Local knowledge boosts Ucits chances in Asia – Knadel
European managers should not take a uniform view of the attractiveness, need or applicability of the Ucits brand when distributing funds to Asia, even though the framework is well known and broadly understood in the region.
That is the view of research consultant Knadel. Miriam Edelman, who works for the firm and who surveyed 50 asset managers of varying size from Asia, Europe and the rest of the world, says the Ucits brand has “a great deal of credibility, and that regulators in multiple jurisdictions in Asia find it comforting to work with, but it is neither multi-citizenship nor a free passport”.
Many continental asset managers use their Ucits products in Asia because watchdogs there know the European framework’s tenets, controls, governance and investor protection, so local approval can be quicker than for non-Ucits funds.
Counting on experience
But Edelman says this is not uniformly so and managers should draw on the expertise of experienced service providers when planning funds and distribution strategies.
“With Ucits,” she says, “regulators will be able to tick the boxes that much more easily, and having a Ucits product should make the process smoother and faster than if you bring, for example, a Cayman fund that may not automatically have Ucits attributes.”
But if regulators do not find provisions in a Ucits fund they are looking for, Edelman says, they may still require modifications with additional constraints before approving local distribution. Final costs of approving a Ucits fund in Asia might vary with number and scale of changes required.
She adds that problems with some funds in Hong Kong and other Asian jurisdictions, as well as the transposition of some hedge fund strategies into Ucits framework in recent directives has slowed the approval process there – in some cases from six weeks to up to a year. This looks set to continue with Ucits IV.
“People are saying [the fitting of hedge fund strategies into Ucits wrappers] will not be corrected at a directive level, but dealt with at the level of regulations,” Edelman says.
“Given the level of caution about hedge funds and alternatives approaches in Asia, I do not think the level of regulation [in Europe] will make [Asian regulators] much more comfortable. It may just take time, and seeing more of the funds.”