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Race is on to launch Hong Kong-domiciled funds

JP Morgan is among fund houses that aim to exploit mutual recognition programme by selling more qualified products on the mainland

PUBLISHED : Monday, 23 September, 2013, 12:00am
UPDATED : Monday, 23 September, 2013, 4:03am

Fund houses in the city are racing to introduce Hong Kong-domiciled funds to make sure their products qualify for sale on the mainland under the proposed mutual recognition programme.

JP Morgan Asset Management, which already has 44 Hong Kong-domiciled funds, the most in the city, would issue more, Asia-Pacific chief executive Jed Laskowitz said.

"We will have more Hong Kong-domiciled funds because we want to prepare ourselves to sell our fund products in China under the proposed mutual recognition programme, which is going to be a big boost to the Hong Kong fund management industry," Laskowitz said.

Last month, Beijing for the first time endorsed a study of the programme, adding it to the latest round of the Closer Economic Partnership Arrangement.

The programme, for which Hong Kong has lobbied the central government to boost the local fund industry, would mean Hong Kong-domiciled funds could be sold on the mainland and mainland funds in Hong Kong. Securities regulators on the mainland and in Hong Kong are working on detailed criteria before the programme starts.

Only about 300 of the 1,800 or so funds authorised by the Securities and Futures Commission (SFC) are domiciled in the city because most international fund houses domicile their funds in Luxembourg or Dublin for tax or corporate structure reasons.

Laskowitz said JP Morgan had more Hong Kong-domiciled funds than others because it had been operating in the city since the 1970s.

He said the firm had a mainland joint venture, China International Fund Management. Set up in 2004, the Shanghai-headquartered venture has branches in Beijing, Shenzhen, Xiamen, Nanjing and Hong Kong and can help sell Hong Kong fund products on the mainland.

Laskowitz said the mutual recognition programme and rising demand for investment and retirement products in Asia would help JP Morgan double its 2.7 per cent market share in the region in a few years.

"Investor education would be important in this programme as many mainland investors are taking a short-term view," he said. "They tend to buy high and sell low. Investors would need to learn about the benefits of long-term fund investment."

US fund house BlackRock launched a new series of Hong Kong-domiciled funds last month, while other fund houses such as BOCHK Asset Management and Allianz have planned similar moves.

After the Hong Kong government disclosed last year that mutual recognition was being studied, some fund houses started to domicile their funds locally. SFC statistics showed the number of funds domiciled in the city stood at 318 at the end of June, up 16.5 per cent from a year earlier. But Hong Kong is still dwarfed when compared with Luxembourg, where 1,035 SFC-authorised funds are domiciled.

BOCHK Asset Management has three SFC-authorised retail funds domiciled in Hong Kong and chief executive Au King-lun said it planned to launch more such funds in the city.

Hong Kong Investment Funds Association chief executive Sally Wong said that by allowing only Hong Kong-domiciled and managed funds to be sold on the mainland, adequate protection should be given to mainland investors, and she did not want the mutual recognition programme to add more unnecessary requirements.

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