Importance of Research Sharing to Global
Asset Managers
February 2023

ASIFMA is an independent, regional trade association with over 165 member firms comprising
a diverse range of leading financial institutions from both the buy and sell side includingbanks, asset managers, accounting and law firms, and market infrastructure service providers.
Together, we harness the shared interests of the financial industry to promote the development ofliquid, deep and broad capital markets in Asia. ASIFMA advocates stable, innovative and competitive
Asian capital markets that are necessary to support the region’s economic growth. We drive
consensus, advocate solutions and effect change around key issues through the collective strengthand clarity of one industry voice. Our many initiatives include consultations with regulatorsand exchanges, development of uniform industry standards, advocacy for enhanced markets
through policy papers, and lowering the cost of doing business in the region. Through the GFMA
alliance with SIFMA in the U.S. and AFME in Europe, ASIFMA also provides insights on global bestpractices and standards to benefit the region.

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2CONTENTS
Introduction ............................................................................................................................................ 4I.

Global asset managers’ research sharing ......................................................................................... 4II. Benefit/Importance of research sharing .......................................................................................... 5
III. Types of Research and Investment View Sharing ............................................................................ 7
IV. Risks and controls ............................................................................................................................. 9V. Summary........................................................................................................................................... 93

INTRODUCTION
With the continued opening up of China’s capital markets, many foreign asset managers have or arein the process of setting up an onshore public fund management company (FMC), either wholly
foreign-owned (WFOE) or majority foreign-owned, in addition to the private fund managementcompany (PFM), joint venture bank wealth management subsidiary (BWMS) and/or unregulated
advisory or consulting WFOE that they might have already established in China.
Regardless of the type of asset management entity global asset managers have or plan to establish
in China, the ability to share research and exchange investment outlook and views between themand their wholly or majority owned subsidiaries in China is a critical part of their strategy and also akey factor in their attraction to investors on a global scale.
This paper sets out (1) the research sharing practices of global asset managers, (2) the reasons why
research sharing is part of their fundamental value and core competencies, (3) the importance of
research sharing to global asset managers which have to stay informed of investment opportunities
as well as risks globally, (4) the benefits that research sharing brings to the development of local
research analysts and the asset management industry in China, and (5) how research sharing
promotes a better understanding of the China market as well as the global markets and presents anobjective view of the investment opportunities in China and elsewhere in the world.

I. GLOBAL ASSET MANAGERS’ RESEARCH SHARING
It is a common practice for global asset managers to adopt a group or global research sharing model
where they share internal research, which includes research on the macro-economy, industries,
sectors and individual companies, within their group.
Global asset managers normally consider their in-depth research as one of their core competencies
and the foundation of many of their businesses. They typically have global research teams made up
of professionals whose disciplines include macro-economic, equity, fixed income and quantitative
research, across many markets and regions.
Their investment expertise includes, for example, (1) actively-managed strategies across both global
and regional universes, and across capitalization ranges and investment strategies; (2) passive
management strategies, such as index and enhanced index strategies; (3) alternative investments,
such as hedge funds, fund-of-funds, private equity, and real estate; and (4) multi-asset services andsolutions, such as dynamic asset allocation, customized target-date funds and target-risk funds. The
investment experts in each of these areas share their best ideas across geographies, asset classes
and sectors, collaborating with each other to generate investment insights.
Global asset managers’ internal industry analysts typically would need to understand industry trends
and individual company’s strengths, taking into account industry development, ecological chains andcompetition on a global scale. For example, an onshore analyst covering an electric vehicle company

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in China could reach out to another analyst within the group overseas to compare the strength ofthe company to other similar industry market leaders elsewhere in the world and/or to understandwhat problems or issues may arise in that industry elsewhere.
Similarly, an analyst covering China from overseas would learn from their counterparts in China
about the latest developments and innovations in China and the latest investor preferences in China.
Until China asset management entities are allowed to manage foreign portfolios or overseas funds
that invest in the China market, overseas analysts and investment managers would benefitsubstantially from the research conducted by their affiliates in China.
In addition, it is not uncommon for some global asset management firms to have global industry
analysts who would cover research on companies of a particular sector (e.g., e-commerce) globallyand share research results with portfolio managers within their group. Portfolio managers treat theresearch results as part of the mosaic in their investment decisions. Research and investment
management, although closely related, however are two distinct activities. In many cases,
investment research or ideas would not result in an investment decision.

II. BENEFIT/IMPORTANCE OF RESEARCH SHARING
Sharing research results among investment teams across geographies within an asset management
group (for internal purposes only and not for sharing with third parties) is a common practice of
global asset managers. It brings the following benefits.

CONSISTENT GROUP INVESTMENT VIEW AND POLICY
The sharing of research across entities within the same group can minimize the risk of contrarianviews so that an overarching "house view" can be derived from a variety of investment views andthe investment objectives of onshore and offshore strategies of the group can be more aligned. This
is what distinguishes one global asset manager from another, and this is the advantage or benefit
that they can bring to China. This would not only benefit the group but ultimately all investors,
including Mainland Chinese investors, who are likely to be interested in a broader view of themarkets as well as investment opportunities.
Global asset managers would want to ensure the quality and consistency of the research publishedby its wholly- or majority- owned fund management company in China as it would raise questions
from investors, both foreign and domestic, if the investment views on China expressed by its China
subsidiary are different from the group’s views expressed elsewhere in the world. The sharing ofresearch and investment views on industries, sectors within the same group would help the groupalign its onshore and offshore investment strategies and ensure consistency of the group’sinvestment approach towards China.
In addition, this iterative process builds trust with investors and builds credibility in the markets andthe companies being invested in. Having real-time access to their subsidiaries’ relevant research5enables global asset managers to speak to clients in a consistent manner globally, which isparticularly important during times of market volatility.

BROADENING THE VIEWS OF ONSHORE ANALYSTS
For onshore China analysts, regular sharing of research and exchanges of research views with theiroverseas colleagues can open up a broader perspective for their domestic portfolios and improve
the quality and service level of their own research. Since world economies are often intertwined
and as dependencies across regions become more prominent, being well-informed on global andregional trends and having access to group research that are diverse and views that are fromdifferent angles and regions of the world is just as important as the research that they conductlocally themselves.
The sharing of research and views of research analysts within a global asset management groupshould result in the local China research teams being better informed when making investment
decisions which benefits and better protects the interests of their domestic investors. In the longrun, it will help China-based analysts prepare for and meet the overseas investment needs ofdomestic investors and protect their overseas investment interests. It will increase their knowledge
base and prepare them to not only manage overseas investments of their domestic clients but also
offshore portfolios investing into the China market.

DEVELOPMENT OF LOCAL TALENT AND THE ASSET MANAGEMENT INDUSTRY IN CHINA
Moreover, allowing the free flow of research into and out of China and unrestricted exchanges ofresearch and investment views between global asset managers and their wholly- or majority-owned
China subsidiaries will lead global asset managers to hire or re-locate more of their China-focus
analysts in China which will facilitate the development of China's asset management industry as awhole. This is why many regulators in the region, such as Hong Kong’s SFC and Singapore’s MAS, are
all trying to encourage asset managers to be based in their jurisdiction.
Many of the global asset managers which have established or are planning to establish an FMC inChina are looking to scale up their onshore presence and investment management operations. If theycannot freely share research with their China subsidiaries, they would have to keep their China-focus
analysts in other markets (e.g., Hong Kong and Singapore), which is not ideal as global asset managers
prefer to build their investment and research teams in or close to the markets in which they invest.

FURTHER OVERSEAS UNDERSTANDING OF THE CHINA MARKET
For overseas analysts covering the China market from abroad, they can learn a lot from their China
colleagues on the ground who are better informed on and have greater access to government
policies, industry sectors and trends, and corporate strategies. Research from their China colleagues
will supplement their global research, thereby strengthening their overall research and outcomes. Itwill help them better understand the China market and better explain it to foreign investors.

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China is often misunderstood by the outside world particularly in today’s geo-political environment.
Therefore, it becomes ever more important for there to be access to information from China on its
capital markets, industries and companies if Chinese companies were to regain their overall
credibility and China were to attract more foreign capital inflows. Global asset managers being able
to access research from their own subsidiaries in China would contribute greatly to the credibility
and trustworthiness of their views on investing in the China market.
Global asset managers which have established or are in the process of establishing asset
management entities in China clearly believe in the prospects and viability of the China market. It is
important and beneficial for them to learn from their China subsidiaries, whether it is the research
generated by such subsidiaries or their knowledge and experience gained in having a subsidiary
operating in China.
Since other major markets in which global asset managers operate do not have restriction on
research sharing between members of the same group, if China adopts the same approach, it would
send a very positive message to global investors. In these other markets, there are usually sufficient
controls and monitoring in place to prevent potential leakage of non-public information, frontrunning, conflicts of interest and other risks that regulators in other markets are concerned about.

III. TYPES OF RESEARCH AND INVESTMENT VIEW SHARINGThe research and exchange of investment views shared globally within a global asset management
group typically include the following:• Macro developments• Market data and development• Market expectations• Research on different asset classes (equities, fixed income, real estate)• Research on industry sectors• Research on individual companies (financial analysis, ratings, valuations)• Investment thesis and ideas

GREATER RESTRICTIONS ON FMCS
We understand that while Chinese regulators tend to be stricter with FMCs on the sharing ofresearch with their shareholders, PFMs, BWMSs (which are regulated by the China Banking
Insurance Regulatory Commission and not the CSRC) and unregulated advisory or consulting WFOEs
have been able to share research with their shareholder (including foreign or overseas shareholder).

INDEPENDENCE OF FMC’S INVESTMENT DECISIONS
Article 9 of the Guiding Opinions on the Prevention and Control of Insider Trading in Investment andResearch Activities by Fund Management Companies issued by the China Securities & Regulatory
Commission (CSRC) on 15 November 2012, for example, provides that investment decisions by FMCs7

should be independent and prudent. Similarly, Article 19 of the CSRC’s Administrative Measures ofPublicly-offered Securities Investment Fund Companies issued on 20 May 2022 requires that the FMC
put in place measures that the FMC’s research and investment decisions are scientific, professional,independent and objective.
While global asset managers adopt a global research sharing model, portfolio managers manage
their portfolios independently, in accordance to their own investment thesis and investment
objectives of their funds/clients while taking into account the research information available tothem. FMC’s portfolio managers, in compliance with Chinese law, should be making their own
independent investment decisions. However, research sharing should not be equated withinvestment decisions.
Global asset managers are experienced with operating across many jurisdictions, each with theirown regulatory requirements and market practices. They are set up internally to ensure compliancewith not only local but also global regulations applicable to them.

PROTECTION OF NON-PUBLIC INFORMATION
CSRC’s concerns over FMCs’ sharing with its shareholder (particularly an overseas/foreignshareholder) may be due to the fact that FMCs manage retail public funds and the leakage of any
non-public information of the FMC may hurt the interest of retail investors of the FMC’s funds.
However, it is a common requirement and widely accepted practice that financial institutions have inplace policies, procedures and controls on their access and use of non-public information. The risksof leakage of such information are not unique to the China market as global asset managers typicallymanage many public funds in other jurisdictions and often gain access to non-public information
which are considered internally only and usually shared among a limited number of staff within thecompany or group on a need to know basis subject to strict information barriers and controls.
Global asset managers have put in place controls to ensure that they comply with both global andlocal laws and regulations applicable to them. In addition, some global asset managers have multiple
business lines, such as investment banking, brokerage as well as asset management within the samegroup, and there are exiting information barriers and controls to ensure proper segregation of thedifferent businesses. Even within the asset management business, there could be additional
information barriers and controls.
Besides the strict compliance policies and procedures already adopted by global asset managers toprotect the leakage of non-public information, they can still introduce additional controls to addressconcerns of Chinese regulators with respect to the sharing of research by FMCs or other local asset
management entities with their shareholder. Global asset managers with such entities in China
would welcome an opportunity to engage with the CSRC and/or other regulators on such additional
controls to address their concerns.

8IV. RISKS AND CONTROLS
Some of the controls that global asset managers have in place or can incorporate include:(1) identifying and/or entering into a research sharing agreement specifying the type of researchthat may be shared within the group (which the CSRC can approve under Article 18 of theCSRC’s Governance Guidelines for Securities Investment Fund Management Companies (for TrialImplementation) issued on 15 June 2006), such as macro-economic data, market data, researchon asset classes, industry sectors and individual companies (financial analysis, ratings,valuations) and excluding certain types of information such as client information, position andtrading information as specified in laws or regulations,(2) systems dedicated to (a) the internal sharing of research, both onshore and cross-border within
the group, (b) identifying and separating non-public information among the research materials,(c) additional protection around access to and use of such information, (d) putting in controls orlimits on those individuals who have access to such information, (e) maintaining a list of thoseindividuals who have access to such information, and (f) monitoring those who have or may
have access to such information to ensure no sharing of such information outside designatedindividuals within the group;(3) periodic training of staff on the policies and procedures for the proper handling of research andany non-public information.
FMCs can also adopt proper governance procedures to ensure that their operation and investment
management decisions are separate and independent from that of their shareholder without
restricting the sharing of research with their shareholder as global asset managers also have a duty
and legal obligation to exercise proper oversight of its subsidiaries.

V. SUMMARY
China allowing research sharing within members of a global asset management group (for internal
purposes only and not for distribution to third parties) will bring the following benefits:(a)Broaden the views of onshore China analysts with experiences and knowledge acquired inother markets, which ultimately benefits Chinese investors;(b)

Deepen foreign investors’ understanding of the China market from the sharing of local
knowledge and experience, thereby attracting more foreign investments into China;(c)Bring global best practices in compliance, surveillance and monitoring that would better
protect the interests of Chinese investors;(d)Develop local asset management talent both for the domestic market and also for future
outbound investments; and9(e)Prepare China to be a regional financial asset management hub that will service both local andglobal investors.

In summary, the benefits of allowing research sharing between global asset managers and their
China subsidiary, in particular FMC, far outweigh the risks, which can be mitigated by the FMC
adopting proper corporate governance, procedures and controls. The latter is the common
approach taken by many overseas markets or jurisdictions to mitigate against such risks.

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