Sally Loane
While the strength of the Chinese economy remains a major talking point, the 2016 Australian Investment Managers Cross-Border Flows report highlights just how important the rest of Asia remains when it comes to money flowing into Australia.
The report, co-authored by the Financial Services Council (FSC) and Perpetual, provides a unique insight into the nature of cross-border fund flows, with fund managers surveyed collectively managing $46 billion out of a possible total of $91.5 billion[1] of overseas sourced funds. The Asia Pacific Region – Japan, New Zealand, China and South Korea – accounts for more than $28 billion (62%), at 31 December 2015.
Japan remains the dominant country, with $11.4 billion of foreign investments made through Australian investment managers. New Zealand ($5.2 billion), China ($2.5 billion) and South Korea ($2.2 billion) are the next largest sources. On a global scale, Europe (including the UK) contributes $3.9 billion, the United States $2.8 billion, and the Middle East $2.6 billion. The Rest of the World accounts for $8.4 billion.
The report reinforces that although cross-border flows remain strong, more needs to be done to ensure Australia remains an attractive destination for foreign funds.
As a proportion of the $2.66 trillion of funds managed by Australian based managers, foreign investors still represent a very small proportion of just 3.4%. Of this, 38% is invested on Australian soil so the economic impact of growing this number is significant.
FSC CEO Sally Loane said: “The 2009 Johnson Report identified a number of reforms needed to promote local financial services products and expertise overseas.
“While new internationally recognised collective investment vehicles, the Asia Region Funds Passport and a recently released paper proposing the removal of non-resident withholding taxes are a step in the right direction; seven years on there are still a number of outstanding barriers to be removed.”
Perpetual Corporate Trust Group Executive, Chris Green, said the report demonstrates Australia’s strong capability in servicing wholesale investors, on both a local and international level.
“There’s definitely an increased understanding of the growing capability of Australian managers. With the right framework in place I see no reason why Australian can’t be viewed on the same footing as many of our international peers.
Mr Green also highlighted the benefits from servicing Asia’s growing investment needs.
“In reality, Asian demand hasn’t really even started. As the wealth of the region’s middle class continues to grow, so too will their desire to make sound investment decisions. Australian managers can help them with these decisions – and, with that comes the opportunity to invest in much needed infrastructure and other assets here in Australia.”
Australian property remains the most popular asset class, with more than 31% ($15.59 billion) of funds sampled, followed by 21.5% ($10.75 billion) in Australian Fixed Interest & Cash.