THE plan to allow fund managers based in Singapore, Malaysia and Thailand to carry out cross-border selling of mutual funds or unit trusts across the three markets made significant headway with the joint launch of a key framework by the securities markets regulators of the Asean countries on Monday.
The Monetary Authority of Singapore, the Securities Commission of Malaysia and the Securities and Exchange Commission, Thailand, joined hands to roll out the Asean Collective Investment Scheme (CIS) Framework - a milestone in Asean's efforts to develop a cross-border "funds passport" as part of its goal to build an integrated regional market.
"Fund managers based in Singapore, Malaysia and Thailand can now offer CIS constituted and authorised in their home jurisdiction directly to retail investors in the other two Asean countries under a streamlined authorisation process," said MAS in a statement.
Under the new plan, retail investors will benefit from a wider choice of funds to invest in, while fund managers will have a direct and efficient route to offer their funds to retail investors in other Asean countries, said Lee Boon Ngiap, MAS assistant managing director of capital markets in a statement.
"We look forward to the participation of more Asean jurisdictions in this framework over the coming years."
To ensure that participating fund managers have the necessary experience and track record to manage retail funds under the new framework, a set of common standards has been established.
The qualifying fund manager needs to meet several conditions, which includes having a minimum five-year track record and having at least US$500 million of assets under management (AUM) globally.
The regulators have published a handbook to guide fund managers on the operational aspects of the framework, and to help them understand the different legislative requirements in each jurisdiction and procedures for the cross-border offering. MAS has also introduced new provisions in a new Chapter 10 on the code on CIS to implement the framework in Singapore.
Fund managers, who stand to benefit handsomely, welcomed the plan. It gives them access to a larger pool of funds and, given the greater economies of scale, lowers the cost of providing funds.
"We are very pleased to hear about this. It means that retail investors will have a wider range of offshore funds to choose from, and more importantly, they will benefit from cost savings as asset managers will no longer have to go through fund feeder structures," said Susan Soh, Schroders Singapore's country head.
The fund feeder structure was in fact an impediment for many fund managers. "In the past, the cost associated to a feeder fund may deter asset managers from launching such funds, thus reducing the focus to its domestic markets," said Goh Seng Kee, chief executive of Maybank Asset Management Singapore.
With the new scheme, this is no longer the case as funds can bypass the intermediary.
Could the lack of a common currency among the three nations prove to be a hurdle in terms of implementation?
"We don't think so as funds would typically provide multi-currency classes to cater for investors' needs," said Mr Goh.
The latest development is a boon for regional ambitions to deepen the capital markets and boost liquidity, more so for Singapore, which also has a foot in another passport scheme - the Asia Region Funds Passport (ARFP) involving Australia, South Korea, New Zealand and the Philippines, which is expected to be launched in 2016.