Australian gov’t announces offshore investment passport framework

Australian gov’t announces offshore investment passport framework

The Australian government has announced a draft framework for its long-awaited Asia Region Funds Passport (ARFP), with interested parties invited to make submissions in response to the public document by September 21.

The AFRP will allow Australian fund managers to market to countries across the Asia-Pacific region.

Australia’s fund management industry is the largest in the region, with has a combined gross domestic product of US$6.9trn, leading to what minister for revenue and financial services Kelly O’Dwyer (pictured left) described as “exciting opportunities” for firms domiciled in Australia.

At the same time as publishing the framework for the ARFP, the treasury also released a draft bill for legislation to create the Corporate Collective Investment Vehicle (CCIV) entities, which will allow Australian firms to pursue overseas business through a company structure.

The rationale behind the proposed arrangement is to offer new markets allied with a light-touch regulatory approach, meaning Australian companies can operate in participating Asian countries with “limited additional regulatory requirements”. The participating countries include Japan, New Zealand, South Korea and Thailand.

‘A two-way street’

The proposals are based on mutuality and reciprocity, with those countries also free to market to Australia, again with minimal additional regulation.

“This will increase competition and choice for Australian consumers. It will also provide cost-effective opportunities to gain investment exposure to a wider range of assets. A study of global pension assets by Willis Towers Watson found that Australia was second only to the United States in its home equity bias,” the draft legislation stated.

The draft legislation compared the scheme to the European Union’s Undertakings for Collective Investment In Transferable Securities (UCITS) directive, saying “CCIVs will operate with a corporate-based structure, meaning they will have the legal form of a company limited by shares with most of the powers, rights, duties and characteristics of a public company.”

‘Complementary consultation’

O’Dwyer added, “These initiatives will work together to enhance the marketability of Australian managed funds across our region and create domestic and regional economies of scale. This leverages our large pool of funds under management and benefits both fund managers and investors.”

“Complementary consultation is also underway on the proposed regulatory guidance to be issued by the ASIC and the other passport economy regulators [which closes on 19 September],” she said.