Bridging the international investment gap

by | Mar 13, 2019

Despite recent hiccups in the bilateral relationship between Australia and China, reflected in trade and political flare-ups, it appears there is still plenty of optimism about the longer-term economic prospects between the two regional powers.

A recent KPMG and University of Sydney report on Chinese investment in Australia showed that while Chinese investment in Australia had declined since 2016, it remained very strong.

“Australia remains globally competitive for attracting Chinese investment, retaining its position as the second largest recipient of accumulated Chinese investment – only behind the US – with just under $US100 billion since 2008,” said Doug Ferguson, head of Asia and international markets for KPMG Australia, on the report’s release in 2018.

Perhaps even more significantly, a global survey of chief executives released by PwC last month showed Australia overtaking the US, Japan and Germany as the number one investment destination among CEOs based in China.

The 22nd Annual CEO Survey, entitled CEOs’ Curb Confidence, reported: “CEOs … are diversifying their bets away from the United States and toward a broader array of markets. Australia seems the principal beneficiary: not even in China’s top 10 last year, it has risen to the number one destination for Chinese investment.”

Meanwhile, there are more than 1.2 million Chinese-speaking people living in Australia and many are cashed-up and ready to invest. Among them is Eric Gao, a former Chinese student at both RMIT and Monash University in Melbourne, who founded BMY Group in 2010 because he identified strong demand from Chinese investors looking towards investment markets in Australia.

“We were probably ahead of our time, because we recognised that the Australian market was inefficient at the time,” he says. “Chinese investors didn’t know where to go; they were looking for opportunities, so we decided to build a business to help them manage their wealth and manage their investments.

“In the past eight years we have been working with high-net-worth individuals and professional investors to offer them opportunities with financial services products or professional services in Australia.’’

So far, Gao says he has more than 42,000, mostly Australian-based Chinese investors on his books.

What really excites him are the 2000 mainly Chinese residents who have come to Australia on a Significant Investor Visa (SIV), an immigration program run by the Department of Home Affairs. The four-year provisional visa is available to highnet-worth investors who have at least $5 million ready to invest in Australia.

BMYG already works with around 100 Chinese investors who can claim SIV status and is hopeful of attracting more interest from this, collectively, very wealthy group.

“Together, the Significant Investor Visa group represents about $10 billion ready to invest,” says Gao. “They are typically people in their late 40s or early 50s. They are still running very successful businesses in Asia and they don’t want to retire, and they are looking for financial products, direct investment opportunities or professional services in Australia.

“This group alone represents a massive opportunity for wealth and funds management. This still doesn’t include other business and investment visas, like the 188a or the 132 sub-class, which attracts business owners and investors with $1 million to $2 million each.

“We have been working with Australian funds managers to connect them with Chinese investors. This includes equity fund managers like Pendal and Bennelong, as well as VCPE [venture capital private equity] firms like Advent Partners and Square Peg.

“The market is still quite inefficient. We have seen rising demands from Chinese investors for investment products, opportunities and professional services. And we also see that more and more Australian institutions would like to expand into Chinese markets onshore and offshore.’’

To facilitate this process, BMY Group released AllFin.com in December, a new digital platform aimed at connecting Australian investment opportunities, products and professionals with Chinese investors, both domestic and overseas.

Using the platform is free for investors, while deal listers or those offering their professional services, such as lawyers, accountants or fund managers, will pay a fee.

Gao says there are already 5000 users of the AllFin platform after its soft launch three months ago. He aims to have between 10 and 15 per cent of the Chinese population in Australia regularly using the platform within two years – around 100,000 to 150,000 users.

BMY Group has experienced some bumps over its eight years – such as in 2016 when plans to attract Asian capital into its own venture capital fund had to be scaled back in light of China’s move to stem the outflow of investment funds. Regardless, the group still experienced strong growth in funds under management, which reached $200 million by early 2019. The company actively invests in technology companies.

“The crackdown in funds leaving China has had an impact globally, but I think it’s likely to be shortterm rather than long-term,” suggests Gao. “I’m already seeing some calming in the global trade talks and I think we’ll see a return in confidence in financial markets as well.’’

Conservative assets and quality business opportunities are expected to be a top priority for investors in the short term.

“I speak with Chinese investors every day and, yes, people are seeing a correction in the residential property market in Australia and there is uncertainty about the financial services sector after the royal commission,” acknowledges Gao.

“But getting the federal election out of the way will remove some of that uncertainty and investors will go from a wait-and-see approach to being more active, especially as we see some more positive news.’’

The next focus for BMYG will be the AllFin platform and a fully-fledged family office operation for wealth management.

“We’ve started having families putting in $10 million with us to invest, looking for the right asset balance and fund manager,’’ says Gao.

‘‘We still think there are inefficiencies in the market between financial products and services in Australia and wealth management. We are aiming to fill that gap.’’

In the meantime, Gao hasn’t forgotten his roots – 2019 will be the second year that BMYG has financed a scholarship for an outstanding student studying business finance at Monash University.

‘‘I’m very grateful for the education I received in Australia,’’ he says. ‘‘And the opportunities this country has provided me.’’

“More Australian institutions would like to expand into Chinese markets onshore and offshore.”

Read original news article here.

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