The 2014 Australian Investment Managers Cross-Border Flows Report showed foreign investment into Australian managed investment trusts (MITs) increased from $20.3 billion on 1 January 2010 to $40.4 billion four years later.
The report, for the first time, provided specific details on country flow sources to Australia.
The report found the Asia Pacific region was the most common origin for funds with 55 per cent of inflows coming from that particular region.
This year’s study showed 33 per cent, or $9.9 billion, of all investment flows came from Japan.
According to the report, this demonstrates the significance of Japan as an existing trading partner and “highlights the potential for future opportunities under the Japan Australia Economic Partnership Agreement (JAEPA)”.
New Zealand and South Korea were also prominent investment sources in the Asia Pacific region, the report said, contributing 14 per cent, or $4.3 billion, and three per cent, or $1 billion, to fund inflows respectively.
The investors using Australia-based managers are predominantly fund managers at 33 per cent, pension funds at 22 per cent and private investors at 14 per cent.
“Over one third of these fund inflows are being invested offshore into overseas-based investments,” said the report.
“This demonstrates that the expertise of Australian investment managers is being sought in managing global investment portfolios and supports conclusions drawn in the Johnson review that Australian fund managers have world-class capability.”
According to the research, foreign fund flows contributed $434 million in total value to the Australian economy in 2012-2013.
The report argued with the right policy settings in place “Australia can take advantage of the potential for domestic fund managers to form a significant and growing proportion of future export activity”.
FSC chief executive John Brogden said it is important that the remaining tax changes recommended in the Johnson review of Australia as a financial centre are implemented so that Australian fund managers can take full advantage of the trade opportunities arising from these free trade agreements.
“Without these changes, Australian fund managers will continue to be at a disadvantage despite the hard work that has gone into negotiating promising financial services terms in the free trade agreements with Japan and Korea,” said Mr Brogden.
“Australia needs a coordinated effort to make the most of our comparative advantage in funds management and to do this the FSC has recommended to the Financial System Inquiry that a body be established to coordinate the efforts of Treasury, the Department of Foreign Affairs and Trade, ASIC and Austrade.”
