China Managers To Have The Upper Hand On MRF

Cerulli the global analytics firm, expects that the side that stands to benefit more from the Mutual Recognition of Funds (MRF) scheme between China and Hong Kong will be China.
Activity under the Mutual Recognition of Funds scheme will initially be concentrated in Hong Kong

Mainland managers are well placed in the MRF. Cerulli's analysis of the 20 Mainland managers with the highest number of qualifying funds under the scheme reveals that all 20 either have a subsidiary operating in Hong Kong, a foreign partner in Hong Kong, or both.

It is also the case that several China managers with foreign partners have also been highly successful in Hong Kong. This means that they will have less of a problem reaching out to distributors if they participate in the MRF scheme.

The same cannot be said of foreign joint ventures in China. They have struggled to consistently provide products and investment strategies that capture the interest of Chinese investors amid a very challenging distribution landscape.

Meanwhile, the demand for China funds in Hong Kong remains strong. According to Hong Kong Investment Funds Association data, China-focused equity funds were the third best selling category of equity funds in Hong Kong in the first quarter of 2015, after Asia ex-Japan and European equity funds.

With such drivers in place, the odds look to be very much in favor of the China managers that have a presence in Hong Kong in the MRF space. With the world watching, it is likely that financial authorities on both sides of the border will want to ensure a smooth process and active product launches under this scheme.

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