What benefits are there for Luxembourg funds to raise capital on the Asian markets?
Marie-Anne Mandroux (M-A. M.): In addition to the significant growth rate experienced globally by the various Asian states, these are countries that have an interest in financial products and have regulations that are increasingly structured in asset management. There are also populations that are beginning to age and therefore feel the need to financially prepare for their pensions. This is an opportunity for foreign funds to get involved with local pension financing products. They are people who have acquired financial prosperity and who now feel the need to invest their savings.
Is the Asian continent easy to tackle in the field of asset management?
Marc Noirhomme (M.N.): No, Asia remains a market that is not easy for non-Asian people to deal with. The processes are relatively long and costly. It’s also a market that is increasingly creating its own investment products. So the products that come in from outside compete with local solutions. In each country, local proposals offer more appeal than products outside Asia. In a country like China, it is impossible to sell a product directly from outside the country. So there are undeniably opportunities for growth, but they are not as important as in the European countries, which remain the main markets for Luxembourg funds.
M-A. M.: In the case of Ucits funds, we must also see that they are fragmented markets, unlike Europe where the rules are harmonised. In the EU, if you have the European passport, you should be able to get a sales authorisation for another country within two days. In Asian countries, this authorisation can take up to about six months. That said, Luxembourg Ucity are beginning to be recognised in Asia. In Hong Kong or Singapore, for example, they have simplified procedures.
Are the regulations as strict as in the European markets, where the requirements have increased in recent years?
M-A. M.: If Europe has experienced an inflation of regulation following a growing need for transparency, we have seen the same process in Asia. Regulations similar to Solvency, for example, have been introduced, notably in Hong Kong and Singapore. In Japan, new regulations are expected by 2025.
Thus, a foreign fund, in addition to its regulatory obligations related to registration, should be able to provide information to local banks and insurance companies on its investment in this fund so that they can carry out their own reporting to their supervisory authorities.
M.N.: Some of these reports are not mandatory, but if you don’t provide them your business impact will be smaller. At Deloitte, we therefore try to identify all these needs to inform and support our customers in this quest for local compliance. In a study we have just completed, we have listed the main tasks that external promoters will have to perform in order to be in line with the reporting requests of local regulators.
What are the main tips for fund promoters who want to get started on the Asian markets?
M-A. M.: They certainly have to do a preliminary analysis of the country-by-country requirements. The rules are different from one country to another. You must therefore have a solid compliance team to master the different rules and be able to communicate the right information.
Does this mean a need for compliance expertise in Luxembourg or good local intermediaries?
M.N.: There are two solutions: either you put in place the necessary resources, possibly with third parties, or you take advantage of the cross-border expertise already well deployed in Luxembourg and elsewhere in Europe. This is something you don’t necessarily find in Asia where the experience is always and only national. We therefore believe that operators benefit from using everything that is available to them in Europe, and particularly in Luxembourg and Ireland. We must take advantage of this cross-border culture to help operators cover the Asian market in the most efficient way.
This article was originally published in French on Paperjam.lu and has been translated and edited for Delano.