June 4, 2015 Changes to the $5 million Significant Investor Visa program were met with mixed reactions on May 29, 2015.
There were cheers from venture capital groups, while most fund managers and migration agents were unperturbed by the government’s new requirement for migrants bringing $5 million into Australia to invest at least $500,000 in eligible Australian venture capital, or growth private equity funds investing in start-up and small private companies.
“There have been negative self-interest reactions to the changes, but we support the objectives of the government to get capital into the economy and attract talent,” Moelis Australia Visa Fund chief executive Andrew Martin said.
“At $500,000, the balance is sensible. It might impact some prospective SIV applicants in the short term but there will be those who will still apply because they trust the stable regulatory environment of Australia.”
Migrants who qualify for the significant investor visa are currently required to invest $5 million into complying investments with a restriction on investment in direct property. On July 1, they have to invest in venture capital funds and be required to deposit $1.5 million in managed funds, which invest in emerging companies listed on the Australian Securities Exchange.
“For some time, the Australian Private Equity & Venture Capital Association has advocated for these changes to the SIV program in order to help better align the flow of capital from high net worth individuals offshore into those parts of our economy that can really drive our nation’s innovative potential,” chief executive Yasser El-Ansary said.
Those who opposed the changes were concerned that wealthy investors looking for safe havens to invest their money, such as migrants from China, would be turned off by the mandatory investment in riskier assets.
“Typically, Chinese investors, who have formed the majority of SIV investors so far, prefer safer asset classes, and VC investment may be an issue,” said Suren Pather, director of another SIV fund, Sumo.
The director of property and migration group Ausin Group, Mark Morcos, feared the changes have the potential to “shut the program down”.
“Under the proposed rules Ausin’s immigration consultants expect investors to shun the SIV program and start looking for more viable alternatives, such as business visas or the Investor Stream Visa,” he said.
“Interest in Canada and the USA’s comparable visa programs could increase as they are more affordable.”
Mr Morcos said Chinese, who make up 91 per cent of the SIV applications, were mostly comfortable with bonds and residential property because they understand them.
“Eliminating the small cap requirement and allowing clients to balance their remaining portfolio with assets of their choice would ensure SIVs remain a viable foreign investment alternative in this country.”
Jeffrey Lee of Comasters legal firm disagreed, saying $500,000 would not be an issue.
“$1 million is still OK. True, they like to keep their money so it won’t disappear, but they also understand that with high risks such as VCs come high returns,” he said.
The director of Asian business research group Basis Point, David Chin, pointed out that those who oppose VC investments have missed a critical point: Chinese themselves are veering towards VCs.
“In recent weeks, the Chinese government had in fact escalated plans to develop their VC industry. They are trying to become the Silicon Valley of Asia.
“Alibaba themselves are investing in VCs and creating their own VC funds. If Australia can tap into that mindset, there are wider repercussions from this policy change.”
[eduaid Newsdesk, Source: Click here to view the news]