Australian GPs losing out on HNW capital

Private equity and venture capital funds in Australia are potentially missing out on hundreds of millions of dollars in capital commitments from overseas high net-worth individuals due to the exclusion of the asset class from the significant investor visa program.

“There is potential for high net-worth individuals coming to Australia under the significant investor visa program to contribute very significant sums of money towards both venture capital, as well as growth private equity funds,” said Yasser Al-Ansary, chief executive of the Australian Private Equity and Venture Capital Association (AVCAL).

Under the visa program, high net-worth individuals from overseas are granted visas to live in Australia in exchange for investment in a variety of asset classes.

However, currently private equity and venture capital are excluded from the list of potential recipients – something AVCAL is urging the government to change.
Wealthy individuals must invest a minimum of A$5 million ($4.5 million; €3.3 million) in the country to be eligible for a visa.

The regime has so far generated large sums of money. Between September 2013 and March 2014, A$580 million was invested in Australia by overseas investors under the program, El-Ansary explained.

The inclusion of private equity as a capital recipient in the program would potentially support fundraising efforts – particularly as domestic LPs step away from investing in the asset class due to regulatory constraints.

“We certainly hear from Australia-based GPs that they are spending more of their time in Asia talking to potential investors in the Asian region, either in addition to or substitute to Australia-based investors in those funds,” El-Ansary said.

“I think more and more we will see an increase in moves towards Asian-domiciled LPs investing in private equity funds and the significant investor visas program might well play quite an important supporting role in helping to counter balance Asia-domiciled investors against domestic-domiciled investors in private equity funds.”

The visa regime was essentially started as an expedited entry program for wealthy foreign individuals to live in Australia on condition of domestic investment.

“It was a regime put in place a few years ago to in an attempt to try and compete with offshore capital to come into Australia [and] you can tell from the growth rate of those applying to come to Australia [and] the quantum of investment funds coming into Australia that the level of interest is quite significant,” El-Ansary said.

He explained that following the huge growth of the Chinese economy, the most significant portion of the applicants come from China, with others from various Asian countries.

Many countries, including the US, Singapore, UK and New Zealand, use similar programs to attract foreign investments, according to AVCAL.