Australian funds industry defends the use of Cayman entities

Australia’s superannuation fund industry has hit back at media criticism of structuring local investments through the Cayman Islands.

Traditional news media, politicians and social media commentators in Australia focussed heavily on Cayman in the wake of a $80 million water rights sale to the government that saw much of the $52 million profit go to a Cayman-based company, Eastern Australia Irrigation.

Regardless of the details of the sale, which allegedly involved inflated prices, to a company that once had Australian Energy Minister Angus Taylor among its directors, millions of ordinary Australians are already among the beneficiaries of similar infrastructure investments through Cayman Islands entities, the Australian Financial Review reported.

Citing the example of IFM Investors, which is owned by 27 Australian super funds, the business newspaper reported that IFM’s infrastructure fund buys ports, airports and toll roads through a Luxembourg company and a Delaware partnership, with the assets held by a Cayman Islands trust.

Superannuation is part of Australia’s system to help workers generate income for retirement. Employers make compulsory contributions for their employees, who are encouraged to make voluntary contributions to super funds.

IFM founder Garry Weaven told the newspaper that this kind of structure had nothing to do with profit shifting and was all about avoiding double taxation. The fact that no tax is paid in Cayman made the process simpler because investors did not have to claim tax credits and would simply pay tax on any earnings in their own country.

Yasser El-Ansary, chief executive of Australian Investment Council, an advocacy organisation for private capital investments, noted Australia was a capital-importing country that is actively seeking foreign investments and politicians were “absolutely wrong” to conflate the issue of profit shifting by multinational companies with the use of pooled investment vehicles in the Cayman Islands.

The Australian Financial Review article listed equity investments by IFM Investors in a container port in Poland and Vienna International Airport in Austria as examples for transactions that benefit about 7 million Australians invested in the 27 not-for-profit super funds that own IFM.

The assets in these deals are held by a subsidiary of Cayman-based Conyers Trust Company, which acts as trustee of IFM’s global infrastructure fund.