Asset management industry to drive growth and prioritise firms’ duty of care amid pandemic, finds KPMG
Asset management industry to drive growth and priori...
New fund regime and lifting of foreign ownership barriers are creating opportunities for asset managers in Hong Kong and mainland China
Asset management industry regulators have returned to their pre-pandemic agendas with new priorities and perspectives, and are seeking to encourage recovery and growth and calling on asset managers to take greater care of their customers, according to KPMG global analysis.
KPMG’s tenth edition of the Evolving Asset Management Regulation Report looks at how the asset management industry is being called upon to support the recovery against a very challenging economic and operational environment. In mainland China and Hong Kong, regulations are driving asset managers to focus on clients’ best interests and new priorities such as cybersecurity and ESG, while a new fund regime has been introduced and barriers to foreign asset managers have been removed, presenting new opportunities.
Andrew Weir, Global Head of Asset Management and Vice-Chairman of KPMG China, says: “Asset managers and investment funds have remained resilient amid the pandemic. Regulators will consider what lessons should be learnt and will require firms to demonstrate they have learnt those lessons. The industry needs to embrace the evolving new reality, including an increasingly digital society, changes to working practices, demands for sustainable finance and greater awareness of global interconnectedness.”
While supervisory expectations and scrutiny may be heightened, new regulations are also being introduced to encourage growth. There is growing emphasis by regulators on creating frameworks that can compete cross border, with regulations that prevent cross-border distribution, registration and foreign ownership being eroded, and there are opportunities in the form of new fund vehicles.
Bonn Liu, Partner, Head of Asset Management, ASPAC, KPMG China, says: “As the pandemic has accelerated the move towards a digital society, regulators are keen to enable technology that makes investing simpler and cheaper for investors, but they also wish to protect the investment ecosystem from technology that facilitates crime or can lead to poor investor choices.”
In Hong Kong, a regime has been introduced for limited partnership funds, which is expected to come into operation at end-August 2020. Vivian Chui, Partner, Head of Securities & Asset Management, Hong Kong, KPMG China, said: “The new regime, together with the introduction of open-ended fund companies in July 2018 and the expansion of mutual recognition of fund arrangements in recent years, demonstrates the government’s commitment to strengthen the city’s position as an international hub for asset management activities.”
Mainland China has also lifted restrictions on foreign ownership of mutual funds and securities firms, a year earlier than planned. The relaxation of limits, giving foreign companies full ownership of their China-based ventures, is being rolled out throughout 2020. There are also openings for foreign inward investment, with the removal of the investment quota limitations on the inbound USD-denominated and CNY-denominated qualified foreign institutional investor programmes, making it much more convenient for overseas investors to participate in China’s domestic financial markets.
In addition, the pandemic has accentuated demands for climate-aware and sustainable investing. Neil Macdonald, Head of Wealth and Asset Management Centre of Excellence (CoE), KPMG China, said: “ESG is a strategic issue that must be embraced across every aspect of asset management firms’ business models. Within the next few years, as companies increasingly build ESG criteria into their core investment processes, non-ESG funds will become the exception. At KPMG we see ESG in very simple terms: Good for investors; good for investment managers; and, good for the planet.”
About KPMG China
KPMG member firms and its affiliates operating in mainland China, Hong Kong and Macau are collectively referred to as “KPMG China”. KPMG China is based in 26 offices across 24 cities with around 12,000 partners and staff in Beijing, Changsha, Chengdu, Chongqing, Foshan, Fuzhou, Guangzhou, Haikou, Hangzhou, Jinan, Nanjing, Ningbo, Qingdao, Shanghai, Shenyang, Shenzhen, Suzhou, Tianjin, Wuhan, Xiamen, Xi’an, Zhengzhou, Hong Kong SAR and Macau SAR. Working collaboratively across all these offices, KPMG China can deploy experienced professionals efficiently, wherever our client is located.
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