Standard & Poor’s Fund Services has placed 15 funds managed by ING Investment Management (Australia) Ltd. (ING IM)  ‘On Hold’ following today’s announcement that UBS Global Asset Management has entered into a binding agreement to acquire ING IM. The acquisition is expected to close in October 2011 subject to Dutch Central Bank approval.

ING IM had A$34 billion in assets under management as of March 31, most of which is managed on behalf of ANZ’s wealth management business, OnePath. ING IM has stated that it will be working with UBS Global Asset Management to ensure a smooth transition for all funds and that there will be no changes to the way these funds are managed in the short term.

There are no changes to the ratings on funds managed by UBS Global Asset Management at this time.

“In S&P’s view, the uncertainty surrounding the ongoing management of the funds managed by ING IM has led us to place these funds ‘On Hold’. We will seek to resolve the ‘On Hold’ status for these funds when we have gained further clarity on the structure following the integration,” said S&P Fund Services head of research Leanne Milton.

The OnePath OA IP-OnePath Income Plus EF/Sel and ING Wholesale-ING Global Bal Emerg Mkts funds were already ‘On Hold’ before today’s announcement and remain ‘On Hold’.

The post S&P Puts 15 ING Funds ‘On Hold’ following sale to UBS appeared first on AdviserVoice.

Threadneedle, a leading international asset manager, has expanded its Australasian team with the appointment of James Wesley as Director, Institutional Clients. Reporting to David Chinnery, Head of Australasian Distribution, Mr Wesley will be responsible for building and managing relationships with key institutional and third party clients. He will be based in Threadneedle’s Brisbane office and will divide his time between Australia and New Zealand*.

Mr Chinnery, Head of Australasian Distribution commented: “James’s appointment is a significant one for Threadneedle’s growth in Australia and New Zealand*, and underlines the firm’s commitment to expanding in these markets. James brings substantial investment and client relationship experience to the role, having spent the past eight years working in the UK funds management industry. Most recently he worked for Threadneedle in London, where he managed the growth of major third party distribution partners including Zurich, AXA, Nationwide, Prudential and Skandia.

“We believe Australian investors will increasingly seek to allocate a higher proportion of assets to offshore funds.  As a major international active house with an enviable performance track record, Threadneedle brings a strong proposition to the market and we look forward to introducing this to investors in the region.”

Threadneedle commenced its business operations in Australia in October 2008, with the acquisition of a Brisbane-based asset-backed securities team. Mr Chinnery joined in May 2010 to head the development of a broader distribution strategy that will focus on introducing key strategies – such as global, Asian and European equities, emerging market debt and absolute return – to Australian investors.

Since 2008 Threadneedle has been expanding its distribution capacity outside its more traditional markets of the UK and Europe, and has opened offices in Hong Kong, Singapore, Dubai and Australia.

The post Threadneedle expands Australasian presence appeared first on AdviserVoice.

It is this people factor that represents a key difference between investing in equities compared with other asset classes.

With other investments, whether you invest in securities with future earning streams (property or bonds) or without (gold or artwork); you are only investing in assets, not businesses. With stocks, the assets of a business evolve over time under the influence of a team of people.

A business, in its simplest terms, is a collection of assets that is operated by a management team to deliver a stream of future cash flows. So to understand how, and by how much, the value of the assets will evolve you need to understand what management intend to do with those assets.

It is not easy to assess management, though. Investors’ perceptions of management are coloured by the current performance of companies.

The key thing to note about management teams is that they comprise, of course, people. And humans can be unpredictable. But, equally, people can be predictable. They tend to do what they are paid to do.

Part of due diligence on a company is to understand what management’s remuneration hurdles are. If, for example, the company and its management target is earnings-per-share growth, expect management to boost earnings per share. Though be aware that this might, perhaps, be at the risk of borrowing too much or some other risky strategy.

If the target is total shareholder returns, expect some management teams to make bold strategic moves in an attempt to propel their company’s share price.

We have found that the best managers are those who are focused on long-term value creation, who take the tough decisions when required.

We have, for example, a high regard for several executives in the resources sectors, industries where management decisions have a long life. It’s no easy task to invest billions of dollars to create assets that will reliably generate value for several decades despite volatile commodity prices. Management teams and boards that do this successfully and consistently are truly exceptional.

The best way to understand a management team is to peer beyond current performance and look at its track record.

Do the actions of management show that it is pursuing initiatives that will grow the value of the company? Or is management intent on building an empire regardless of value creation; for example, by buying other companies at inflated prices?

There are often significant short-term pressures on company management. Those that can step away from these to focus on long-term value creation are the management teams and boards that deliver for shareholders.

These will generally be the companies that can grow market share even in difficult times. These are the managers to back.

We conduct over 500 meetings with Australian management teams every year, and through this process we can compare executive teams. Most CEOs are credible and charismatic. So you have to step back and ask yourself if the reality matches the rhetoric you hear in a meeting.

So as well as meeting with management, we go through a due-diligence process where we talk to lower levels of management, visit plants and factory floors and even talk to competitors and suppliers.

For practical reasons, most non-professional investors can’t do this. But there is a guide they can turn to: a company’s annual report.

Management’s annual reports serve as an indispensable guide to the financial health of a business. There are three areas to scrutinise.

The first is the quality of the board. Who is on the board? Are the people qualified and credible? Does the company follow corporate governance standards? Do executive pay structures and levels seem reasonable or excessive? The answers to these questions indicate whether a board is likely to provide sensible checks and balances to a CEO, or just rubberstamp plans.

The second area is strategy. The first question to pose is: what strategy is the CEO pursuing? Can these plans be easily understood? Are these strategies likely to add value, or simply make the company bigger? What will the management team be rewarded for? Do remuneration metrics align with the stated strategy?

The third area concerns financial integrity. Does the company have a habit of taking financial items “below the line”? What’s happening to depreciation costs – has management extended the accounting life of assets to reduce depreciation charges and boost earnings?

The people side is what makes investing in equities special. It’s why the most famous quote of the world’s most famous investor, Warren Buffet, relates to management: “You do not know who is swimming naked until the tide goes out.” His friend Gates, Jobs and Murdoch would no doubt agree.

———

This ff is issued by FIL Investment Management (Australia) Limited ABN 34 006 773 575, AFSL No. 237865 (“Fidelity Australia”).  Fidelity Australia is a member of the FIL Limited group of companies commonly known as Fidelity International. Prior to making an investment decision, retail investors should seek advice from their financial advisers. Investors should also obtain and consider the Product Disclosure Statements (“PDS”) for any Fidelity fund mentioned in this document. The PDS is available at www.fidelity.com.au. This document may include general commentary on market activity, sector trends or other broad-based economic or political conditions that should not be taken as investment advice. Information stated herein about specific securities is subject to change. Any reference to specific securities should not be taken as a recommendation to buy, sell or hold these securities. While the information contained in this document has been prepared with reasonable care, no responsibility or liability is accepted for any errors or omissions or misstatements however caused. The document may not be reproduced or transmitted without prior written permission of Fidelity Australia. The issuer of Fidelity’s managed investment schemes is Perpetual Trust Services Limited (“Perpetual”) ABN 48 000 142 049. Perpetual is not the publisher of this document and takes no responsibility for its content. Reference to ($) are in Australian dollars unless stated otherwise. © 2011 FIL Investment Management (Australia) Limited.  Fidelity, Fidelity International and the Fidelity International and Pyramid logos are trademarks of FIL Limited.

The post What’s the most important aspect of equities to analyse? appeared first on AdviserVoice.

While recent research from Standard & Poor’s (S&P)1, announced this week, shows that most active Australian equities managers are failing to beat the index, Aviva Investors is one of the few managers to deliver outperformance over 1, 3 and 5 years.

S&P’s research found that for the five years to December 2010, more than 70 per cent of actively managed Australian equity funds underperformed the S&P/ASX 200 Accumulation Index.

The short-term figures were equally unsettling for investors: 81 percent of actively managed Australian equity funds underperformed the S&P/ASX 200 Accumulation Index in the year to end-December 2010.

Conversely, all of Aviva Investors’ actively managed Australian equities funds that have a 5-year track record have significantly outperformed their benchmarks over the 3 years and 5 years to December 2010.

In addition, Aviva Investors’ short-term performance numbers are also impressive with every fund significantly outperforming their benchmarks in the 12 months to December 2010.

“For many investors, it is clearly disappointing to hear that they are paying active fees to their investment manager to not even meet the index, never mind outperform it,” said Aviva Investors Head of Equities Glenn Hart.

“At Aviva Investors we are proud to say that we have delivered excess returns to our investors over both the long-term and the short-term. We do not believe that investors should have to choose between either short-term or long-term outperformance and have shown that the right manager can deliver both.”

Mr Hart said that this investment outperformance has been achieved by focusing on quality, in-house research.

“We believe markets are inherently inefficient and this results in stocks sometimes trading away from their underlying valuation for a period of time. We seek to exploit these mispricing opportunities by looking for stocks which are out of favour with the market.

“Our decision to invest is based on a detailed bottom-up analysis of the company’s future prospects, in which we have formed an in-house valuation which is significantly different to the consensus. We believe that adherence to this approach should produce consistent outperformance of the benchmark over the medium-to-long term in all but extreme market conditions.”

Professional Selection Australian Equities – Strong outperformance as at 31 December 2010

Investment returns are based on exit to exit prices of Professional Selection units, are net of management fees and assume reinvestment of all distributions. Past performance is not a guide to or indication of future performance.

The post Bucking the trend in active asset management appeared first on AdviserVoice.

The Australian Exchange Traded Fund (ETF) market is expected to grow to more than A$6bn in assets under management (AUM) in 2011 Russell Investments said in an analysis of ETF market trends released today. According to Russell, the surge will be driven by providers taking advantage of broader investor community understanding of ETFs and more flexible regulatory conditions.

Since their first appearance in Australia in 2001, ETFs have really begun to experience strong growth in the past year, with almost A$4bn in AUM as of December 2010 (see figure 1 in attached document).

Up to 15 new ETFs and at least three new providers are predicted to hit the market in 2011, Russell said. There will also be more asset classes available and more customised options.

“A year ago ETFs were still regarded as a new product, but we are now seeing a lot of interest from a range of users,” said Amanda Skelly, director ETF product development at Russell Investments. “In addition to their continued popularity in the core market of SMSFs, ETFs are likely to win more acceptance from advisers and investment platforms in 2011, and also make inroads into institutions.”

A more focused approach

Russell believes the trend for ETF in 2011 will be for more focused, targeted products. For example ETFs will continue to expand across different assets such as bonds and currency.

ETFs based on equities will continue to target exposures to specific sectors and sub-sectors. There should also be new implementation methods for ETFs, such as derivatives-based approaches, where a greater portion of the ETF is invested in instruments such as futures, forwards and swaps. Whether Australian investors embrace this type of ETF will be something to watch. While derivative based ETFs have seen strong growth in Europe, growth has slowed in the U.S. More customised approaches will also be popular, for example the use of ETFs in income-based strategies which became popular last year, the first of which was the Russell High Dividend Australian Shares ETF.

“The market is evolving quickly, there is not only a wide range of ETFs but ETFs are increasingly being used to implement more sophisticated strategies,” said Ms Skelly.

Potential global entrants to the Australian ETF market are likely to be assisted by more flexible rules allowing them to enter the local market.

“The success of newcomers will be driven by their ability to leverage existing capabilities and develop relevant solutions for Australian investors,” said Ms Skelly.

Meanwhile within the top 15 existing ETFs, secondary market liquidity is likely to improve.

Asian exchange mergers could be game changer

ETF providers will also be watching developments with regards to proposed exchange mergers, which Russell believes will have a positive effect on the local market, by delivering secondary market liquidity and product diversification as well as cost and operational efficiencies.

“If the proposed Singapore Stock Exchange (SGX) takeover of the Australian Securities Exchange (ASX) succeeds it will be an absolute game-changer for the ETF market,” said Ms Skelly.

“However if the takeover does not go ahead, Asian-based exchanges will continue to expand their ETF capabilities, attracting larger institutional investors which may potentially limit the longer term growth of ETF assets in Australia.”

“In the year ahead, we are likely to see a lot of activity in the ETF space and the increased variety and competition will hopefully broaden the appeal of ETFs,” Ms Skelly concluded. “Russell is planning to capitalise on this activity and is actively investigating how to build on the success of our first ETF to bring more products to market.”

The post ETF usage to surge to $6bn in AUM in 2011, Russell says appeared first on AdviserVoice.

“As a continuation of our organization’s long-standing commitment to corporate stewardship, we are pleased to sign on to the UN investment initiative,” said Grant Forster, chief executive officer of Principal Global Investors Australia. “It is intrinsic to who we are as an asset manager and aligns with our investment strategy and culture.”

Signatories commit to considering the six Principles of Responsible Investment related to environmental, social and corporate governance (ESG) issues in the course of doing business. Although the Principles are voluntary and aspirational, reporting on an annual basis is required. Governance is provided by a 13-person board made up of 11 elected signatory representatives and two representatives from the UN Environment Program and the UN Global Compact.

“As a leader in the global asset management industry, we believe appropriate consideration of these issues is part of delivering superior risk adjusted returns” Forster said. “We are committed to acting in the best long-term interests of our clients and will apply the Principles where consistent with our fiduciary responsibilities and in alignment with our investors’ expectations.”

For more about PRI or to view a complete list of signatories, go to www.unpri.org.

The post Principal Global Investors Becomes a Signatory to the United Nations Principles for Responsible Investment appeared first on AdviserVoice.

Retirement asset management specialist, Aviiid Third-age Living, has moved another step closer to formalisation of its flagship fund, A-CARES No. 1, with the announcement of a series of appointments of senior personnel and executives. All are well known and respected in the retirement investment sector.

This includes nomination of industry luminaries, Eve Crestani as Chairman of the Aviiid Board, and Andrew Kentmann, as non-executive director, along with appointment of leading industry researcher and well-known advocate and spokesperson, Lois Towart. The series of appointments includes other key positions that broaden and deepen the strength of the Aviiid team, in preparation for the launch of its innovative and holistic retirement asset management model.

“As many in our industry know, Aviiid has been moving steadily to this point over the past couple of years and I couldn’t be happier with the team we have assembled,” said Aviiid Managing Director, Scott Marinchek.

“Our vision for building the nation we want to retire in differs from some of the older commercial models and the skill set of our team reflects that. We now have a combination of specialised financial and investment experience, expertise and deep understanding of the imperatives of sustainable investment in social capital and demonstrated execution capability.

“Our aim is to use the skills of our team to provide the best of both worlds: strong reliable returns for investors and provision of high quality lifestyle experiences for Australians entering their ‘Third-age’ of living.”

Key nominations and appointments include:

Eve Crestani, Chairman and non-executive director nominee for Aviiid Securities Limited. Eve is a professional director and business consultant with a background in law and management and over 30 years’ experience in financial and professional services. Eve is a chairman and director on a number of Boards including Australian Unity Limited, The State Superannuation Administration Corporation (Pillar) and Mercer Investment Nominees. She is also involved with a number of industry bodies. Her roles include Emeritus Trustee, Committee for the Economic Development of Australia (CEDA), Founding Fellow, Australian Institute of Company Directors, former Committee Member, Australian Graduate School of Management Alumni Committee and member of the Hong Kong Securities Institute.

Andrew Kentmann, non-executive director nominee for Aviiid Securities Limited. Andrew’s experience includes 18 years with Lend Lease Corporation and related entities in various senior executive positions including Director, Lend Lease Real Estate Investments Limited, Fund Manager of the listed Darling Park Trust and Managing Director of the Parkland Group of retirement villages and nursing homes.

Lois Towart, Senior Research Analyst. Lois has over 20 years’ experience in the property industry specialising in the seniors’ living and aged care sectors at major organisations including Lend Lease, Macquarie Bank, Colliers International, Jones Lang LaSalle, Stantons and the Western Australia Valuer General’s Office. Lois is a licensed valuer and has written papers for both academic and general publication. She is a sought after speaker and presenter in the seniors living sector, including in international forums.

James McNally, Head of Compliance. With over 16 years’ experience in the funds and property management industry with FKP Funds Management Limited, Perpetual Trustees Australia Limited and MIA Services Pty Limited, James is also a director of Australian Leisure and Entertainment Property Management Limited.

Sean Yuen, Senior Risk Analyst. Sean has over 10 years’ experience as an analyst and fund accountant in the financial services/funds management/property development sectors, including with companies such as ING Real Estate (listed A-REITs), Becton Property Group and CRI, Mirvac AQUA, State Street Australia Limited and Commonwealth Securities.

Henrik Alksnis, Senior Accountant. Henrik has over 30 years’ experience working in senior accounting and auditing roles locally and abroad. Henrik is a qualified chartered accountant.

According to Mr Marinchek, the recruitment drive is continuing, with the next wave of appointments likely to focus on the operational level as Fund acquisitions are finalised.

“The Aviiid vision is one of a continuum of care, in which we have involvement at critical touch points along the retirement living chain – so from funding through to ownership, through to management and operation, through to relationships with associated lifestyle services such as healthcare and even some retail. We believe it is only through this level of involvement in all aspects of the Third-age living experience that we can achieve our aim of building the nation we want to retire in.”

The post Further appointments at Aviiid Third-age Living appeared first on AdviserVoice.

Investing globally has the potential for providing better returns and greater diversity of risk exposure than limiting capital allocations to home markets, according to a new white paper by BNY Mellon Asset Management.

“Investing globally can help investors spread their risks and position themselves to achieve better returns across a range of economic scenarios,” says Curtis Arledge, vice chairman of BNY Mellon responsible for asset and wealth management. “It seems that many investors in developed countries may have not fully appreciated this approach, as studies referenced in the white paper demonstrate an over reliance to home equities.”

Among the trends driving a global investing approach are the rise of emerging countries as growth engines for the world economy, the growing share of global market capitalization outside traditional investment centers such as the United States, and the trend toward truly global companies that derive sizeable portions of their earnings from countries and markets far from their home headquarters.

As well as arguing the rationale for global investing, the white paper addresses the range of perceived risks associated with investing beyond one’s domestic market; including the increased complexity of managing currency translation risk and liquidity concerns, as well as fiscal and political uncertainty in some countries.

An important factor underlying the trend for global investing is the divergence in economic growth between emerging economies and the traditional developed market countries.  “While many emerging market economies were not as severely affected by the financial crisis, the growth in developed economies has been constrained by a deleveraging process that is shrinking the amount of available credit,” says Mitchell Harris, interim head of asset management at BNY Mellon.

This deleveraging has caused sharp performance divergence between asset classes and currencies around the world, as well as heightened volatility, which can be exploited for returns, according to Newton*, one of the BNY Mellon boutiques that contributed to the white paper.

“As individual country risks have changed, every company, sector, and investment opportunity should be considered within a global context to identify long-term winners,” comments Helena Morrissey, chief executive officer of Newton.

Investors who fail to take a global approach could be hurt by the divergence between economic conditions in their home countries compared with those of foreign markets.

“Active global equity managers with deep knowledge of local conditions and future trends, who are able to accurately select companies and countries with the greatest potential for outperforming returns, have been rewarded after and even during protracted bear markets,” adds Kirk Henry, portfolio manager at The Boston Company Asset Management LLC.

Attractiveness of Emerging Markets

The rise of emerging markets has created opportunities for both equities and fixed income investors, according to the white paper. The paper notes that faster GDP growth and better opportunities for increasing productivity are expected to help emerging markets equities out-perform those in developed markets.

Many of the prior barriers that impeded the progress of emerging markets countries have disappeared as the governments of these countries have taken steps to bring inflation under control, liberalize their currency regimes, develop local currency bond markets, amass reserves, and reduce their dependence on external capital, according to the report.

For bonds, BNY Mellon’s fixed income specialist Standish Mellon Asset Management Company LLC says that more effective monetary policy in many emerging countries has helped contain inflation and better fiscal policy has kept indebtedness low, improving sovereign credit quality.  David Leduc, Standish’s chief investment officer, points to the resilience of local currency emerging market debt through the financial crisis. “They were the local equivalent of U.S. Treasuries, a final safe haven during times of stress. Emerging market local currency bonds have the potential to provide investors with good diversification, attractive returns and a type of risk that is not closely tied to the cyclical nature of credit,” he adds.

Alternatives

Real estate and private equity investors can also benefit from taking a global approach.  In real estate, investors can take advantage of widely different valuations across regional markets.  The report notes that many of the most dynamic sectors of the global economy and a number of the fastest-growing emerging market companies are not yet available in the public markets and can be accessed only through private equity.

As the proportion of foreign investment in investment portfolios increases, investors will also need to guard against currency fluctuations that can have a large negative impact on returns, according to Michael Shilling, chief executive officer of Pareto Investment Management Limited, the BNY Mellon currency hedging specialist.

The white paper concludes that with multiple asset classes and investment strategies to choose from, it is clear that there is no one-size fits all approach to global investing but the advantages of an investment philosophy which seeks to leverage global trends and investment opportunities outside domestic markets is difficult to refute.

The post Investing Globally Can Provide Better Opportunities than Domestic Myopia, According to BNY Mellon Asset Management appeared first on AdviserVoice.

“The acquisition of Tyndall Investments by Nikko AM further strengthens a leading asset management operation in Australia and New Zealand that has over AU$25 billion in combined funds under management, keeping the business and team intact and retaining the highly-regarded Tyndall Investments brand and investment approaches.

“The Tyndall Investments management team in Australia has participated in the strategic review process, and fully endorses the outcome.

“Throughout the process, the Tyndall investment teams have remained focused on managing client portfolios and continue to be highly rated by the research community for their approach, process and performance track record.

“We look forward to building on the momentum the acquisition generates and the opportunities created from a major international asset management parent which has a strong pan-Asian presence and an aligned business capability and focus,” Mr Hobart said.

Nikko AM is one of the largest asset managers in Japan with US$120bn in mutual funds and institutional accounts, is owned by the Sumitomo Trust & Banking Co. Ltd and Nikko AM employees, and is recognised as a strong and stable company.

Tyndall Investments offers Australian and international equity, Australian and international equity fixed interest and global premia funds in Australia, and has AUS$22 billion in funds under management.

Mr Bob Van Munster, Head of Tyndall Australian Equities, said that the equity team couldn’t be more pleased with the outcome.

“It allows us to retain our highly regarded approach and investment style and we are looking forward to a future with a partner that is focused on asset management.

“Having Nikko AM as our new parent provides us with direct investment insights into one of the fastest growing regions in the world, which is increasingly considered the major economic influence on Australian investment markets.”

Mr Roger Bridges, Head of Fixed Income, added that it is an outstanding result for the Tyndall fixed income team.

“Despite a difficult environment for fixed income managers over the last 12 months, we have continued to generate consistent returns for investors through a measured approach that helps manage risk.

“We have a strong track record in fixed income management that has proven itself throughout different market cycles and economic conditions, and with Nikko AM as our new parent we can build on this strength while continuing to provide the benefits of our capabilities to Suncorp as our cornerstone client.”

The post Outcome ideal for Tyndall Investments appeared first on AdviserVoice.

The report, released today by the Prime Minister of Australia, the Hon Julia Gillard MP, at APEC in Yokohama, Japan, shows Asia’s funds management industry strongly endorses the proposed development of an ‘Asia Funds Passport’ that would enable and encourage funds to flow across the region.

The findings give strong support to APEC taking the next step and establishing a working group to discuss the proposal.

Titled ‘Asia Region Funds Passport: The future of the funds management industry in Asia’, the report shows that under an Asia Funds Passport, Australian fund managers would be able to offer investment funds throughout the Asia Pacific region.  It would also provide Australian investors with easier access to investment funds from within the region.

Presently, Australia only has access to the New Zealand and Hong Kong markets under regulatory mutual recognition agreements. In some Asian markets, up to 90 per cent of funds offered are located outside the region, predominately in Europe.

John Brogden, CEO of the Financial Services Council, said: “The region needs to take control of its regulatory environment to correct the balance. We must ensure that Australian retail investment products are available for purchase throughout the region.

“Australian superannuation funds and members would benefit significantly from accessing a wider range of investment opportunities in attractive Asian markets. An Asia Funds Passport would also increase competition in the funds management industry resulting in lower investment costs.

“The introduction of an Asia Funds Passport would have significant economic benefits flowing from enhanced regional capital flows, growing and deepening financial markets and higher levels of employment in Asia’s funds management industry. It would also increase the industry’s scale and efficiency across the region.

“We are therefore encouraged by the inclusion of the Asia Funds Passport on the APEC agenda and with the Australian Government’s leadership role in this regional initiative,” Mr Brogden said.

The Financial Services Council/PwC research shows 86 per cent of the Asia Pacific region’s industry bodies and all market participants surveyed believe the establishment of an Asia Funds Passport is of importance to the funds management industry’s growth regionally.

Andrew Wilson, Asset Management Leader, PwC Australia said:  “The establishment of an Asia Funds Passport presents complex challenges for the region, particularly across differing legislative and tax regimes. However the challenges are not insurmountable.

“Of the 11 markets that were surveyed, there were many similarities between regulatory frameworks across areas such as disclosure requirements, custodian arrangements and approval processes. This provides a strong foundation from which to establish an Asia Funds Passport.

“Similar challenges to those facing the Asia region have been overcome by the European Union to establish an ‘Undertakings for Collective Investments in Transferable Securities’ (UCITS) regime.  There is much that can be learned from the EU’s experience over the past 25 years,” Mr Wilson said.

Mr Brogden said once an Asia Funds Passport was established, mutual recognition with jurisdictions outside the region could also be developed.

“Australia has the fourth largest funds management industry in the world and the largest in Asia, with $1.4 trillion in funds under management.  Funds are expected to reach $5 trillion over the next 20 years,” Mr Brogden said.

“It makes sense to capitalise on this and export our financial expertise to the rest of the world and attract a much greater share of funds to be managed by Australian based enterprises.”

According to the report, some of the benefits of an Asia Funds Passport include:

• Increased investor choice.  An Asia Funds Passport would provide broader investor choice through direct access to otherwise inaccessible markets, instruments and offshore expertise.   Greater product variety would provide retail investors with better diversification and the ability to participate in the growth of offshore markets.
• Access to capital.  Emerging markets are undergoing significant expansion and have intensive capital requirements. Mature economies with well-established pension systems have the assets and capital to fund this demand.
• Improved efficiency and cost reductions.  Cross-border capital flows would provide fund managers with access to larger client savings pools and allow them to achieve greater economies of scale.  Greater fund size would help drive competition and place downward pressure on the fees paid by investors.  Fees across the region currently range from 0.4 to 3.0 per cent, offering potential for significant reductions.  Direct access to offshore funds rather than through an intermediary would help eliminate extra layers of fees and commissions.
• Retention of asset management jobs, regionally.  Increased growth in the region’s funds management industry would lead to employment growth and retention of expertise in Asia.

Mr Wilson said: “Asia will be the future growth engine for the global funds management industry. The region accounts for USD2.757 trillion, or 13 per cent, of global funds under management but nearly two-thirds (60 per cent) of the world’s population.

“Combined with the terrific growth of Asia’s middle class over the last 20 years, these disparities suggest enormous opportunities for funds management growth across the region.”

The post Report supports need for Asia Funds Passport on APEC agenda appeared first on AdviserVoice.