The scheme is based on the mutual recognition and trust of the legal framework for funds in each participating country. Special passport rules will also apply to streamline the regulatory process in terms of fund authorisation, types of legal vehicles that can be offered, investment and portfolio allocation restrictions and other areas.
The benefits of the Passport for the Australian funds management industry include:
- providing investors with diverse investment opportunities with access to otherwise inaccessible markets, investments and foreign expertise
- providing fund managers access to larger savings pools and easier access to foreign investment capital.
Despite the benefits, the principal difficulty for implementation will be reaching a consensus on the scope of the Passport given the scheme is to operate across countries with different political, legislative, and taxation requirements.
On 20 September 2013, a formal Statement of Intent was signed by Australia, Singapore, New Zealand and South Korea. By itself, this does not launch the scheme. Rather it is expected to commence in 2016 after further consultation and regulations are considered. Australian fund managers should be involved and contribute to the consultation process and ensure they evaluate and understand the opportunities and other consequences for their business.
In the longer term the goal of the Passport is to become a broader, more inclusive scheme with more economies joining and the possibility of an Asian/European mutual recognition agreement.