New SIV rules put spotlight on risk

Australian fund managers looking to capitalise on new significant investor regulations requiring overseas investors to invest in start-ups and emerging companies need to customise their products to the significant investor visa (SIV) market, a commercial law firm said.

Hall and Wilcox partner Harry New said SIV investors generally preferred low risk investments like government bonds and property, and asset classes they could trust.

"The new requirements involve a level of risk, which may be off-putting. We will have to wait and see if there is a negative impact," New said.

There were some opportunities for Australia under the new regulations, especially for Australian equities and property fund managers, but they needed to customise their products to suit the SIV market

"This market segment had previously not attracted a significant proportion of the SIV market as investors look to the security of government bonds or the perceived more secure returns offered by property development funds and mortgage funds," New said.

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The law firm's partner and head of China Practice, Eugene Chen, said fund managers needed cultural awareness of the SIV market in order to tailor their products.

Real estate investment trusts and large commercial property funds would also benefit from the changes, especially due to the requirement that a fund manager have $100 million in funds under management to run SIV funds.

"We know that SIV investors like investments that they can understand easily, and they may gravitate towards those underpinned by bricks and mortar," Chen said.