Wealthy mainland Chinese have been the biggest draw to an Australian investor visa scheme that could bring in A$5 billion ($5.2 billion) annually to the fund management sector Down Under.
Launched by the federal government on November 24, the Significant Investor Visa scheme offers residency to high-net-worth (HNW) individuals who invest A$5 million in a defined range of Australia-regulated investment products. They include managed funds with portfolios in Australian equities, property, infrastructure or fixed income.
Much of the interest so far has come from Asia, largely from HNW mainland Chinese, according to David Chin, managing director of Basis Point Consulting. The Sydney-based firm estimates the scheme could result in $5 billion in inflows each year to the funds sector.
About 700-1,000 applications are expected annually, led by HNW mainland Chinese. The visa is temporary, with participants required to spend a minimum of just 160 days over four years before being granted an extension or permanent residency.
While the Australian government has never publicly specified mainland Chinese as a primary target, the provisional visa has the subclass number 188, with the permanent version bearing the subclass 888. Both numbers are considered auspicious in Chinese culture.
While Moelis & Co and Goldman Sachs affiliate JBWere have launched investment products tailored to the scheme that are specifically aimed at Chinese, there is a broad range of funds in Australia that qualify under the programme.
They include long-only funds, says Chin, and alternatives such as vehicles that invest in real assets and long/short equity hedge funds.
The visa potentially offers individuals a chance to develop hedge fund portfolio management skills, which could later be applied to run China strategies after the mainland’s capital markets broaden, says Chin, during a visit to Hong Kong.
An example would be a Chinese individual who, as part of his/her A$5 million investment, allocates to an Australian hedge fund. A joint venture could be created with the management firm wherein the individual could “learn the DNA of becoming a hedge fund manager”, says Chin, and “replicate or leverage that in China”.
There have been no estimates yet as to the amount of capital that might be allocated to the Australian hedge fund and boutique asset management industry, which is estimated to have more than A$200 billion in assets.
Performance among Australian strategies “like everywhere else has been varied”, says Chin. “The skill-set and pedigree of the manager has become important.”
He believes the scheme – dubbed the ‘888 visa’ Down Under – will help “build closer business relations at different levels”, strengthening ties between Australia and China over the long term.