Japan's Fund Managers Feel The Burn Of Regulatory, Compliance Costs - Data

Robbie Lawther

9 June 2017

As MiFID II regulations loom on the horizon, fund managers in Japan are now allocating up to 10 per cent of their total expenses on regulatory compliance, according to a report by two Japanese firms.

surveyed around 90 firms in Asia, mainly in Japan, with around $375 billion in assets under management collectively. The report aimed to shed light on the issues facing fund managers.

The report found that around half of fund managers are allocating between 5-9.9 per cent of their total expenditure on meeting regulatory requirements, with a further 16 per cent spending more than 10 per cent of total costs. These findings are consistent with results found by AIMA’s globally conducted studies.

Just under half of the respondents said that they expect to increase investments in compliance by 2020, while around half said they found complying with the raft of post-financial crisis regulations to be “costly” and “complex”.

Also, the report showed that among the raft of post-financial crisis requirements, MiFID II was cited by 36 per cent of respondents as having the greatest impact. Other reforms include Basel III requirements (24 per cent); Japanese regulator’s inspection regime (20 per cent); and the Foreign Account Tax Compliance Act, which is a US crackdown on tax evasion (13 per cent).

“The results of this survey demonstrate that the alternative investment industry in Japan is committed to addressing the operational challenges posed by MiFID II and other new regulations,” said Jack Inglis, AIMA chief executive. “While we support the investments in compliance that the industry is making, we will of course continue to make the case to regulators that the new requirements be applied proportionally, in order to avoid erecting unnecessarily high barriers to entry for new managers.”

This publication reported a survey by Duff & Phelps in April that found only 36 per cent of firms are confident to be on track to comply with the regulation by 3 January 2018.