASIC Forum for industry participants.

The regulator’s forum was addressed by Martin Codina, the Financial Services Council’s director of policy, and Catherine Simmons, State Street’s v.p.for regulation, industry and government affairs in Asia Pacific.

Both the FSC and State Street have been strong supporters of the idea, which involves much greater standardizing of regulations for funds between the main countries in the region, although many custodians and fund managers believe parochial obstacles are too great to be overcome anytime soon.

Codina said that it was possible that there could be a decision made at the next APEC meeting later this year to implement a pilot program from as early as 2015. A sub-committee of APEC – consisting of representatives from Korea, Singapore Australia and New Zealand – is looking to finalise proposed rules surrounding the Asian funds passport. If those countries sign up at the meeting, and following further consultations, a pilot program could be commenced in 2015.

According to the ‘InvestorDaily’ newsletter, Codina said: “This is the critical meeting and the expectation in my mind is that at this meeting we’ll get that decision.”

State Street’s Simmons said it was important that the Asian Region Funds Passport was able to compete with the UCITS model. UCITS funds have proved increasingly popular with investors in Hong Kong and Singapore.

She supported a simplistic approach that started with a limited number of jurisdictions and expanded as the vehicle gained support.

“I think it’s difficult to achieve agreement between all the markets at once, so you don’t want to go down the Euro path and have an Asia Pacific passport with every single country,” Simmons said.

“You should begin with agreement on a product with a few jurisdictions that are ready. You can use the US dollar for fund settlement to overcome the currency issue but have local currency product and encourage local jurisdictions to join once the vehicle is more established,” according to InvestorDaily.

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