Significant Investor Visa (SIV)
Austrade’s new SIV complying investment policies requires at least $2 million invested in SmallCap and VC funds. This policy change will provide significant opportunities for fund managers as well as fresh capital for start-ups and small ASX listed companies.
China’s rapidly growing domestic VC, stock market, and financial services industry also provides leveraging opportunities for Australian firms in these sectors.
The balancing investment of $3 million is likely to flow predominantly into property-linked funds (10% resi limit within these funds) given the property appetite by SIV applicants from China who make up 90% of all SIV applicants.
The latest Significant Investor Visa (SIV) statistics show 41 approvals per month, equating to nearly 500 per year. On a positive trend, there were 239 new SIV applications lodged in the 7 months to 31 January 2017. This equates to 34 a month, or 409 per year if annualized.
As mentioned in our previous newsletters, we believe the Department of Immigration (DIBP) has limited staff resources for SIV processing, and can only process 40-50 approvals per month, with a back-long of 2+ years.
However, 14 of the 41 approvals are under the new SIV investment regime at present. (The new regime requires $5m investment into SIV-compliant VC, small cap and balancing funds)
In the early years of the SIV program, approval rates were reportedly around 70-80% of SIV applications, due to incomplete paperwork and unfamiliarity about DIBP due-diligence requirements from immigration agents. However, we expect a higher approval rate now compared to previous year’s due to more experience by the SIV industry. (UK’s investor visa program has an approval rate of 92%)
Based on these numbers, Australia is on track to eventually take around 400 high-net-worth SIV migrants per year, generating:
- $200m for VC funds,
- $600m for SmallCap funds and
- $1200m for balancing funds each year, (once the migrants are approved), as part of their obligations to invest $5m each into Australia.
- For a sense of scale, the entire universe of the 1600 ASX listed SmallCap firms (defined here as firms having less than $500m market cap) is approximately $100 billion in market capitalisation, a fraction of the overall $1,700 billion ASX market. Potentially having $600m flow into SmallCap stocks each year is significant.
- There is just $450m in VC funds awaiting deployment within all VC funds in Australia, (AFR 3 March 2017), therefore SIV-related VC funds are almost half of the VC funds available.
- VC and start-up fervour has caught up in China itself – driven for example by Alibaba’s ‘start-up to mega riches’ story. Risk capital is the new paradigm in China and SIV applicants should be well acquainted with this.
- China’s financial services industry itself is mushrooming, resulting in strong interest for Chinese entrepreneurs to gain the ‘DNA’ of a funds management/wealth advisory business. Therefore there could be joint venture appetite between Chinese SIV investors and Australian fund managers and wealth advisory businesses to replicate the Australian business in China.
- There is no dominant group of ‘gate-keepers’ between SIV investors and Australian investment/business providers, meaning distribution channels are open, although migration agents appear to be initial points of contact. Legally, they cannot provide investment advice unless they are AFSL licenced. Nor can they get paid for making introductions unless fully disclosed to SIV clients.
- ‘Sell to one HNW = sell to many HNW’ opportunities exist, due to close personal networks between the ultra-high-net-worth in China and Asia generally. This means SIV clients of a fund manager will typically tell their contemporaries which can be leveraged into gaining more SIV clients.
- SIV changes are intended to redirect capital into the area that benefits Australia most, i.e. capital for small companies and start-ups which generate more jobs relative to investments in cash or bonds.
- In addition, around 16,000 business and skilled migrants arrive from China each year, equating to 8% of Australia’s 190,000 annual immigration intake. Unlike migrants of previous decades, many of these new migrants are wealthy, and influence tourism, education, and investment-related decisions amongst their personal networks in China.
- This influence on ‘Australian opportunities with a China-growth angle’ is led to BasisPoint establishing its Aus-China portal – for more information, visit basispoint.com.au
Past SIV Events
Basis Point has organised two major SIV conferences (April 2013 and July 2014) which attracted a combined 620 delegates. We also organised or participated in six SIV seminars in Sydney, Melbourne, and Hong Kong in the first five months after the programme’s launch in Nov 2012, which attracted another 800 delegates.
We would like to thank our 2014 SIV conference sponsors including:
Platinum:One Investment Group, NAB Private Wealth
Gold: Migration Alliance, Baker & McKenzie
Silver: Moore Stephens, ACB News, Altair Asset Management.
Past SIV Newsletters
Click here for the new fortnightly newsletter which covers SIV/HNW, Property, Agribusiness, and Funds/Capital markets sectors.
A selection of our past SIV newsletters is as follows;