12 May, 2016
The Australian government recently signed the Asia Region Funds Passport (Passport) Memorandum of Cooperation (MoC) with Japan, Korea and New Zealand.
The Passport is designed to create a new set of collective investment vehicles that will be recognised by all participating regulators across the Asia-Pacific region under the Mutual Recognition Regime. The objective of the Passport is to facilitate cross-border investment in the funds management sector.
Significance of the MoC
The recent signing of the MoC by the governments of Australia, Japan, Korea and New Zealand is a significant milestone after more than six years of international negotiation on the Passport arrangements.
The MoC comes into effect on 30 June 2016 and its current form ensures that any eligible APEC economy is able to participate in the Passport even after it comes into effect.
The participating economies have up to 18 months from 30 June 2016 to implement the Passporting arrangements through domestic legislation. The Passport will become activated as soon as any two participating economies implement the arrangements contemplated under the MoC domestically.
Projected Benefits of the Passport
APEC reported in June 2015 that the Passport could save APEC investors an annual $20 billion USD ($28.32 billion AUD) in fund management fees, provide higher investment returns, and create 170,000 jobs across the APEC economies within five years of its implementation.
A report by consulting firm AT Kearney indicates that the Passport could exceed $600 billion USD of funds under administration by 2030.
The unexpected Japanese commitment to the Passport is expected to allow access by Australian fund managers to the $14 trillion USD ($19.83 trillion AUD) in savings held by Japanese households. Australian fund managers in particular believe the Passport will allow them to offer Japanese households an alternative to the sub-par returns they have historically received on their savings
Conclusion and next steps
If you are uncertain about the effect of the MoC, have a question about the Passport, or would otherwise like to contact us, please do not hesitate to get in touch with a member of our team.
Click here to read the MoC.
For further information, please contact:
Astrid Raetze, Partner, Baker & McKenzie