TAILIEUCHUNG - Viewpoint Fund distribution strategies in Asia Pacific

Currency risk is the risk that the value of investments denominated in currencies, other than the functional currency of the Fund, will fluctuate due to changes in foreign exchange rates. Investments in foreign markets are exposed to currency risk as the prices denominated in foreign currencies are converted to the Fund’s functional currency in determining fair value. The Fund may enter into forward currency contracts for hedging purposes to reduce foreign currency exposure or to establish exposure to foreign currencies. . | This paper explores the ongoing changes to crossborder investment fund distribution in Asia Pacific. It examines the success of Undertakings for Collective Investment in Transferable Securities Directives UCITS the way that patterns of demand are changing and some of the obstacles to greater pan-regional activity. It also sets out some possible trends in cross-border fund sales and ends with a call for asset managers to avoid being left behind by market developments. Asian fund markets remain very distinct but have huge growth potential This our latest paper in the asset management Viewpoint series focuses on the Asia Pacific market. It draws on a panel discussion that took place during Ernst Young s recent Asset Management Executive Plenary in Hong Kong. The discussion explored potential changes to patterns of investment fund distribution in the region with a particular focus on cross-border activity. Asia Pacific investment fund markets are highly diverse in terms of size and maturity. They range from large mature domestically focused markets such as Japan and Australia through more outward-looking expanding markets like Hong Kong and Singapore to the emerging giants of India and mainland China. Adding to this diversity investors in some Asia Pacific markets prefer to invest in property commodities and their own businesses. As a result funds under professional management in several of the region s largest economies remain small compared to aggregate savings. Furthermore 2010 saw negative net fund sales in several key markets including India mainland China and South Korea1 as investors reacted to indifferent equity performance. In India demand was further weakened by new restrictions on up-front intermediary fees which boosted sales of insurance-based savings products at the expense of pure investment funds. Despite these variations the long-term outlook for investment fund markets in Asia Pacific remains encouraging. The past 10 to 15 years have shown strong .

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