Asia Region Funds Passport (ARFP) – regulation memo

The Asia Region Funds Passport (ARFP) is an initiative led by the Asia-Pacific Economic Cooperation (APEC).


The Asia Region Funds Passport (ARFP) is an initiative led by the Asia-Pacific Economic Cooperation (APEC). The objective of the ARFP is to attract and keep finance within the region, in order to foster its economic growth as well as to strengthen the investment management industry. Five countries (Australia, Japan, New Zealand, South Korea and Thailand) signed a Memorandum of Understanding to participate in the ARFP.

About the Asia Region Funds Passport – ARFP

The Asia Region Funds Passport (ARFP) has been live since 1 February 2019. Japan, Thailand, Korea, New Zealand and Australia are ready to receive registration applications from local prospective Passport funds and entry applications from foreign Passport funds.

APEC is continuously promoting the ARFP scheme to other member countries for consideration. Potential new joiners could include India, Indonesia, the Philippines, Singapore and Vietnam (currently observers in the ARFP working group).

The ARFP allows units of funds authorised in a participating country (home jurisdiction) to be offered in other participating countries (host jurisdictions) upon approval as an ARFP fund and host jurisdiction authorisation. The ARFP emphasises investor protection by ensuring that participating countries must meet the standards of the International Organization of Securities Commissions (IOSCO).

Key reference document: APEC ARFP website

Key requirements of the Asia Region Funds Passport – ARFP

The fund must:

  • Be constituted or established as a regulated Collective Investment Scheme (CIS) or a sub-fund of a regulated CIS in one of the participating ARFP jurisdictions
  • Be distributed in its home jurisdiction
  • Have a net asset value of at least USD 500 million
  • Only invest in specific asset classes: transferable securities, money market instruments, deposits, depositary receipts over gold, derivatives, units of other funds.

Further details can be found in the ARFP rules document.

The fund’s operator must have a minimum capital of USD 1 million, plus 0.1% of Assets under Management (AuM) above USD 500 million of AuM, up to USD 20 million. The ARFP commits to a 21-day application review timeline for ARFP eligibility.

Scope of the Asia Region Funds Passport – ARFP

Asset managers in participating countries aim to raise capital from retail investors in the Asia-Pacific region using their locally domiciled funds. As of today, the alternative strategies and long short funds are excluded from the scheme. So far, only certain investors in some countries have had direct access to a limited range of foreign funds. For instance, Australia (wholesale investors), Japan and South Korea allow the distribution of UCITS funds.

Industry implications of the Asia Region Funds Passport – ARFP

Funds in Asian economies are largely domestic strategy funds. The ARFP is an excellent opportunity for asset managers to distribute their unique strategies to new markets. Local asset managers will face increased competition from foreign asset managers, likely leading to a downward pressure on fees. Retail investors will benefit from a wider range of fund investment products to choose from.

Challenges for asset managers

Currently, host jurisdictions’ rules significantly differ in areas such as disclosure requirements. In addition, unequal tax treatments between local and foreign funds also hamper foreign fund attractiveness and comparability.

Asset managers also face challenges in managing an effective distribution model such as:

  • Currency restrictions in South Korea and Thailand: onshore FX requirements, overall foreign investment quota, foreign currency transaction restrictions
  • Fund operator responsibility for appointing suitable local representative, distributor and transfer agent in host jurisdiction(s)
  • Tax treatment needs to be harmonised across the participating countries to allow neutrality (at a minimum) between local fund and passported funds
  • Distribution via the local channels is also a significant hurdle as this requires distributor education and investment, and online platforms are still in their emerging stage

They also have to choose the most suitable product for the target market(s), avoiding cannibalising sales of local distributor partners and offering competitive fees against local funds.

Securities Services’ view

The ARFP Joint Committee is strongly committed to the success of the ARFP by actively engaging with the industry. We believe that the ARFP forms a good framework to promote cross-border fund distribution in the Asia-Pacific region. The ARFP will complement the existing cross-border distribution schemes in the region such as the UCITS and master-feeder fund structures. Now that ARFP is live since 1 February 2019, we expect to see the first ARFP funds launched in the near future. Asset managers are likely to take a wait-and-see approach to the scheme. Distributing in a new market requires a long-term commercial strategy, to offset costs incurred by building distributor networks and meeting reporting requirements.

Key dates of the Asia Region Funds Passport – ARFP

September 2013 – Signing of ARFP Statement of Intent

September 2015 – Signing of ARFP Statement of Understanding

June 2016 – Signing ARFP Memorandum of Cooperation

December 2016 – Formation of Joint Committee

August 2017 – Third ARFP consultation paper released Guidance for laws and regulations

January 2018 – ARFP pilot programme launched

February 2019 – ARFP went live

Market Update

In January 2021, world first Fund Manager in New Zealand, Smartshares fund management division was approved to distribute funds within the ARFP scheme.


ASEAN Collective Investment Scheme (ASEAN CIS) – regulation memo

Under the ASEAN (Association of Southeast Asian Nations) CIS framework, the units of a fund authorised in one CIS domicile (home jurisdiction) can be offered in other participating countries (host jurisdictions) upon approval by home and host regulators.

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