Investing in Australia
The Managed Funds Industry in Australia is one of the best developed in the world and the largest in Asia. This is underpinned by mandatory pension fund legislation whereby employers contribute an additional 9% of their employees' wages and salaries into a recognised Superannuation Fund. With the employee able to make significant tax effective additional contributions, the total investment pool including Superannuation is estimated to exceed US$1 trillion.
Within this environment, Australia's Hedge Fund Industry has grown rapidly over the past five years, and FUM are now approaching US$60 billion according to data from Austrade and the Reserve Bank of Australia. Overall the Managed Funds industry is underpinned by a stable political and economic environment, well developed and regulated financial markets, a well educated source of skilled labour, and a world famous lifestyle. As a result, according to Austrade in 2008, Australia’s “hedge fund managers control around 35 per cent more assets than managers in Hong Kong and around 130 per cent more than managers in Singapore."
In line with industry trends elsewhere in the world, this growth has led to numerous new Fund Managers, who also benefit from significantly lower start up and ongoing costs than their northern counterparts. Australia is home to approximately 200 Hedge Fund and Fund of Funds managers, offering a wide range of products and strategies to local and international investors. Unlike many countries, retail investors can invest in hedge funds, provided the managers are appropriately licensed. The industry is also well serviced by local and multi-national service providers.
Australia does have some negatives, the most significant of which is its distance from the rest of the World (approx 24 hours travel time from New York, London and Europe, and 8 and 10 hours from Singapore and Hong Kong respectively) although it spans a time zone whereby Sydney and Melbourne's working day takes in the close of business in New York through to the start of business in London and Europe. Distance, travel times, and to a lesser degree time zones cause difficulties for investors and managers alike, and can certainly add to transparency issues associated with investing or monitoring hedge funds.
At the same time, although the corporate tax rate at 30% is reasonably competitive on an International scale, Australia is not what might be called a "tax haven" in spite of some significant changes over the past decade, including the Superannuation environment discussed earlier. As a result, although there is a rapid expansion of both managers and FUM, most fund managers who attract international and institutional investors establish the actual fund in "tax friendly" offshore jurisdictions such as the Cayman Islands.
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