The 2015 Australian Investment Managers Cross-Border Flows Report by the Financial Services Council (FSC) and Perpetual has revealed foreign investment into Australia through managed investment trusts (MITs) has more than doubled from $20.3 billion at 1 January 2010 to an estimated $43.6 billion at 31 December 2014.

While the increased investment has created more activity for the Australian economy, there remains untapped potential due to the lack of growth in financial services exports, which have remained steady at 3.6% during the same five-year period.

Some key findings of the report are:

  •  Untapped potential for further growth in the Australian economy
  •  Financial exports remain steady at 3.6% during past five years
  •  Australian managers have global investment management expertise
  •  56% of fund inflows invested offshore
FSC CEO Sally Loane said, “As Australia transitions into a services-oriented export economy, the expertise of our world-class fund managers and cross-border trade of financial services will become imperative for our future economic growth. “The opportunities to export Australian financial services are significant and making sure we have the right regulatory architecture in place will play an important role in determining our level of success as an exporter. As the fourth largest funds management industry in the world, worth $2.6 trillion, having the right policies in place to enable the trade of financial services, particularly with Asian markets, has the potential to stimulate economic growth in Australia. While doubling the volume of funds is very positive, we need to do more to ensure that we grow financial services exports as a proportion of the export economy."

“We need to reduce the complexity and confusion associated with our withholding tax regime, decrease withholding tax rates to make them more competitive with other countries, and complete the outstanding Johnson recommendation to broaden the range of collective investment vehicles, so we are not limited to trusts.”

Nearly two thirds (65%) of all fund inflows are sourced from the Asian region, with Japan accounting for 56% ($11.9 billion) of these funds.

Perpetual CEO and Managing Director Geoff Lloyd said, “Our geographical location means our neighbours in the Asia Pacific region are natural trading partners for us and recent free trade agreements will help further stimulate fund flows across the region. We’re making good progress on the Asia Region Funds Passport and free trade agreements with Japan and Korea are already having a positive impact on flows. With the China agreement now passed through parliament and the Trans-Pacific Partnership underway, there is strong momentum to achieve further growth in the Australian economy in the near future. The skill of Australian investment managers is being sought in managing global investment portfolios; with the report revealing that 56% of fund inflows to Australia are being invested offshore. It is encouraging to see Australia’s world class investment management expertise being sought after globally.”

“Global equities is a key part of Perpetual’s growth strategy and these findings support the growing demand we are seeing for global investments,” Lloyd added.