Speaking to InvestorDaily, Ms McCann said Henry Davis York has been encouraged by Treasury lodge a submission on the Funds Passport consultation paper before the 11 July deadline.
Under the regime, Australian fund managers will be able to offer their Australian-domiciled products to investors throughout Asia.
Australia prepared the consultation paper jointly with South Korea, New Zealand, the Philippines, Singapore and Thailand.
“Treasury want as much ammunition to take back to the bargaining table with the other jurisdictions,” said Ms McCann.
However, most people in the Australian funds management sector agree there is one “glaring flaw” with the current proposals, she said.
“Currently, for Australia, it’s limited to managed investment schemes as being the proposed passport vehicle. It’s a real disadvantage competitively for Australia,” said Ms McCann.
“The traditional unit trust is unfamiliar to investors offshore, and is not competitive with the other investment vehicles which you might find in participating jurisdictions.”
In other jurisdictions around the region, other vehicles with a flow-through tax structure are popular with investors, said Ms McCann.
“That’s a problem: the only investment vehicle that we’ve got in Australia that has that tax treatment is the unit trust. The real issue with this proposal is the vehicle that we’re offering,” she said.
“In the consultation, Treasury was quite clear that at this stage – certainly in the earlier consultations – that was not on the table. But it’s a real impediment to the success of the regime.”
The consultation paper also imposes restrictions when it comes to delegation to other managers, she said.
“Currently what’s envisaged is that the operator of a passport fund … can only [delegate to a manager] who’s in a passport jurisdiction,” said Ms McCann.
“If you’re offering a global equities fund … you don’t want to be limited to someone who’s sitting in a trading desk in South Korea.
“If you’re going to be building really compelling product and offering it then you need access to the best and brightest for that asset class,” she said.
