Thu. Oct 29th, 2020

Regulation HK

Financial Regulator

HKIFA Warns Against Changing UCITS Delegation Model – Report

2 min read

HKIFA chief Sally Wong reportedly said a move to restrict the delegation model could prompt capital to flow away from the European fund industry.

The HKIFA (Hong Kong Investment Funds Association) has warned that a Brexit-related overhaul of the EU’s retail fund rules could undermine the dominance of European funds in Asia, reports the Financial Times.

Funds governed by Europe’s UCITS framework for retail funds are sold across the world and are particularly popular in Asian jurisdictions such as Hong Kong, Taiwan and Singapore.

The delegation allowed under the UCITS framework enables asset managers to set up a fund in the EU and carry out portfolio management activities from other jurisdictions.

In August, ESMA (European Securities and Markets Authority) recommended changes to the delegation rules in response to Brexit. The changes will be under consideration in the upcoming review of the EU’s asset management rule book.

ALSO READ: Why APAC Should Care About the EU’s AIFMD Review (2 Sep 2020)

According to the Financial Times, HKIFA chief Sally Wong said a move to restrict the delegation model could prompt capital to flow away from the European fund industry.

Wong said EU policymakers should carefully consider the global implications of any changes to delegation, noting that Asian authorities’ increasing focus on boosting their local fund industries made it an “inopportune moment” to review the rules.

Hong Kong, Taiwan and Singapore have all taken steps to boost the attractiveness of local domiciliation of funds in recent years, while other Asian countries have been working to launch cross-border funds passport and mutual recognition schemes.

Asian authorities may seek to profit from the fragmentation created by an overhaul of the UCITS rules by accelerating such changes, Wong said.

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