The Impact of Regulation on the Private Fund Marketplace

The Capstone team conducted a review of the impact recent legislative changes had on the global private fund marketplace, specifically focusing on Brazil, China and India post 2009. The team analyzed the opportunities created or lost by both fund managers and fund allocators in regions around the globe.  In order to deliver a comprehensive analysis of private funds markets, the Capstone examined the three main players in the market: investors, regulators and fund managers.

The team found that in Brazil, successful managers will be able to use offshore vehicles to capture valuable capital outflows from wealthy individuals and institutions looking abroad for diversification. Those navigating an entry to Greater China will find restricted options, but should remain enticed by a huge potential investor base and the prospect of gradual reforms.

Hong Kong, meanwhile, gives managers a springboard to expand their regional presence while preparing for greater market convergence with the mainland. Fund managers interested in Singapore will be faced with limited opportunities and harsh transparency requirements, likely pushing them north to Hong Kong. Those willing to commit to India will cope with limited direct market and investor access, but can look forward to a continued gradual liberalization of capital markets and exciting growth potential.

There are also potential risks. Brazil is entering a recession and continues to grapple with political scandal and uncertainty, rising interest rates and an inflation scare. China’s growth is slowing and the domestic political environment may derail those committed to capital markets reform. Hong Kong’s sometimes fiery exchanges with the mainland over democratic reforms could threaten the young equity market connection between the two powers. Political uncertainty permeates Singapore as the nation-state mourns the passing of its founder and symbolic leader. India’s confounding and labyrinthine democracy ensures that market reforms come slowly, which is bad news for the immature regulatory environment.