On March 31, 2020, taptap点点官方网站 Shanghai Guidebook for Overseas Asset Management Institutions (“Guidebook”) was published. taptap点点官方网站 Guidebook was jointly compiled by Asset Management Association of China (“AMAC”) and Shanghai Asset Management Association with taptap点点官方网站 supervision and support of Shanghai Financial Work Bureau and ShanghaiSecurities Regulatory Bureau. To be noted, taptap点点官方网站 Guidebook was issued right before April 1, 2020 when China lifted taptap点点官方网站 limitations on taptap点点官方网站 ratio of foreign shareholding in securities and fund management firms. These moves have shown China’s determination to promote a further opening up of its financial sector.

taptap点点官方网站 Guidebook was compiled with taptap点点官方网站 aim of providing overseas asset management institutions with information regarding taptap点点官方网站 preparatory work and application procedures for conducting asset management business in Shanghai. taptap点点官方网站 scope of taptap点点官方网站 Guidebook includes a comprehensive range of practical issues including an overview of fund management in China and Shanghai, different fund types, laws and regulations applicable to different fund types, application and approval processes for products and institutions, fund service providers, fund distribution, relevant tax policies, etc.

Shanghai has been standing at taptap点点官方网站 forefront of taptap点点官方网站 opening up and innovation of China’s financial sector. taptap点点官方网站 top 10 global asset management companies have all chosen Shanghai as taptap点点官方网站 business destination. As of March 2020, among taptap点点官方网站 25 wholly foreign-owned enterprise private fund management (“WFOE PFM”) companies which have registered with AMAC, 24 of them are domiciled in Shanghai. In addition, 4 of taptap点点官方网站 world’s top 10 equity investment management institutions in terms of “Asset Under Management” including TPG, Carlyle, Blackstone, and Warburg Pincus have successfully established an RMB Fund Enterprise as a limited partnership under taptap点点官方网站 Qualified Foreign Limited Partners (“QFLP”) pilot program. Among taptap点点官方网站 top 20 asset management institutions in taptap点点官方网站 world, 10 have successfully obtained taptap点点官方网站 Qualified Domestic Limited Partner (“QDLP”) pilot qualification and another 8 are actively following up on application matters.

Shanghai has been taptap点点官方网站 birthplace for almost every significant moment of China’s fund industry, including taptap点点官方网站 birth of China’s first batch of fund companies, first batch of Sino-foreign equity joint venture fund management companies, first Qualified Domestic Institutional Investor (“QDII”) fund, etc. Shanghai is now attracting globally renowned asset management institutions to set up here by further innovating its system, opening up its foreign investment policies and increasing its service support system for multi-level financial services.

Whilst overseas asset management institutions are heading for China, China’s asset management industry is also actively looking for foreign markets. As long-standing desirable fund domiciles, Luxembourg, Ireland and taptap点点官方网站 United Kingdom are taken as examples in this article to give Chinese asset management companies some insights.

As taptap点点官方网站 largest European fund domicile and taptap点点官方网站 second largest fund center in taptap点点官方网站 world, Luxembourgprovides a stable and advantageous environment for fund domiciliation. Since taptap点点官方网站 decline of its steel industry in taptap点点官方网站 late 20th Century, Luxembourg has transformed itself into a global financial and banking center. taptap点点官方网站 legal and regulatory framework in Luxembourg is constantly being improved to offer desirable tools for investment managers to structure their investments. In addition, various EU regulations facilitating taptap点点官方网站 movement of capital across EU borders such as taptap点点官方网站 EU Parent Subsidiary Directive (“90/435/EEC” and “2003/123/EC”), taptap点点官方网站 Interest and Royalties Directive (“2003/49/EC”), and taptap点点官方网站 VAT Directive (“2006/112/EC”) have contributed to Luxembourg being taptap点点官方网站 jurisdiction of choice for many global funds investing in taptap点点官方网站 EU. Whilst taptap点点官方网站 UK has provided competition in taptap点点官方网站 past, for example many funds also considered taptap点点官方网站 benefits of establishing themselves within London, Jersey and Guernsey etc., fund managers ought to assess taptap点点官方网站 impact of Brexit and taptap点点官方网站 degree to which it enhances Luxembourg’s position as taptap点点官方网站 prime cross-border hub for funds as a choice to develop taptap点点官方网站 distribution activities across taptap点点官方网站 EU market and as a gateway to Asian markets.

Luxembourg is taptap点点官方网站 world’s acknowledged leader in Undertakings for Collective Investment in Transferable Securities (“UCITS”) funds. UCITS funds were created in December 1985 by a Directive of taptap点点官方网站 European Union. taptap点点官方网站 first UCITS European directive set out a common set of rules for taptap点点官方网站 cross-border distribution of collective investment schemes via taptap点点官方网站 European Passport. UCITS were designed with taptap点点官方网站 retail consumer in mind, ensuring appropriate levels of protection for investors. taptap点点官方网站 last major amendment to taptap点点官方网站 UCITS framework was in 2016 when UCITS V was transposed into Luxembourg law. One of taptap点点官方网站 main objectives of that reform was to further enhance investor protection.

While Luxembourg is best known for its expertise in UCITS funds, it has developed parallel expertise in alternative investment funds. It has bespoke structures for all taptap点点官方网站 main alternative asset classes and investment strategies. taptap点点官方网站 main regulated and supervised investment vehicles in Luxembourg including UCITS, Undertakings for Collective Investment (“Part II UCI”), Investment Company in Risk Capital (“SICAR”), Specialized Investment Fund (“SIF”) and Reserved Alternative Investment Fund (“RAIF”). Each of these vehicles has its own unique legal and regulatory requirements.

Ireland has also been a leading domicile for internationally distributed investment funds, covering taptap点点官方网站 widest range of fund types. International fund promoters are attracted to Ireland due to its open, transparent and well-regulated investment environment, a strong emphasis on investor protection, an efficient tax structure, and its innovative business culture.

Authorized investment funds in Ireland are established as either UCITS or non-UCITS (Alternative Investment Funds, “AIFs”). taptap点点官方网站 flexibility of UCITS is evident in that they may be set up as a single fund or as an umbrella fund that is comprised of several ring-fenced sub-funds, each with a different investment objective and policy. Exchange Traded Fund (“ETF”) is typically established as UCITS with a broad and unique operating model offering investors taptap点点官方网站 ability to diversify over an entire sector or market segment in a single investment. Since taptap点点官方网站 launch of taptap点点官方网站 first European ETF in 2000, Ireland has been taptap点点官方网站 number one European domicile for ETF issuers. A MMF is an open ended mutual fund that invests in highly liquid short-term financial instruments, which is also usually established in Ireland as UCITS.

taptap点点官方网站 Alternative Investment Fund Managers Directive (“AIFMD”), implemented in July 2013, has transformed taptap点点官方网站 EU regulatory landscape in taptap点点官方网站 alternatives space. All AIFs are covered by AIFMD which has introduced new organizational, operational, transparency and conduct of business requirements on AIFMs and taptap点点官方网站 funds they manage. Ireland was taptap点点官方网站 first jurisdiction to provide a regulated framework for AIFs and remains at taptap点点官方网站 forefront of developments with taptap点点官方网站 implementation of AIFMD. There are two main types of AIF in Ireland, taptap点点官方网站 Qualifying Investor AIF (“QIAIF”) and taptap点点官方网站 Retail Investor AIF (“RIAIF”). QIAIF is a regulated investment fund suitable for well-informed and professional investors. As taptap点点官方网站 QIAIF is not subject to any investment or borrowing restrictions, it can be used for taptap点点官方网站 widest range of investment purposes. taptap点点官方网站 RIAIF has replaced taptap点点官方网站 previous non-UCITS retail regime with a more flexible framework. taptap点点官方网站 updated RIAIF framework allows for taptap点点官方网站 creation of an investment fund which is subject to less investment and eligible asset restrictions than taptap点点官方网站 UCITS regime but is more restrictive than taptap点点官方网站 QIAIF regime. Consequently, taptap点点官方网站 RIAIF could provide an attractive alternative for managers who need to set up a more highly regulated fund but whose investment strategies do not easily fit within UCITS.

taptap点点官方网站 UK remains one of taptap点点官方网站 world’s prominent centers for portfolio management on behalf of investors around taptap点点官方网站 world. Whilst taptap点点官方网站 UK exited taptap点点官方网站 EU on January 31, 2020, it is currently in a transition arrangement with taptap点点官方网站 EU which will last until December 31, 2020 or possibly longer. Brexit is likely to have a disadvantageous impact on taptap点点官方网站 future of taptap点点官方网站 UK-based asset and fund management industry in taptap点点官方网站 short term, although taptap点点官方网站 extent of that impact and also taptap点点官方网站 long term effects remain to be seen.

A collective investment scheme (“CIS”) is an investment fund used for collective investment by investors. Investors’ money is invested on a pooled basis by an investment manager in return for a fee. Section 235 of taptap点点官方网站 Financial Services and Markets Act 2000 (“FSMA 2000”) defines a CIS as: “any arrangements with respect to property of any description, including money, taptap点点官方网站 purpose or effect of which is to enable persons taking part in taptap点点官方网站 arrangements (whether by becoming owners of taptap点点官方网站 property or any part of it or otherwise) to participate in or receive profits or income arising from taptap点点官方网站 acquisition, holding, management or disposal of taptap点点官方网站 property or sums paid out of such profits or income”. Essentially, a CIS is a vehicle in which profits or income is shared through collective investment. There are different types of CIS which are classified as regulated schemes, recognized schemes and unregulated schemes.

Under taptap点点官方网站 UK legal framework, regulated CIS are those that may be promoted to taptap点点官方网站 public, namely authorized funds which are constituted in taptap点点官方网站 UK and recognized schemes which are constituted outside taptap点点官方网站 UK and recognized by taptap点点官方网站 Financial Conduct Authority (“FCA”). Investment funds that are structured as CIS must be authorized or recognized by FCA to be promoted to retail investors in taptap点点官方网站 UK. Firstly, an authorized CIS must be established in taptap点点官方网站 UK and take one of taptap点点官方网站 following legal forms: authorized contractual scheme (“ACS”), authorized unit trust (“AUT”) or investment company with variable capital (“ICVC”). Further, it must also be classified, based on a marketing strategy, as one of taptap点点官方网站 following: undertaking for collective investment in transferable securities scheme (“UCITS”), non-UCITS retail scheme (“NURS”), qualified investor scheme (“QIS”). Secondly, a fund that is established outside taptap点点官方网站 UK must be recognized by FCA in order to be promoted to retail investors in taptap点点官方网站 UK. A recognized fund may also be called a ‘recognized CIS’ or ‘overseas scheme’. Thirdly, if a collective investment scheme is not authorized or recognized, it is considered as an unregulated collective investment scheme (“UCIS”). Unregulated collective investment schemes are not subject to taptap点点官方网站 same restrictions in terms of their investment powers and how they are run.

China’s fund industry has been consistently promoting international cooperation with an open mind. taptap点点官方网站 opening up of China’s asset management industry is a two-way process. On one hand, China is constantly expanding taptap点点官方网站 opening up of its financial sector and actively optimizing its capital market system and structure. On taptap点点官方网站 other hand, Chinese asset management companies are positively exploring overseas opportunities to provide services to a wider range of international clients.