Local investors in Asia are increasingly seeking global diversification. As a result, asset management industry participants see the development of cross-border rules as a top regulatory priority, according to a white paper by Calastone.

Asia’s asset management is largely fuelled by international investors. According to data from the Monetary Authority of Singapore, for example, 77 percent of assets under management (AUM) are from this group. In Hong Kong, investors outside of the city and mainland China consistently account for 54-56 percent of AUM over the past five years.

While diversification for global investors has always been a norm, there is also an increasing need amongst those within Asia. A Calastone white paper entitled «Global Diversification and Digitalisation: The Future of Asian Asset Management» found that 89 percent of respondents said diversification by local investors is «very important» or «extremely important» with APAC markets leading interest, followed by North America.

Regulatory Barriers

However, there are challenges to fulfilling this need, most notably in interoperability between markets – an area that requires further regulatory development.

More than half of the respondents in Calastone’s paper named cross-border investment and market access as a top regulatory priority for their organizations.

«History has demonstrated that markets pursuing overly customized formats often struggle to achieve scalability and efficiency. Instead, adopting global standards is essential for ensuring sustainable growth. This approach not only facilitates interoperability but also provides the consistency needed to drive market development,» Calastone explained.

Regional Standardization is «Required»

According to the paper, standardization is required across APAC in order to achieve seamless fund flows. Currently, there are a myriad of unaddressed issues such as differences in commission structures in various jurisdictions or inefficient settlement of transactions.

«Without unified protocols, the full potential of innovations like tokenized assets, DLT, and cross-border fund distribution will remain unrealized,» Calastone added. «This underscores the need for industry-wide cooperation between regulators, asset managers, and technology providers to develop and implement global standards that will drive the next phase of growth, making markets more accessible, liquid, and resilient.»