Australia’s hedge fund managers are gaining attention from international investors, while at home the investor community has remained largely indifferent, according to IPE.com. But Triple A’s new Australian partner, Damien Hatfield, maintains that local tax rules remain a barrier to entry for ‘offshore’ investors.
Hatfield says he has received several offshore enquiries regarding Australian long-short and long-only equity managers. “This tells me that fund of fund flows are starting again, and that offshore investors are looking for diversification, hence their interest in Australia.”
The country has a good selection of managers, whose assets were decimated during the global financial crisis. Hatfield says “these managers had anywhere up to 80 per cent of their assets redeemed because the redeemer was a fund of funds facing their own liquidation pressures.”
According to research carried out by Eva Riou of Primary Asset Consulting, there are over 900 asset managers and boutiques in Australia. Hatfield is a veteran of the hedge business, but even he says he was “staggered” by the total.
The enquiries coming in from offshore have been largely for long-only boutiques and Hatfield says some of the investment requirements are based around the China/Resources story, and also high yielding stocks. But there’s one thing holding back this interest; Australia’s tax regime for investments.
“It’s a real pity that we have this idiotic withholding tax treatment of unfranked dividends,” says Hatfield. “When will Labor and Liberal Governments wake up to the fact that offshore investors would like to allocate to local managers but are deterred by this withholding tax issue?”
Australia is bidding to be a financial hub in Asia Pacific, but that is unlikely to eventuate unless there is a perceived level playing field on tax. Hatfield says, “We have such an opportunity to develop as a global funds management centre. As per usual, this will pass us by, as Singapore and Hong Kong attract the monies and players.”