OREANDA-NEWS. July 03, 2015. In response to the commencement of the China-Hong Kong Mutual Recognition of Funds (MRF) fund passport scheme, Bonn Liu, KPMG International’s head of investment management, Asia Pacific, said:

“Today is a new milestone in fund passporting and is another significant distribution opportunity for fund managers seeking to capitalize on a rapidly growing market.”

“MRF is viewed to be part of Beijing’s efforts to allow diversification for Chinese investors and to further internationalize the Chinese currency. It adds to other measures such as Stock Connect and the Renminbi Qualified Foreign Institutional Investor (RQFII) scheme, which have similar aims.”

“Within the region, other potential boosts to the industry come in the shape of the APEC AsiaRegion Funds Passport (ARFP) and the ASEAN Collective Investment Scheme Framework (ASEAN Framework), both of which provide multilaterally agreed frameworks to facilitate cross-border marketing of funds within Asia.”

The development is an example where new fund passports are lowering cross-border barriers, but regional passports, including European initiatives, can have the effect of raising barriers to entry for foreign funds. 

Julie Patterson, KPMG International’s head of regulatory change in investment management, Europe Middle East and Africa, explained:

“Regulation is both lowering and raising barriers to the cross border distribution of investment funds.”

“Some barriers to distribution within regions are being lowered. The internationalization of the Renminbi and the Asian regional passport initiatives create wider distribution opportunities within the region.

“On the other hand, European UCITS can find it more difficult to register and distribute there than in the past.”

“The fund distribution landscape is becoming increasingly complex but there are growing opportunities. Only those who have the vision and ability to navigate this environment will be able to capitalize on these opportunities.”


Notes to editors:

About the Mutual Recognition of Funds (MRF) scheme

The MRF was first announced in January 2013 and the framework was recently agreed between the Hong Kong Securities and Futures Commission (HKSFC) and the China Securities Regulatory Commission (CSRC) in six areas:


  1. Types of recognized funds – Qualified funds will be authorized in accordance with mainland or Hong Kong laws and regulations, initially covering simple fund products. The types of products may be expanded.
  2. Eligibility of management firms – Firms can be registered in the mainland or Hong Kong and must be licensed by the CSRC/HKSFC.
  3. Approval/vetting process of funds – Funds will be subject to a streamlined vetting process by the host regulator.
  4. Fund operations – Requirements relating to investment restrictions, dealing, valuation, audit and meetings must comply with the laws and regulations of the home jurisdiction.
  5. Disclosure of information – The host regulator may demand supplementary information on content, format and frequency of update of offering documents.
  6. Investor protection – The HKSFC and the CSRC will strengthen regulatory co-operation and assistance and clearly specify dispute resolution mechanisms.