Asian countries invested 28 billion Australian dollars with Australian managers; more than 11 billion Australian dollars from Japan alone. High withholding tax on Australian assets is a barrier to more flows.

The Asia Pacific has retained its position as the leading contributor of funds flowing into Australian Managed Investment Trusts, but with the region’s middle class growing and their appetite for financial services expected to boom, there is significant scope for Australia to capitalise on further opportunities in the region.

These are some of the observations in the 2016 Australian Investment Managers Cross-Border Flows Report, commissioned by Perpetual and the Financial Services Council. The annual Report, now its fifth edition, is undertaken to shed light on the implications of policy changes for the export of managed funds products to offshore investors.

Key Findings at a Glance

  • Asia Pacific is the dominant source of cross-border fund inflows representing 62 percent.
  • Overseas money flowing into Australian Managed Investment Trusts has grown at a compound rate of 17.8 percent per annum over the six year study period.
  • Other fund managers were the biggest source of investment (48 percent) followed by pension funds (16 percent) and sovereign wealth and endowment funds (9 percent).
  • The most popular asset class was Australian property with 31.1 percent (AUD 15.59 billion) of funds sampled, followed by Australian fixed interest and cash at 21.5 percent (AUD 10.75 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.

Outstanding Barriers

As a proportion of the 2.66 trillion Australian dollars of funds managed by Australian based managers, foreign investors still represent a very small proportion of just 3.4 percent. Of this, 38 percent is invested on Australian soil so the economic impact of growing this number is significant.

«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,» FSC CEO Sally Loane (pictured above) said.