‘Not just a piece of Britain’: Down Under open for funds innovation
The new corporate collective investment vehicle (CCIV) could create new markets for Australian fund managers and bring international managers to Australian shores.
Australia is still viewed as somewhat incurious about the region it inhabits, despite gesticulations at the fact that its countries are our largest trading partners. But the newly-created CCIV – due to commence in July – could soon allow for the two-way flow of funds management expertise between Australia and Asia in a move that will open our somewhat staid industry to international innovation.
“It creates a far more known entity from a regional perspective,” said APIR CEO Chris Donohoe. “There’d be no appetite and there is no appetite to take a trust structure up into Asia… You could try and do it, but they typically don’t have an interest in trust structures. It’s part of what they’re used to, and the complexity, and they’ve really baulked from them.”
Per Treasury, the CCIV is an investment vehicle with a corporate structure, with additional consumer protections in the form of an independent depositary for retail funds that is responsible for the oversight of certain administrative functions. A single CCIV can offer multiple products and investment strategies within the same vehicle.
It goes hand-in-hand with the existing Asia Region Funds Passport (ARFP) and is structured similarly to the existing European “undertakings for collective investment in transferable securities” (UCITs), which allow funds to be distributed across the EU and Asia.
The value proposition is obvious. Emerging markets managers often talk of tapping into the tastes of Asia’s growing middle-class, and the new vehicle could allow Australian fund managers to put their products in the hands of that continent’s nouveau riche. There’s “three trillion reasons why” Asian managers would want to bring their products here. While that’s mostly institutional money, it’s still viewed “as a very attractive marketplace”. APIR – which provides internationally recognised financial identifiers to products and market participants – also stands to benefit.
Regulation will be dual, but the heavy lifting will have been done in the manager’s home jurisdiction, providing an “element of trust”. There are still some hurdles to this latest embrace of the Asian Century. Managers will have to have an agent on the ground – likely the local distribution lead – and managers and anybody called a distributor will have to have their AFSL altered. And fee sensitivity is rife in Australia, presenting one challenge to international managers who might look for a new home for their funds Down Under.
“The reality is that if they’re bringing in expertise, if they’re bringing in something different, if they’re bringing in something new then people will pay for that; that’s what you should be rewarded for, as far as your fee structures go,” said Andrew Dyster, general manager for client development at APIR. “But fees are always under pressure and if you’re going to bring something in, you’ve got to understand what the market’s acceptance of these things are.”
The creation of the CCIV was initially recommended by corporate adviser Mark Johnson in 2009. The Financial Services Council advocated for the CCIV to create new markets for existing fund managers, and the ATO, Treasury, and ASIC are all “pushing this thing reasonably hard” out of a desire for “harmonization”.
The sorts of managers that might want to take their products abroad remains “the million dollar question”; global fund managers are always “kicking tires”, and a few years back, when the ARFP was created, foreign managers – mostly Japanese and Korean – were knocking at APIR’s door. The local interest has died down, but ASIC is now approaching managers to get them into the process.
“I think they’re saying, “we need our financial world here not to just be sitting out here like a piece of Britain – it needs to work with the region itself”,” Donohoe said.