Citi 2018 FinReg Outlook

Australia Prepares for Asia’s UCITS Moment An interview with Carla Hoorweg, Senior Policy Manager for Investment, Technology, and Innovation, Financial Services Council It has been a long road for the Asia Region Funds Passport (ARFP). Initiated in 2013 by the Asia-Pacific Economic Cooperation forum, the ARFP is designed to create a cross- border fund market in the Asia Pacific region that will allow funds established in one participating country to be sold into another. Currently Japan, South Korea, Thailand, New Zealand, and Australia have agreed to participate. The ARFP reached a major milestone at the start of the year. For the first time participating countries can agree to launch ARFP funds once the local regulators give it the green light. Carla Hoorweg, Senior Policy Manager for Investment, Technology, and Innovation at the Financial Services Council (FSC), explains the ARFP and the opportunity it presents for asset managers. What does the ARFP mean for asset managers? The purpose of the ARFP is to create regulatory architecture in the region that will present new manufacturing and distribution opportunities for asset managers. Similar in concept to the UCITS [Undertakings for Collective Investment in Transferable Securities], it provides a common set of rules and a framework agreed upon by the financial services regulators in the participating countries. Managers will be able to access a broader range of markets with a lower regulatory burden, due to the predetermined thresholds for experience and clear product eligibility criteria. For asset managers the ARFP will mean different things, depending on the structure of their existing product manufacturing and distribution systems. Global players may be able to reap better market or tax treaty access through the ARFP than their existing structures. For domestic players who are not currently accessing foreign jurisdictions, the ARFP will offer streamlined access to other jurisdictions — instead of exporting their products to Asia through a European structure. The ARFP will also give investors access to a wider range of investment options, which will result in greater choice, better competition, and lower fees at a regional level. Asia Pacific “We certainly hope the ARFP will become the UCITS of Asia. It doesn’t make sense for Asian investors to access Asian markets via Europe. It also doesn’t make sense for economic activity generated by Asian managers servicing these Asian investors to flow to the EU.” Citi Custody & Fund Services – FinReg Outlook 2018 35 34