Banking & Finance

Luxembourg and Hong Kong sign mutual fund recognition agreement to ease cross border sale

  • Agreement was signed between Commission de Surveillance du Secteur Financier and the Securities and Futures Commission
PUBLISHED : Tuesday, 15 January, 2019, 10:02am
UPDATED : Tuesday, 15 January, 2019, 9:20pm

Luxembourg, the largest fund centre in Europe, has signed a mutual funds recognition agreement with the Securities and Futures Commission aimed at encouraging more cross border fund sales.

Luxembourg’s Minister of Finance Pierre Gramegna told the Post in an exclusive interview on the sidelines of the Asian Financial Forum that the agreement is an important development for the fund industry in both markets.

The agreement signed between Commission de Surveillance du Secteur Financier (CSSF) and the SFC on Tuesday, will allow the two regulators to have deeper cooperation in exchanging information and also make it easier to register retail funds in each other’s markets.

“A high percentage of UCITS funds sold in Hong Kong are domiciled in Luxembourg, which shows that there are strong links between Hong Kong and Luxembourg,” Gramegna said. “The mutual fund recognition agreement will allow a faster approval process of standard retail fund products for both markets.

“The agreement will allow more fund choices for investors in both markets. It is important for the long term development of the fund industry between Hong Kong and Luxembourg.”

UCITS or Undertakings for Collective Investment in Transferable Securities is a regulatory framework in Europe for the management and sale of mutual funds.

Luxembourg-domiciled funds are also widely distributed in more than 70 markets worldwide including Hong Kong.

There are 1,037 retail mutual funds sold in Hong Kong that are domiciled in Luxembourg, representing 47 per cent of 2,185 SFC-authoritised mutual funds as of September, according to SFC data.

Under the mutual fund recognition agreement, the retail funds that have already been authorised by the SFC can get a faster approval process by CSSF to be sold in Luxembourg. Likewise, fund products from Luxembourg could also get a faster approval by the SFC for sale in Hong Kong.

Over the past few years the SFC has signed similar cross border fund sales agreements with mainland China, Malaysia, France, Switzerland and Britain.

These agreements are part of the Hong Kong government’s efforts to develop the city as an international asset management centre.

Gramegna also said Luxembourg welcomes Hong Kong and Chinese companies to invest in the country.

Seven major Chinese banks have set up offices in Luxembourg.

The new generation of fintechs, such as mobile payment provider Alipay, has also gained a licence to operate in Luxembourg recently. Alipay’s parent Alibaba Group Holding also owns the South China Morning Post.

“Luxembourg is an ideal jurisdiction for Chinese financial companies to operate in the EU as it is located in the heart of Europe,” Gramegna said.