A QUESTION OF TIMING
Given the involvement of Japan and Australia, the world’s third and fifth-largest pension markets by assets, the ARFP has generated some excitement, but it is also far from clear how quickly it (or the CIS) will scale. ARFP was originally targeted for implementation in 2016 but this has been pushed back to late 2017.4
Such agreements inevitably contend with wide disparities in regulatory regimes: in the case of the CIS, for example, currency controls in Thailand and Malaysia are seen as major challenges, as are country-specific requirements such as mandated currencies for fund offerings and languages for documentation. ARFP, meanwhile, is dogged by uncertainty around taxation issues, causing Singapore to withhold participation for the time being.
Nonetheless, in the long term regulatory harmonisation and passporting are likely to drive the adoption of more regionally domiciled fund structures. For one thing, it seems unlikely to some market participants that schemes like UCITS will be included in the MRF, since this would preclude China developing its own fund management industry. But in the next three to five years these schemes will be subject to a degree of testing and maturation.