By Heath Aston, Political reporter From The Sydney Morning Herald

Malcolm Turnbull, Australia’s second-richest parliamentarian, has invested in a ”vulture fund” based in the tax haven Cayman Islands.

Disclosure of what appears to be a $1 million stake in a New York-run fund targeting distressed and bankrupt companies sparked criticism from financial transparency campaigners on Thursday.

They argue the Communications Minister has invested legally but in conflict with the Coalition’s current campaign against corporate tax dodging and the offshoring of profits.

Australia is to chair the G20 leader’s summit in Brisbane in November and Prime Minister Tony Abbott and Treasurer Joe Hockey have put on the agenda discussion of tax evasion and profit shifting.

On Thursday, Mr Hockey launched a fresh assault by moving to legislate a Labor initiative to stop multinational companies like coal miner Glencore minimising tax by loading up debt in higher-tax jurisdictions.

Many global hedge funds locate in tax havens to avoid paying capital gains tax and for the comparatively looser governance obligations, an expert said.

Others argue that tax havens allow investors in hedge funds to pay tax once and in their own home country. A spokesman for Mr Turnbull said: ”Income from his investments is declared and taxed in Australia.”

Mr Turnbull, who has divested himself of shares and switched his investments to managed funds and hedge funds since being elected, updated the register of members’ interests on June 18.

It shows he and wife Lucy bought into the $7.6 billion CVC Global Credit Opportunity Fund and the lesser-known Bowery Opportunity Fund.

The Bowery fund, which boasts of annual returns of 21 per cent since 2009, is run by Vladimir Jelisavcic, a founding partner of Bowery Investment Management.

The fund focuses on ”overlooked, middle market and trade claim opportunities, both in stressed companies as well as distressed companies many of which were in Chapter 11 [bankruptcy]”. It bought up $80 million in debts associated with the bankrupted Chicago Tribune and Los Angeles Times and recovered 100¢ in the dollar.

In an interview Mr Jelisavcic gave with a hedge fund trade magazine last October, he listed the minimum investment to join the fund as $1 million.

But a number of financial transparency campaigners have called for Mr Turnbull to sell his stake.

Uniting Church employee Mark Zirnsak, a member of Tax Justice Network and the assistant Treasurer’s special reference group on profit shifting said it would ”make sense” for Mr Turnbull to divest.

”This looks to be in conflict with the government’s position on wanting to crack down on secrecy jurisdictions, commonly known as tax havens, like the Cayman Islands,” he said.

IMAGE: Under pressure: Malcolm Turnbull. Photo: Glenn Hunt

For more on this story go to: http://www.smh.com.au/national/turnbull-investment-in-tax-haven-criticised-20140703-3bbgc.html#ixzz36Q3Xdsyr