Convergence of Regulatory Schemes in the Investment Management Industry

Three separate Asian based regulatory frameworks for investment funds have been created over the past two years. In essence, each of these Asian fund passport schemes aims to emulate the success of the UCITS framework in creating an EU single market as well as acceptance outside of the EU. Whilst each of the Asian passport frameworks has the ability to generate material economic benefits to stakeholders residing within the group of participating jurisdictions, the benefit generated by each framework would be greater if/as additional regions were to join over the coming years. This paper aims to apply this idea to the largest world regions in terms of assets under management (AUM). It analyses the relative economic impacts on these regions associated with hypothetical convergence of regulatory schemes across the world, as compared to a situation with no convergence. In particular it looks at the convergence of regulatory schemes within APEC, and also between Asia and Europe, as well as at the recognition of regulatory schemes across the world. Results are developed through the application of KPMG Global – a dynamic global CGE model – and show an increase in total real GDP for the largest AUM markets between 0.09 per cent (US$76 billion) and 0.12 per cent (US$100 billion). These gains are the result of international portfolio diversification as households are able to choose from a broader range of foreign products once investment markets are integrated. Exploited economies of scale in the investment management industry plays also a critical role as they provide efficiency gains from improved resource allocation.