After nearly six years of planning, the Apec-led Asia Regional Fund Passporting (ARFP) scheme has finally launched this month, according to its website.
The ARFP connects the fund markets of Australia, Japan, Korea, New Zealand and Thailand.
Plans were first announced in 2013 and the five countries participating in the scheme entered into a Memorandum of Cooperation in 2016. Initially, the scheme was expected to launch in August last year, but the date was moved to February as participants were at different stages of implementing the programme.
However, only Australia, Japan and Thailand are ready to receive registration applications for both outbound and inbound passport funds, according to the ARFP website.
New Zealand and Korea are still undergoing legal and regulatory requirements for full implementation, the website said, adding that there will be another face-to-face meeting in May.
More successful than the Asean CIS?
Another fund passporting programme, the Asean Collective Investment Scheme (CIS), connects the markets of Singapore, Malaysia and Thailand.
Although launched in 2014, the programme has not gained much traction, with only seven fund managers joining the programme.
Leo Chen, Hong Kong-based managing director and head of Asia at asset servicing firm Calastone, believes that the ARFP will be more successful than the Asean CIS because of the larger geographic scope.
“Within the Asean CIS, the countries are pretty close together. So if you are a high net worth investor, you have probably gone to Singapore [to invest your money in offshore products].
“The ARFP has a lot more countries participating, with more available investor money to tap, so there is more incentive to join the programme.”
While the markets participating in the ARFP may already have access to offshore investments via sub-advised funds offered by domestic managers, the scheme should give investors more options.
Chen explained that most sub-advised funds usually cover a broader asset class of a market, such as Japanese equities. However, investors may not have access to sector-specific Japanese equity funds, which could be made available through the ARFP.
ARFP funds could also be a less expensive option compared to feeder funds, Andrew Gordon, Hong Kong-based managing director for Asia at RBC Investor and Treasury Services, told FSA previously.
For example, in Japan, investors already have access to feeder funds, which are called “toshin funds” in the market.
“The feeder fund works well, but there is an extra layer and that can bring additional expenses for the investors,” Gordon said.
