28/07/2010 Author: Tony Griffiths

New Zealand gains in Asia-Pacific hub race

New Zealand has moved ahead of Australia in the race to establish a new global hedge fund centre in Asia-Pacific, crystallising plans to use Europe’s Ucits regulation as a template for its new fund regime, HFMWeek can reveal.  

Both countries are currently deep into the process of creating new domestic fund regulation. However, while Australia is in the early stages of designing, what it calls, an Investment Management Regime (IMR), New Zealand has already settled on the European model and is believed to be on the verge of receiving governmental approval, according to one industry commentator.

“It’s just before the point at which the government says they’re 100% going to go for it,” said Stephen Abletshauser, a lawyer with New Zealand- and London-based Palladium Trust Services.

A white paper released by New Zealand’s Ministry of Economic Development at the end of June declared that, in creating a new centre, the country “must either meet or better the Ucits regime”.

New Zealand hopes to attract banks, funds and managers from across the globe, notably from Europe by, in part, becoming the premier destination for fund administration in the Asia-Pacific region. According to Abletshauser, a strong enough regime could see Ucits-like funds themselves administered from New Zealand.

“For the Asia-Pacific regime there is a void because there’s little substantial regulation for fund administration out there,” he said. “What New Zealand is trying to do is ensure the quality of the funds that are administered from New Zealand is high, so that in the future you could passport some of these New Zealand funds into and out of Europe. The domestic funds won’t be Ucits funds as such, but they will be as highly regulated. It’s really just about trying to get the gold standard.”

In May 2010, the Australian Government backed an earlier recommendation from the Australian Financial Centre Forum for the country to establish an IMR. “A key objective of the Australian Government is to secure Australia’s position as a leading financial centre in the Asian region,” said assistant treasurer Nick Sherry in a letter to HFMWeek.

Last month, the Government asked the Board of Taxation to build a report into the potential design of an IMR. An Australian Treasury report on a new fund regime – following consultation with its funds industry and the Board of Taxation – is due by 31 October 2010, at which the potential for the early implementation of an IMR will also be considered.   

Abletshauser, however, expects the new regime in New Zealand to have been signed into law later this year – putting its programme for regime change many months ahead of Australia’s.  

New Zealand isn’t the only country providing Australia with competition for an improvement in fund services in the Asia-Pacific region. Singapore has made a recent policy decision to reach out to the fund administration community, setting up diploma courses in the local universities and polytechnics, and marketing specifically to both global and niche administration firms.

Last week, Singapore-based research firm GFIA released a study suggesting that Asia-focused hedge funds perform better if they are run from within the region.