New Zealand has made the inaugural application for export under the Asia Region Funds Passport (ARFP), a region-wide initiative allowing a managed fund based in one country to be offered more easily to investors in other participating countries.
ARFP is led by the Asia-Pacific Economic Cooperation (APEC), which aims to attract and retain finance within the region; to foster its economic growth, as well as to strengthen the investment management industry as a whole. The five countries currently participating in the scheme are Australia, Japan, South Korea, New Zealand and Thailand.
New Zealand completed the ARFP regulatory paperwork on July 26, 2019 becoming ready to receive registration applications from local prospective passport funds and entry applications from foreign passport funds, well behind the other countries in the fund-sharing group – Australia, Japan and Thailand. Korea is expected to complete preparations for implementing the ARFP later this year.
Earlier this month, during a special briefing at the annual conference of the Financial Services Council (FSC), a non-profit member organisation and the voice of the financial services sector in New Zealand, Hugh Stevens, head of NZX funds management, said the firm had applied to offer the SuperLife NZ Dividend Fund to Japan via the new cross-border route. Superlife is a member of NZX Group.
“We’re the first in the world to put in an application under ARFP,” Stevens said.
Australian and NZ fund managers already have easy access to each other’s markets under the trans-Tasman mutual recognition scheme for offers of financial products – which won’t be affected by the ARFP.
Under current ARFP rules, an eligible fund must:
- Be constituted or established as a regulated Collective Investment Scheme (CIS) or a sub-fund of a regulated CIS in one of the participating ARFP jurisdictions
- Be distributed in its home jurisdiction
- Have US$500m under management and US$1m of equity,
- Only invest in specific asset classes: transferable securities, money market instruments, deposits, depositary receipts over gold, derivatives, units of other funds.
The ARFP also emphasises investor protection by ensuring that participating countries must meet the standards of the International Organization of Securities Commissions (IOSCO).
In New Zealand, there are 19 fund managers that meet the ARFP requirements.
ARFP was first mentioned in the 2010 Johnson report by the Australian Financial Centre Forum.
In September 2013 Australia, Singapore, New Zealand and the Republic of Korea signed a Statement of Intent at the APEC Finance Ministers’ meeting in Nusa Dua, Bali.
In June 2016, Australia, Japan, the Republic of Korea, New Zealand and Thailand entered into a memorandum of co-operation on the establishment and implementation of the ARFP.
In December 2016, a Joint Committee was established. In August 2017, the Third ARFP consultation paper released Guidance for laws and regulations.
In January 2018 the ARFP pilot programme was launched and in February 2019 ARFP went live.
The ARFP is a significant opportunity for funds and investors across the Asia-Pacific region, opening up access to possible investors and investments that would otherwise be more limited.