On October 14, the Irish Funds Industry Association signed an Memorandum of Understanding (MoU) with the Asset Management Association of China (AMAC).
The industries in Ireland and China possess complementary strengths and the agreement is timely given that:
• Global investors have a growing appetite for exposure to the Chinese financial markets/broader economy and this is increasingly being facilitated within Irish domiciled investment funds.
• Indigenous Chinese asset managers are developing franchises and with this comes an increasing desire to export their capabilities to global investors.
• Expanding channels of capital flow further supports the internationalisation on the renminbi, a policy priority of the Chinese authorities.
These opportunities are both significant and complex and by working in closer co-operation with our colleagues in AMAC we hope to share the benefit of the Irish industry’s more than 25 years’ experience supporting investment managers from all around the world to internationalise their businesses. AMAC, as a key stakeholder in the development and promotion of the industry in China and possesses a unique perspective on the specific characteristics of this rapidly developing market.
Finally, through our relationship with AMAC we hope to be able to provide greater insights to investment managers from around the world who see China as an important destination to source investment opportunities or investor capital.
There are already opportunities for inbound investment into China via Ucits funds under existing quota arrangements and the recent launch of Stock Connect adds another important channel which is market-, rather than firm-, based.
At the same time, the local capital markets in China are developing apace and there is adequate evidence that the internet is having a significant impact on the manner in which funds may be bought. Finally, the growth of private funds in China, which would fall under the Alternative Investment Fund Managers Directive (AIFMD) for distribution in Europe, presents both an opportunity but also a challenge given the current absence of a co-operation agreement between the European Securities and Markets Authority and the China Securities Regulatory Commission.
The existing and well-established product construct that is Ucits, buoyed by the AIFMD regime (which while early in its life is showing great promise) and impending developments regarding European Long-term Investment Funds demonstrate the breadth of thought and experience which we bring to discussions about the development of the funds industry in China.
Given that Ireland administers more than €3 trillion of investment funds and supports more than 900 managers we feel we can add to the significant thought and effort which AMAC and other stakeholders in China are putting into their own exciting development path. We must also bear in mind that our way (and by this I mean Europe’s regulatory and product framework) will not necessarily be the way in which the Chinese choose to develop their own market and listening will be a key skill as we move forward.
As with any relationship, both sides must benefit and the MoU provides a foundation stone on which we hope to build better understanding and co-operation with our colleagues in China. The benefits of doing so for investors, our respective economies and the member firms we represent are strong and varied enough that we believe it’s a journey well worth taking together.
©2014 funds europe