The case for launching new share classes under MRF

Taylor Hui recently featured in Ignites Asia, a Financial Times publication, discussing the case for launching new share classes under the mutual recognition of funds scheme or, MRF.

Taylor commented, “The tiered redemption fee model is not used in Hong Kong, and distributing banks in the territory don’t have systems to cater for this. A solution to this would be to create a separate share class under the MRF.”

He continued: “From a commercial point of view, the advantage of setting up a separate class is that you can have separate fee rates, such as management fees or redemption charges to adapt to the local market,” he says.

In the mainland, a minimum of 25% of redemption charge proceeds must be reinvested in the fund, and this could create an unequal situation for investors, according to Taylor.

For instance, if a mainland fund being sold in Hong Kong does not carry a redemption charge like it does in China, then this would create a “dilution effect” in that Hong Kong investors would benefit from a higher net asset value, he said.

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Taylor Hui

Partner | Financial Services

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