Australia's fund management industry potentially stands to gain an influx of new investors under the government's recently announced Significant Investor Visa (SIV) program. The new Visa requires high net worth potential immigrants to invest a minimum of $5 million in a specific range of asset classes including ASIC approved managed funds which invest in Australian equities.
While the requirement that the funds specifically invest in Australian equities or other approved assets will limit some local absolute return managers, the opportunity for those that do qualify is significant. AFM understands there are a number of plans to market to the new investor/immigrant group which is expected to focus on China's high net worth demographic.
Administration of the program seems significantly simpler than many other government programs, and this will be welcomed by both the Visa holders and fund managers, particularly given the ongoing delay and lack of clarity about tax breaks for offshore investors in Australian managed funds announced following the Johnson report recommendations.
Emerging managers boosted by Volcker rule.
The ranks of Australian early-stage managers have been further boosted by a number of new funds in the past few months. Some of the new start-ups can be attributed to the ongoing implementation of the Volcker rule initially announced in January 2010 by President Obama and due to be implemented on 1 January 2013 in a crackdown on investment bank's proprietary trading and ownership of hedge funds.
While not all the new funds can be attributed to the new regulations, there are certainly some traders who have departed large global investment banks due to the new rules, including MST Capital, established by Gerard Satur (ex UBS) which has attracted over 100 million in seed capital from a local institution, and Auscap, founded by ex-Goldman prop traders Matthew Parker and Tim Carlton.
Emerging managers face a range of challenges in their early stages, as without a definable track record gaining new investors is difficult to overcome. What is apparent is that many of the new start-ups, including quantitative Asian equities manager Alpha Beta Capital founded by Andrew Barry, have established the necessary structure and processes to satisfy investors of their operational and risk management frameworks.
While gaining institutional investors in the early stages is particularly difficult, many family offices and high net worth investors understand and recognise that performance from early-stage managers is frequently significantly better than larger or more established competitors. The focus on due diligence compliance and institutional grade back-office systems has become a significant barrier to capital raising for early-stage managers, but this new breed and their focus on structure is welcome.
It's early days for returns from many managers for November, but in what has been described as a "tricky" month, most that we have seen have been positive. Politics continue to drive global headwinds, with the current challenge being negotiations of the fiscal cliff in the United States. China appears to have leveled out, while Australia's chances of avoiding a deficit seem unlikely.
Have a good week-end.
Regards,
Chris.
