Asia-Pacific fund managers test the waters in onshore Europe
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Asia-Pacific fund managers test the waters in onshore Europe

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The commercials of running an onshore fund product are appealing, and Asia-Pacific managers want to jump in on the action.



Jill Griffin

Country Chief Executive Officer and Head of the Depositary Bank for the Luxembourg branch of Standard Chartered Bank

European and Asian investors look to Asia-Pacific (APAC)

In Europe, the mass affluent market is growing. Data from PricewaterhouseCoopers (PwC) estimates this investor segment will control $31.6 trillion by 2020, an increase from $22.8 trillion in 2012. [1]

As traditional markets remain weak, European investors are looking further afield for better returns, and identifying products or managers in APAC to complement and diversify their portfolios. A typical hedge fund in APAC (ex Japan) has returned 17.6% over the last 12 months, beating the industry average of 10.73% during the same period. [2]

Meanwhile, the mass affluent market in Asia is growing even faster than in Europe. PwC estimates mass affluent investors in Asia will control $43.3 trillion by 2020, a rise from $20.5 trillion in 2012. [3]

The appeal of European fund products to global investors

Both these investor markets are strong champions of European fund wrappers such as Undertakings for Collective Investment in Transferable Securities (UCITS). 

Under the Alternative Investment Fund Managers Directive (AIFMD) and UCITS, fund managers are subject to strict regulatory oversight and this supervision provides assurance to conservative clients.

AIFMD and UCITS V require a depositary to be appointed for each fund, and assigns liability to the depositary in the event of their assets being lost or stolen in the custody or sub-custody chain. A non-EU Alternative Investment Fund (AIF) can appoint a third country depositary provided it meets equivalence rules. Investors clearly understand this to be a positive advancement for consumer protection.

As a result, the APAC region – specifically Hong Kong, Singapore and Taiwan – accounts for around $200 billion in UCITS’ Assets under Management (AUM).[4] AIFMs are still relatively new in Asia, although inflows are expected to increase as local institutions familiarise themselves with the brand, which only launched in July 2014. 

Despite strong demand, challenges exist

Although APAC managers have outperformed many of their peers, there are barriers to European and domestic inflows.

Most managers in Hong Kong and Singapore use limited liability company structures in offshore jurisdictions such as the Cayman Islands, British Virgin Islands, Curacao or Bermuda. While this provides tax neutrality, some EU governments are applying pressure on investors – particularly public sector pension funds – to invest in onshore products only, and APAC investors themselves sometimes view offshore fund structures as unregulated.

Access to some APAC managers is also being curtailed by EU regulation. AIFMD introduces restrictions around distribution, particularly for non-EU firms using National Private Placement Regimes (NPPR). Some markets such as Germany and Italy do not permit private placement of non-European Economic Area (EEA) funds to local investors. 

Managers can obviously rely on reverse solicitation, but any omission around marketing to EU investors will be met resolutely by regulators. For most firms, reverse solicitation is a risk to be avoided.

Brexit planning has absorbed significant EU resources, and AIFMD equivalence discussions have become a secondary issue for European policymakers. In fact, there is a strong possibility certain EU regulators could insert additional demands for third countries in exchange for equivalence.

Move onshore to promote more inflows

The growing European and Asian investor community, strong performance by APAC managers and the barriers faced by investors, provide several compelling reasons for managers to bring their products onshore.

Onshore structures can aid capital raising. Onshore products can be passported across the EU with little difficulty, without having to rely on complex, bespoke private placement arrangements in individual countries.

Furthermore, the procedures will become more consistent as regulators work through the Capital Markets Union (CMU) to synchronise the distribution rules for UCITS and AIFMs.

Established APAC managers have set up UCITS or AIFM structures in the past, but an increasing number of mid to small-sized managers are contemplating a move onshore as well in response to institutional investor pressure. Setting up a EU fund structure is undeniably expensive, particularly for a sub $100 million firm,[5] but the possibility of being awarded big-ticket investments is an enticing prospect. 

And firms are finding ways to mitigate the cost

Firms may set up management company structures if they have reservations about investing heavily in onshore physical infrastructure. They can avail of one of the many third party management companies, or rent a sub-fund on an established fund platform, often referred to as a “rent-a-sub-fund” or “plug & play” platforms.

Standard Chartered – through its Luxembourg-based Staight2UCITS platform – allows boutique managers and those new to cross-border distribution to build assets through dedicated sub-funds. This product helps fund managers achieve quick speed to market; low set-up costs, and operational efficiency.

Other managers simply establish a master-feeder structure for their home market. The master-feeder approach – permissible since the introduction of UCITS IV – is highly efficient, and appeals to APAC investors who appreciate the Luxembourg UCITS brand, and the country’s strong regulatory regime. 

Whatever the approach or size of firm, adopting a fund structure – whether UCITS or AIFM – will help managers win mandates from Asian and European institutions and retail clients, who appreciate the depositary protections, transparency and regulatory framework of these products.

For further information about Straight2UCITS, please contact Jill Griffin (, +352 28 55 00 204).

[1] PwC. (2014). Asset Management 2020: A Brave New World. Retrieved from PwC website:

[2] HFRI Indices Performance Tables. Retrieved from HFR website:

[3] PwC. (2014). Asset Management 2020: A Brave New World. Retrieved from PwC website:

[4] PwC. (December 2015). Asset Management Newsletter (December 2015). Retrieved from PwC website:

[5] KMG Capital Markets. (July 2014). Risk Management – More Expensive Than You Think. Retrieved from KMG Capital Markets website:


Euromoney and Standard Chartered will be running a series of webinars on debt capital markets. The first one will be on 'Investing China: CGB futures and the Bond Connect’ on May 15. Find out more



Based in Luxembourg, Jill Griffin is the Country Chief Executive Officer and Head of the Depositary Bank for the Luxembourg branch of Standard Chartered Bank.

Jill has worked in Asset Services for over 25 years and is an established and active member of the Luxembourg Funds community. Areas of expertise include: Depositary roles & responsibilities, Fund Regulation, Global & sub custody operations & services, Fund distribution, Fund data, and Financial reporting. Beyond her technical knowledge, Jill is most known for the relationships that she has built within the Investment Funds community along with her reputation for delivering exceptional client service. 
Since rejoining Standard Chartered Bank in January 2015, Jill has been responsible for establishing SCB Luxembourg’s UCITS V and AIFMD Depositary Services; including the launch of a Luxembourg Platform Proposition which offers asset managers a unique tool to distribute their investment expertise via a dedicated and entirely segregated sub-fund within an existing Luxembourg UCITS structure.

Prior to joining Standard Chartered Bank, Jill was the Managing Director of Northern Trust Global Services Ltd Luxembourg Branch where she was responsible for the Depositary Bank as well as a director on the Board of the Luxembourg Management Company. Other senior positions include Chief Sales & Marketing Officer and Member of the Executive Board at KNEIP, as well as roles with Deloitte, Standard Chartered Bank and JP Morgan Bank. This is Jill’s second term at SCB having worked in the London Branch of Standard Chartered Bank as a Senior Relationship Manager between 1995 and 2001.

Jill is a British national, who has lived in the UK, Germany and Japan. She currently resides in Luxembourg where she is the Chairwoman to two International charities: the NGO Stop Aids Now and the Luxembourg affiliate of the global charity Dress For Success.




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