South Korea will on May 27 join an Asian funds passport scheme that will allow Korean asset managers to sell their public investment funds in Australia, Japan, New Zealand and Thailand.
Asset managers in those four countries will also be able to sell their funds in South Korea under the Asia Region Funds Passport (ARFP) initiative, a multilateral framework for cross-border selling of funds across participating economies.
Korea’s Financial Services Commission says domestic asset managers who plan to sell their funds in the other countries must meet several requirements, including at least US$500 million of assets under management and a minimum five-year track record.
"Foreign passport funds sold in Korea will be subject to the same rules, regulations and investor protection measures as the local publicly offered funds," the regulator says in a statement on January 20.
The ARFP went live on February 1, 2019, almost three years after the five countries signed a memorandum of agreement for an initiative that they agreed to in September 2013.
Australia, Japan and Thailand were the first members when the scheme kicked off, followed by New Zealand five months later.
Korea’s inclusion comes after the Korean government in November revised legislation to enable asset management firms to sell their funds outside of their jurisdiction.
Although the ARFP appears to open doors to foreign markets for both asset managers and investors, it may be more complex in practice.
According to the chief investment officer of a Malaysian fund management company, "in theory, it provides asset management firms more opportunities abroad, and gives investors more choices when they want to invest in foreign funds".
"However, I doubt it will make a big impact to the markets. This is because at the end of the day, each market has different jurisdiction and tax structure. It can be complicated and asset managers may just opt for launching a feeder fund instead," the Kuala Lumpur-based manager tells Asia Asset Management, speaking on condition of anonymity.