Australia needs to make CIVs Asia friendly: EQT

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The financial services industry is in an ideal position to capitalise on the current awareness of the importance of trade with Asia to promote changes that will make Australian investment products more attractive for Asian investors and fund managers, suggests Harvey Kalman head of corporate fiduciary and financial services at Equity Trustees Limited.

Mr Kalman said that it should be seen as an imperative that Australia aligns its financial services compliance and tax regimes with international practice, as well as coming into line with the Collective Investment Vehicle (CIV) approach now being used internationally.

“It is an ideal time for the bodies representing the various sectors of the financial services industry to present a coherent approach that will result in product changes that capitalise on Australia’s already strong reputation in the region.

“There is a clear opportunity to make Australia the regional centre for investment funds, supporting other moves to make it the overall premier Asian financial hub.

“This would be of enormous benefit to our economy, capitalising on the expertise we have already developed in financial services and regulation to create jobs, increase investment opportunities, add tax revenue, and benefit our trading position.”

Mr Kalman said that Australia needs to adapt its investment vehicles so that they align with what is considered international best practice or even introduce “me too” structures that will support Australia’s leadership role in financial services in the Asian region.

“We are able to use the work of other international jurisdictions, for example the Undertakings for Collective Investment in Transferable Securities (UCITS) approach developed by the European Commission.

“I have argued for some time that Australia has the expertise, regulatory know-how and established financial base to develop an Australian/Asian UCITS (A-UCITS) that would bring the Australian finance industry huge benefits.

“UCITS have now been adopted by all members of the European community as the preferred CIV structure.

“The key to their success is that they can produce a new share class in the CIV, which may have a different base currency, or be hedged or unhedged for currency.  This quarantines the effects of the different currencies to that share class.

“So, for example, depending on where an international investor is based or what their own preferences are, they could invest in an Australian bond fund in either an Australian dollar share class, Euro share class, or Hong Kong dollar share class and receive performance in their base currency.

“Investors in other share classes would not wear the effects of currency movements that are unrelated to their own investments.

“We should face the reality that investing through Australian funds is not attractive to overseas investors because our investment funds do not comply with what is generally regarded as the required standards internationally.

“The reality is that Australian investment vehicles are off the radar for investors from other countries.

“UCITSs have already made inroads internationally and are well regarded by the global investment community.

“There is obviously a huge market for such products and I am fearful that if Australia doesn’t move quickly to introduce a similar internationally accepted investment vehicle, another jurisdiction will, to our cost,” he said.

“We should be using our experience in regulatory improvements, advice and superannuation, as well as developing better investment fund models to maintain our leadership position, meet international standards, and attract more investors.

“It takes time to bring around the kinds of changes needed and we need to move quickly or we will miss out on the Asian savings boom,” Mr Kalman said.

Equity Trustees Limited is a publicly listed company that provides a range of financial services to corporate and private clients. Its businesses include asset management, distribution, responsible entity appointments, private client wealth management, and corporate and personal superannuation.

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For more information please contact:

Harvey Kalman

P: 0403 066 749