Servicing a $2.1 trillion superannuation industry has equipped local fund managers with skills that are attractive to overseas institutional investors. Cross-border fund inflows to Australia have almost doubled over five years.
Funds managed by Australian managers on behalf of overseas clients has increased from $48.9 billion at January 1, 2010 to $91.5 billion at December 31, 2015, according to Australian Tax Office data.
The 2016 Investment Managers Cross-Border Flows Report produced by the Financial Services Council (FSC) and Perpetual took a sample of 50.2 per cent of these flows into Australia and found there was a 17.8 per cent compound growth over five years, with 62 per cent of the inflows coming from Asia Pacific.
The skills fund managers have built up via servicing their super fund clients is what has made them attractive to overseas investors, Colonial First State Global Asset Management, head of product Asia Pacific, investment product and solutions Amna Khan said at an FSC briefing on Tuesday.
The asset classes where local fund managers received the most foreign investors inflows were Australian property (31 per cent of cross-border inflows), Australian fixed interest and cash (22 per cent), overseas shares (18 per cent), overseas property (10 per cent) and Australian shares (10 per cent).
Despite the near doubling of foreign inflows over the past five years Australia was still “punching below our weight in overseas sourced money”, FSC chief executive Sally Loane said.
There is “lots of room to grow” given the $91.5 billion of overseas money only represented around 3.4 per cent of the $2.66 trillion in funds managed by Australia based managers, she added.
The annual Investment Managers Cross-Border Flows Report was first introduced in 2010 to measure the impact of recommendations from the 2009 report Australia as a Financial Centre – Building on our Strengths that set out how to open Australia up to foreign investors. Successive governments have already implemented many of the recommendations, such as the Asia Region Funds Passport.
“[But] we are not going to take our foot off the throat of government until they’ve finished those recommendations, because if we do we can’t exploit the potential,” Loane said.