China: Asian funds passporting: the Luxembourg of Asia?

Last Updated: 20 October 2015
Article by Suzanne Gibson

The Asian retail investment funds market is in the throes of a significant shake-up, with two new cross-border Asian passporting regimes and a momentous mutual recognition arrangement between Hong Kong and China.

The ASEAN CIS Framework for cross-border offerings of collective investment schemes (CIS Framework) is already in existence, with managers in Singapore, Malaysia and Thailand now able to passport their compliant domestic funds to retail investors in these three countries.

The proposed Asia Region Funds Passport (ARFP) is a broader passporting framework, and is a step closer to realisation following the signing on 11 September 2015 of a Statement of Understanding by Finance Ministers from Australia, New Zealand, The Philippines, South Korea, Thailand and Japan. Significantly, this was the first time that Japan had committed to progressing the ARFP, and the inclusion of the strong Japanese market is a huge boost to the strength of the framework in the region. Although Singapore did not sign the Statement of Understanding last week, it has been represented at negotiations since ARFP's inception, signed the Statement of Intent in relation to the ARFP in September 2013 (together with Australia, South Korea and New Zealand) and continues as an active participant. There may also be other signatories before ARFP's proposed 2016 launch.

The Mutual Recognition of Funds between Hong Kong and the Mainland of China (MRF) permits Hong Kong and Chinese fund managers to passport their compliant local funds to retail investors in Hong Kong and China. For Hong Kong managers, the MRF provides incredible opportunities by allowing access to the massive Mainland Chinese retail market.

All three regimes are designed to enable the cross-border regional distribution of compliant domestic funds to retail investors in other passporting countries. In a perfect passporting world, regional fund managers would be able to freely offer their local products to retail investors in other passporting countries on a level playing field. But if the European UCITS experience has taught us one thing, it is that managers will flock to the country which offers them the best combination of tax efficiency, accessibility and marketability – a place that:

  • offers the best tax treatment for the fund, the manager and the investors;
  • is accessible and easy to do business in; and
  • has robust regulation, familiar funds structures and investor protections which will satisfy foreign retail investors.

Whichever country achieves this could become Asia's retail investment funds hub – the Luxembourg of our region.

Who is in the running for this crowning glory?

Once the proposed ARFP is launched and assuming Singapore continues its involvement with the ARFP, the key ARFP contenders are likely to be Singapore and Australia. But with the

recent launch of the MRF, Hong Kong is also a major competitor.

Singapore is already a leading Asian asset management hub in a prime geographic location for Asian distribution. It offers tax incentives for qualifying funds and an attractive tax regime for funds, managers and investors. It has experience of regional funds passporting through the existing CIS Framework and has been a key advocate for the ARFP.

At A$2.6 trillioni, Australia has the largest amount of investment fund assets under management in Asia and the third largest in the world, behind the U.S. and Luxembourgii. It has a highly advanced, well-regulated financial services industry, and key government support for the ARFP. Australia has made some significant tax reforms in recent years, including the Managed Investment Trust reforms providing concessionary withholding tax, the introduction of a new tax regime to apply to managed investment trusts which will, amongst other things, accommodate currency overlays on particular classes of units and the recent revision of the investment management regime. The investment management regime is specifically focused on facilitating the access of Australian financial intermediaries. There are also recommendations to introduce new (non-trust) collective investment vehicles which would be more akin to fund structures used in other jurisdictions (e.g. potential limited partnership structures and corporate flow-through vehicles).

Hong Kong has not committed to the ARFP. But the 1 July 2015 launch of the MRF is a game changer for global funds managers, giving Hong Kong-compliant public funds access to the retail investor market in Mainland China. If Hong Kong were to join the ARFP, it would be able to offer any Hong Kong funds that were both MRF and ARFP compliant to retail investors in ARFP countries as well as to retail Mainland Chinese investors. Even without ARFP participation, many global fund managers are considering establishing a Hong Kong presence (to the extent they do not already have one) so that they can benefit from the MRF and access the Mainland Chinese retail investor funds market.

Now that China has implemented the MRF with Hong Kong, it will be interesting to see whether we will see similar mutual recognition frameworks negotiated with our countries.

Significant changes in the distribution landscape for Asian funds could have a real impact on UCITS distribution in Asia, particularly in countries where UCITS has been particularly successful, such as Hong Kong, Singapore and South Korea. Unlike the EU, Asia does not have a supra-national legislator or regulator, a common currency or 30 years' experience of a regional funds passporting regime up its sleeve. But Asian governments do have the will to innovate and to create a market which encourages the regional distribution of fund products established in Asia, meets product demand by the increasing pool of investible funds in the region, slows the tide of Asian money being managed ex-Asia and boosts economic growth. For Asian retail investors, retail regional passporting should lead to increased product choice and diversity of available product potentially coupled with a corresponding downwards pressure on fees. For fund managers, it is an exciting time to assess product structures and operating models, to identify the products and structures which best meet regional demand from these new distribution channels.


iAustralian Bureau of Statistics March 2015

ii Investment Company Institute, Worldwide Mutual Fund Assets and Flows, Second Quarter

2014 (released 2 October 2014), as cited in the Why Australia Benchmark Report 2015, issued by the Australian Trade Commission, January 2015.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.