Fund industry eyes investors from Chile to China

LUXEMBOURG (Reuters) - The funds industry is eyeing significant growth in years to come from investors in new markets from Chile to China.

Luxembourg's financial market regulator signed deals with Chinese authorities in recent weeks to allow certain Chinese institutions access to Luxembourg funds, following a similar Sino-British deal.

"We won't the open door to China tomorrow. It is a foot in the door that could be opened at some point in the future," Luxembourg fund industry association (ALFI) Chairman Claude Kremer told the Reuters Funds Summit.

"In mainland China they are to some extent savers. The task is to change them into investors," he continued.

Chilean and Peruvian pension funds and Middle East investors are also taking a keen interest in Luxembourg products. Kremer also said the industry was eyeing Brazil, although acknowledged it was only a potential market.

Asian investors, notably in Hong Kong, Taiwan and Singapore, bought into EU-regulated mutual funds UCITS in the past few years and made up around 35 percent of net inflows last year, according to European fund industry umbrella group EFAMA.

Massimo Tosato, vice chairman of Schroders (SDR.L), said that flows from Asia had remained positive in the start of the year, albeit at a slower pace than last year, while many investors elsewhere had pulled their money out.

"So it's slowing down but it's still positive and again it's in the emerging markets area, commodities, as well as in some lower risk international equity products, higher dividend, higher income type of structures or products with some kind of bottom floor," he said.

Fund companies need to find growth outside their traditional markets as retail investors in continental Europe have been frightened away.

Henri Reiter, director of advisers Fund-Market, said they had largely entered in the 1990s, been burned when the dot-com bubble burst and only just got their money back last July, just before the latest crisis broke.

Luxembourg, Europe's largest funds base, believes it will gain most from the push outside Europe, principally because of its dominance of the market in UCITS, funds designed to be sold across borders.

Ireland, Europe's other principal cross-border base, also sees gains.

"We see bilateral deals continuing to be signed. Luxembourg is the first beneficiary of the Asian evolution," said Jean-Michel Loehr, chief executive of RBC Dexia Investor Services Bank.

(For summit blog: summitnotebook.reuters.com/)

(Editing by Keith Weir)