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Michael writes on emerging markets, architecture and engineering. He has served as a correspondent in Tokyo, London and Johannesburg and has written for Reuters, the Financial Times, The Age and The Sydney Morning Herald.

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Fund managers bank on 888 visa

Published 05 December 2012 05:57, Updated 18 December 2012 10:21

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Fund managers bank on 888 visa

Since the approval of a new category of visas last month that offer four-year residency that can then be converted into citizenship, fund managers have been jostling to seal distribution channels that will enable them to sell complying investments to wealthy customers in Asian countries. Photo: Reuters

Australia’s new 888 Significant Investor Visas may have fund managers salivating at the thought of retail investors handing over $5 million-sized chunks of cash but their would-be customers have not yet shown the same enthusiasm.

Investment bank Moelis & Co managing director Andrew Martin is in China this week to lead the bank’s first roadshow to potential applicants since the visa rules were formalised late last month. Consultancy firm KPMG, which on Tuesday finalised the English and Chinese documentation for the investment products it will market, will next month go to China to sell them.

While there is some interest – consultancy Deloitte said last month a fund it was marketing with investment bank JBWere had already drawn 100 applicants – Australian interest in selling investments that qualify for the visa so far outweighs Chinese interest in buying them, a migration agent with Shanghai-based agency Austar, Edward Sun, says.

“We’ve got a few clients already interested [who have] already signed the contract with us,” Sun tells BRW. “But not many as the people in Australia think. They’re very hot in Australia, not very hot in China.”

Since the approval of the new category of visas last month that offer four-year residency – which can then be converted into citizenship – with no minimum English-language requirement and only demand an average 40 days a year to be spent in Australia, fund managers have been jostling to seal distribution channels that will enable them to sell complying investments to wealthy customers in Asian countries. However, the visa is available only to holders of a sub-class 188 investor visa who get have already held a complying investment in Australia for four years.

“People are trying to crystallise their relationship with distribution partners and lock them down,” the director of one Sydney-based financial services firm says.

Austar is one of China’s largest migration agencies, with 20 branches across the country. It has been approached by “over 10” Australian companies in the past three months, Sun says.

“Many banks and financial companies are coming to talk to us to try to ask Austar to sell their product, however, we haven’t decided which products are better for our clients,” he says.

Australian fund managers are not just competing with each other. The UK and Singapore already have equivalent offerings with a lower investment threshold - just £1 million ($1.54 million) and S$1 million ($785650) respectively. New Zealand’s programme imposes a language requirement for investors with just $NZ1.5 million ($1.18 million), but no such requirement for those investing $NZ10 million.

In the wider scheme of things, this level of retail capital inflow is unlikely to be significant.

“It’s sticky (investment) and it’s large, but it’s not going to change the fund management industry in Australia,” the Sydney-based director says. “The biggest impact is it will be waking up Australian investment banks. This will engage the Australian fund management industry with China.”

The head of KPMG’s China-Australia practice Doug Ferguson says the new visa would be a ‘useful channel’ for the next wave of Chinese investment into Australia. After some $45 billion of Chinese investment mainly by state-owned enterprises over the past six years into resources industries, the next phase would increasingly be by private interests into alternative investments such as renewable energy, agriculture and real estate, he says.

“This visa in some respects is one of the mechanisms,” Ferguson says.

Still, some say the new visa shows that Australia’s funds management industry knows as little about doing business in Asia as any other trade.

“Our funds industry needs to understand what the market looks like a lot more then they do at the moment,” says David Thomas, a consultant leading a private mission to the Asian Financial Forum in Hong Kong next month. “I’m hearing a lot about people setting up funds who haven’t ever dealt with an Asian investor before. They think this is going to be a jamboree.”

Austar’s Sun says a few clients have already made applications for the visa. They haven’t yet had to choose an investment, as that will only happen once their applications have been approved in principle, he says.

“We have not decided which funds we will introduce to clients,” he says. “It’s too early.”