The Bank of China NZ (BOC) has created a new investment option built around a recent government policy change incentivising special visa immigrants to allocate more to local growth assets.
BOC launched a world-first wholesale fund in 2016 targeting Chinese immigrants looking to enter NZ under special Investor Category visas. The bank now offers a version of the fund tilted 25 per cent to local shares and the rest in NZ bonds.
Mark Ford, BOC NZ head of asset management, said the-now $400 million fund – structured as a wholesale portfolio investment entity (PIE) – was making it simpler for immigrants to meet the minimum standards for relief of certain Investor Category visa conditions.
Following changes to the immigration rules last May, Investor Category visa applicants could garner minor exemptions from residence requirements by putting at least 25 per cent of their funds in NZ growth assets.
Jonathan Maitland, Immigration NZ head of visa services, said in a release: “[I hope] investors will look favourably at making a greater allocation to New Zealand growth assets as part of their immigration intentions.”
Immigration NZ offers two classes of Investor Category visas based on minimum investment amounts of $3 million (increased from $1.5 million last year) and $10 million, respectively. The rules require applicants to invest in compliant NZ assets for the duration of the visa period, which ranges from three years for the $10 million plus category to four years those investing lesser amounts.
While other NZ firms – including FNZC (which lured former BOC head of wealth, Eric Wei, to a new role last year) – offer compliant immigrant investment products, Ford said the BOC fund was the only one structured as a portfolio investment entity (PIE).
“Successful investors look at the performance of a fund after all fees and taxes,” Ford said in a statement. “Some of the simple investment structures out there, like those structured as term deposits with simple fixed interest returns, may not be as cheap as they look once you factor in the after-tax return.”
The BOC fund reported an annual return of 6.3 per cent to the end of September this year. Since taking up the role this year, Ford restructured the fund as a multi-class PIE while appointing Nikko Asset Management NZ as local equities manager along with incumbent, Devon Funds Management.
The larger fixed income component of the BOC fund is shared between Nikko and AMP Capital.
In 2017 the government increased the annual quota for the under $10 million investment visa category to 400 (spread across geographies) with no limit on the number of wealthier applicants.
Coincidentally, last week the OECD published a black-list of countries offering ‘citizenship by investment’ schemes that can “be potentially misused to hide their assets offshore” and avoid tax obligations.
Some of the named investment visa schemes could also undermine the OECD common reporting standards (CRS) – created in 2014 to share financial institution data across borders on an annual basis.
NZ was not on the OECD black-list, which featured a number of Caribbean islands, Malaysia, Vanuatu, as well as European island states of Malta and Cyprus – the latter two ranked atop a survey of the best global ‘citizenship-by-investment’ jurisdictions.
The UK-based Henley & Partners ‘Global Residence and Citizenship Programs 2018–2019’ report published last week also rated Austria and Portugal as the respective top two countries to buy residence with Australia ranked seventh on the same list.
Henley group chair, Christian Kälin, said in a release: “Demand for such [investment citizenship] programs is at an all-time high, and new programs are being launched each year.”
Meanwhile, the Investment Migration Council (IMC) – a global lobby group representing firms operating in the sector – refuted the OECD claims that citizenship-by-investment programs were subject to widespread abuse.
Only a small percentage of citizenship or residence applications came via investment programs, the IMC says, while for most of those: “… tax is a non-issue, since they either move completely to their new place of residence and become tax residents there or do not change their tax residence at all.”
The OECD should strengthen CRS due diligence requirements rather than target specific programs noted in the black-list, the IMC says.
“… there are many high-risk nationalities, including Pakistan, Ukraine, Algeria, Russia, Nigeria, and Somalia, that pose a much more real danger to the international community in terms of criminal activity in the financial system,” the lobby group says.