Asian investors won't buy CIVs, says Tria

The collective investment vehicle (CIV) structure announced in the federal budget will not be the "catalyst" that drives Asian investors towards Australian managed funds, argues Tria Investment Partners.

In a new Trialogue note, Tria Investment Partners said the federal government should be applauded for its announcement of two new CIV structures in the federal budget last month.

The announcement came after the government signed the Asia Region Funds Passport Memorandum of Co-operation with Japan, Korea and New Zealand in April 2016.

However, while the intention is clearly to “open up Asia’s large and growing retail asset pools to Australia’s asset management industry”, Tria is sceptical about the likelihood of Asian retail investors being quick to buy Australian investment products.

“It’s well known that foreign investors have found the structures of our managed investment schemes difficult to digest,” said the note.

“The proposed new CIVs go some way to addressing the competitiveness of our fund structures, but in our view the structures on their own won’t be the catalyst driving Asia’s retail customers to buy our fund structures. There are other barriers that need to be overcome first,” said Tria.

The failure of the Australian asset management industry to break into Asia in the past has not been down to having the wrong investment structure, it added.

Instead, Australian funds management houses have been held back by the complexity of regulation and licensing requirements across Asia; a lack of appealing investment strategies; a lack of brand awareness; distribution-related challenges; and a seven-year (or higher) payback period, said Tria.

“Successful entries by Australian managers into Asian markets are few and far between (although this is not a uniquely Australian problem),” the note said.

“Although the regulatory reforms are welcome, we shouldn’t expect an influx of offshore investors coming into Australian funds.

“It’s more likely that the problems of low brand investment (with investment professionals and the retail marketplace), an insufficiently unique or in-demand product, and failure to address distribution-related barriers will persist.

“So there is scope for Australian managers to compete in Asia and the challenges they face are (largely) within their control. If a manager can overcome them, structure won’t get in the way,” said Tria.