The funds have built up, but that doesn’t mean the knowledge has built up yet.” Entering joint ventures can be risky exercises. “You own 49 per cent of the business and exercise 1 per cent of control,” says Mann. But perhaps they can be justified in a market with as much potential as China: “It’s their country,” Fasso reasons. “Put the JV agreement in the bottom drawer and focus on moving the business forward.” Managers in Asia say a physical presence is needed to succeed in the region’s most attractive markets. It empowers business development and client service efforts. And it’s crucial that these capabilities are optimised because the competition from other managers on the ground is so tough.
First stamps There are 5,311 UCITS funds currently on sale in Asia-Pacific markets. In Singapore, investors can choose among 2,300 funds; in Hong Kong, they are offered 1,209 funds; in Macau, the number is 579; and in Korea, 250 funds are on the shelf, according to PwC’s Global Fund Distribution 2010 report. Global names such as Fidelity, Franklin Templeton and the asset management arms of HSBC and Citi have been in the region for about two decades. They are attuned with the investment tastes within Asian markets and have established strong brands. “You wouldn’t go offshore and be cocky,” Fasso says frankly. “You’re dealing with a much more competitive market than in Australia.” Asian retail investors can be more fickle, too. The holding periods for funds are often much shorter than what Australian managers would be accustomed to. “Funds are often sold into the market like an IPO [initial public offering], with investors trying to get in below the net asset valuation,” Fasso says. “Mutual funds managers are constantly having to reinvent funds to keep inflows coming.”
An opening for Australian managers is infrastructure, he says, given the strong domestic tradition in managing these assets and the fierce contests among long-only equities and fixed income managers. This activity makes Australia’s aim of introducing the funds passport no mean feat. But Weir will leverage the inherent selfinterest in each market to argue the task force’s point, which will tell governments the UCITS footprint across Asia is essentially an extension of European Union funds management regulation and is shaping the regulatory frameworks of Asian countries that have adopted them. While this has not been a detrimental influence to date, it might bring unwanted changes in the future. “What regulators in parts of Asia are finding is that their funds management regulatory structure is being incresingly determined in Europe,” Weir says. A regional passport can change this momentum.