Calastone, the global fund transaction network, today announced that it is enabling fund transactions for BEA Union Investment Management Limited (“BEA Union Investment”), under the Mutual Recognition of Funds (“MRF”) scheme, via Calastone’s network. This follows the recent approval of two BEA Union Investment funds – the BEA Union Investment Asian Bond and Currency Fund and the BEA Union Investment Asia Pacific Multi Income Fund – for sale in Mainland China, under the MRF scheme.
This milestone was made possible by Calastone’s achievement of direct connectivity to Shenzhen Securities Communications Co. (SSCC), a fully-owned subsidiary of the Shenzhen Stock Exchange, for the purposes of order processing between Mainland China and Hong Kong investment markets.
The MRF scheme has been gaining traction in 2018 with seven northbound approvals, surpassing a total of four in 2017. Going into the new year, it is expected that the approval process remains steady and that the Hong Kong-domiciled funds see continued inflows. According to China’s State Administration of Foreign Exchange, Hong Kong-domiciled funds sold under the MRF have seen accumulated net sales of approximately RMB 9.31 billion as of 31st October 2018. Also, Z-Ben Advisors projects that the China’s retail fund market will grow to USD12 trillion by 2027.
Leo Chen, Managing Director and Head of Asia at Calastone said, “We are excited to support BEA Union Investment under the MRF scheme. As more funds are approved for north- and south-bound sale, the domestic funds industries in Mainland China and Hong Kong are becoming more deeply entwined and the investment opportunities available are widening. Calastone will continue to play an important role in simplifying access to MRF for our clients and in facilitating increased trade volumes”.
Calastone’s direct connectivity to SSCC means its clients can use their existing network infrastructure to submit orders to and receive fund orders from China, under the MRF scheme, to settle these trades. Previously, firms would have had to undergo a cumbersome and expensive process to establish dedicated infrastructure, to enable access to the China market.
Eleanor Wan, Chief Executive Officer of BEA Union Investment, explains: “We are delighted that two of our funds have been approved under the MRF scheme. Calastone’s single, standardised fund processing route provides us with the ability to seamlessly access the Mainland China markets and allows us to build scalable processes to assist with the continued growth of our business.”
In fact, international and local fund managers are also eyeing opportunities in the broader Asian region, beyond the MRF. Regional products, which are distributed across multiple jurisdictions, can help the fund managers achieve scalability, to increase client reach and assets under management.
According to a survey[1] commissioned by Calastone in 2018, when asked which emerging fund centres in Asia offer the most attractive market for asset managers, almost half of the participants (47%) highlighted Indonesia, followed by Thailand (16%). An increasing number of fund passporting schemes, such as MRF and the upcoming Asia Region Funds Passport, are facilitating access to these markets for fund managers. While this can result in a significant regulatory and infrastructure burden, Calastone allows fund managers to access multiple global and Asian markets – and now the Mainland China market as well – via a single connection.
[1] “The Impact of Technology and Regulation on Funds”, Calastone and Funds Global Asia, 2018
