Have passport - will invest?

Finance Update

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After more than six years of international negotiation between Australia, Japan, Korea, New Zealand, the Philippines, Singapore and Thailand, a Memorandum of Co-operation (MoC) has now been signed in relation to the Asia Region Funds Passport (Passport). The Passport will enable the cross-border offering of eligible collective investment schemes in participating countries. You can find the MoC here and a brief factsheet from the Financial Markets Authority (FMA) here.

The MoC came into effect on 30 June 2016 and, at this point, has been signed by Australia, Japan, Korea, Thailand and New Zealand. These five countries now have up to 18 months for domestic laws and regulations to be put in place. The Passport will be activated as soon as any two of the participating countries have implemented those laws and regulations. 

Implementation of the Financial Markets Conduct Act (FMCA) and a demonstrated adherence to the International Organization of Securities Commissions' international regulatory framework were key factors behind New Zealand's inclusion in the Passport. 

A New Zealand licensed manager will be able to take advantage of the Passport if it has its principal place of business in New Zealand and: 

  • Is responsible for or has discretionary management powers over other's money with a total asset value of at least US$500 million
  • Has suitably qualified officers (a CEO with at least 10 years' of relevant experience and at least two executive directors each with at least 5 years' experience)
  • Meets a financial resources test (net assets of at least US$1 million plus an additional capital amount calculated by reference to the total assets under management), and 
  • Meets organisational requirements (including having adequate internal control mechanisms and risk monitoring procedures), is of good standing and has an acceptable track record. 
An FMCA registered managed investment scheme offered overseas under the Passport will be limited to investing in: currency, deposits, depository receipts over gold, transferable securities and money market instruments. Derivatives will be permitted, but only in relation to assets in this list. 


The scheme must also be highly diversified, and there are limits on exposures to single issuers as well as on certain types of asset that may be held. For example, a scheme cannot hold more than 10% of its assets in unquoted transferable securities, and there are also limits on investments that confer significant management influence. 

Other notable features include: 

Limits on delegating the investment management function - delegates must be regulated in a Passport country or in a jurisdiction that, in the FMA's opinion, has a regulatory framework that is broadly similar in effectiveness to New Zealand's, and  A prohibition on performance fees unless, among other things, the fee is not likely to result in excessive risk being taken.  While the funds under management thresholds for New Zealand funds managers are high, the Passport will offer managers the ability to more readily distribute compliant funds into participating countries. 

So what's next? 

Well, to succeed in its objective of deepening the region's capital markets and strengthening the international competitiveness of the region's financial markets more than the current five signatories will be needed to create momentum and critical mass. If that threshold can be achieved, all that remains will be for New Zealand managers to seize the opportunities. 

To learn more about the Passport, and its implementation in New Zealand or in any of the other participating countries, please contact our team.