Equity Trustees head of corporate fiduciary and financial services Harvey Kalman said Australia must comply with the collective investment vehicle (CIV) being used internationally and adapt its investment vehicles to what is considered international best practice or introduce ‘me too’ structures.
“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,” 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.”
Mr Kalman said Australia should look at developing something similar to the Undertakings for Collective Investment in Transferable Securities (UCITS) approach developed by the European Commission, which has now been adopted by all members of the European Community as the preferred CIV structure.
“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,” he said.
He believes the key to the success of UCITS is that a new share class can be produced in the CIV, which may have a different base currency, or be unhedged for currency.
“This quarantines the effects of the different currencies to that share class,” said Mr Kalman.
“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,” he said.
This means investors in other share classes would not be affected by currency movements unrelated to their own investments, said Mr Kalman.
“UCITSs have already made inroads internationally and are well regarded by the global investment community,” he said.
“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.”
