“What’s in it for them is regaining control of the regulatory framework of their funds management sectors.” He says the UCITS structure prevents Hong Kong, Singapore and other markets from fully developing their own funds management sectors. “These funds are, in the vast bulk of cases, being run out of Europe as well as being administered there,” Weir says. “There isn’t a strong domestic funds management community [in many Asian markets]: there are a lot of international funds management companies selling UCITS in the region. “A whole range of skills – fund administration, legal support and tax advice – are being lost from Asia. If Asia had its own regulatory framework and that enabled funds to sell across borders in the region, we would see more funds managed and administered out of Asia. “I’d prefer to see Asian countries develop these regulations and control them, rather than accept what comes from Europe.
These countries could control the regulatory framework going forward and that would encourage the development of their local industries.” But what Weir will learn when he presents this vision is how strongly it resonates with Asian authorities and how willing they are to change this state of play. Jurisdictions have much to gain from hosting manufacturing operations. Of the 44,629 UCITS funds domiciled in Luxembourg, 20 per cent of them are managed in the US, 19 per cent in Germany, 16 per cent in Switzerland and 13 per cent in the UK. The administration hub captures between only 3 and 5 basis points of the revenue delivered by these vehicles, says Greg Cooper, CEO of Schroders in Australia.
“The management and distribution component is where the greatest revenue generation occurs,” he says. By developing fully-fledged funds management sectors, rather than acting as distribution gateways for the savings amassed by their populations, Asia-Pacific nations can build truly strong domestic industries instead of those pumped up on the “steroids” of low taxes and light-touch regulation, Weir says. Most of the funds that BlackRock sells in Asia are managed in the US and UK and sold as UCITS vehicles through its global platform, Aladdin. Damien Frawley, head of the manager’s Australian business, says this has allowed the manager to concentrate on building distribution and client service centres in the region. But earlier this year, BlackRock restructured its business into three divisions to cover the Americas, Asia-Pacific, and Europe, the Middle East and Africa. Its Asia-Pacific chair, Rohit Bhagat, is charged with further beefing up the manager’s asset management capabilities in the region. So its distribution and client service offices are being tailed by manufacturing capabilities.