Fund managers catering to wealthy Chinese investors have come up with suggestions on Australia’s Significant Investor Program.
The last major review of Australia’s Significant Investor Program in 2015 led to significant changes like bar on residential real estate purchase and mandatory investments in venture capital, private equity funds, and small cap/emerging companies’ funds.
With the Australian government undertaking another review of its business visa streams, the fund managers who deal directly with candidates were eager to have their say.
Incentivizing Greater Participation by Investors
Fund managers advised the Australian government to stay committed to the SIV program and to consider measures that will make it more attractive for wealthy investors.
Responding to the government’s invitation for suggestions, they have offered their views on improving the SIV program and incentivizing wealthy applicants to choose Australia.
Longer Validity of the SIV
Currently, the SIV allows investors and dependent family members to stay in the country for up to four years, while reaching permanent resident status takes around six years.
Fund managers have suggested investors be allowed to stay in the country for an additional year, up to five years. This move, if implemented, will increase the economic benefit arising out of the SIV program by 20 per cent without any changes to the minimum investment requirement or the asset mix.
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Shorter Holding Period For Riskier Investments
Another suggested change is a shorter holding period for investors opting for riskier investment streams.
Currently, investors must allocate ten percent of their SIV investments into venture capital and private equity funds that invest in companies with enterprise value of less than $250 million.
An additional 30 percent must be invested in small cap or emerging companies operating in Australia.
Fund managers have recommended a shorter holding period of three years as compared to the existing four years for those prepared to invest more into these high-risk asset classes.
While investors gain from a shorter lock-in period, Australia will benefit from the increased investment into the emerging sectors of the economy.
This suggestion remedies an important criticism made in the 2016 report of the Productivity Commission about the lack of material impact of SIV investments into emerging sectors of the Australian economy.
A shorter holding period may make investors more amenable to the idea of choosing the SIV, which is the only program in the world with such strict rules governing allocation of funds into different asset classes.
With the global economy facing another crisis due to coronavirus, it remains to be seen whether Australia will liberalize the SIV to attract more foreign investment into the country.