Managed funds could be flowing more freely across the Asia-Pacific (APAC) region from next February after a landmark decision last month.
As of February 1 2019 fund managers based in five APAC jurisdictions, including NZ, can begin exporting approved retail products across member borders under the Asia Region Funds Passport (ARFP) regime.
Last month the ARFP joint committee – featuring NZ, Australia, Japan, Thailand and South Korea as members – confirmed the start date following a meeting in Auckland.
“After 1 February, applications can be made by passport funds to Host Economies to allow cross-border offers,” the ARFP release says.
Fund managers in each of the five countries could start the passport application process ahead of launch date, the ARFP says, but products would not be registered until February 1.
“Passport regulators will continue to assist operators in this period by providing information and clarification on the regulatory requirements in their jurisdictions,” the release says.
Last month the Ministry of Business, Innovation and Employment (MBIE) released draft Financial Markets Conduct Act amendments that would enable the ARFP regime in NZ.
According to an ARFP report: “The aim is to have regulations made in late 2018. Changes are also being made to New Zealand’s register of financial products and schemes to accommodate the ARFP. Currently, MBIE expect these IT changes will be completed and operational in February 2019.”
Alasdair McBeth, DLA Piper NZ partner, said in August the ARFP should open up new markets for local managers while expanding product choice for NZ investors.
“We think the opportunities outweigh the threats,” McBeth said at the time. “But it will be a 10-year plus game. It will take some time to build confidence in the ARFP.”
The ARFP would allow fund managers with a minimum US$500 million under management (and US$1 million in equity) to export only ‘vanilla’ investment products – with restrictions on derivatives, securities lending, short-selling, borrowing and performance fees – to passport member countries.
Other APAC countries including Malaysia, the Philippines, Taiwan and Singapore could also join the ARFP party over time.
However, the ARFP system would not supersede the trans-Tasman mutual recognition agreement between Australia and NZ that allows funds to offer funds in both jurisdictions under a single prospectus.
Almost 800 of the 1,194 investment offers listed on Disclose are issued by Australian providers under the agreement.