The revamped SIV regime requires applicants to invest at least $500 million into start-ups or venture capital/private equity funds and at least $1.5 million in eligible small cap funds.
One Investment Group executive director Justin Epstein said the decision to change the system was a “knee-jerk reaction”.
“It begs the question of whether the government is merely responding to fearmongering headlines regarding foreigners snapping up Australian residential supply,” Mr Epstein said.
“Has the government not thought about the consequences for the residential property market once these migrants are granted permanent residency in four, six or eight years?
“Or is the government merely delaying the public visibility on the impact of the SIV?” he said.
Mr Epstein acknowledged the new rules create an “interesting opportunity” for Australian venture capital firms and small-cap equities managers, with a few caveats.
“The larger and more reputable private equity managers have little interest in taking investors into their funds with a minimum subscription amount of $500,000.
“One Investment Group has been in discussions with a number of private equity managers who are eager to explore new sources of capital, however their interest typically lies in the range of minimum commitments of $10 million to $15 million,” Mr Epstein said.
Still, the flow of capital into “such a small segment of the market” will have a significant impact on small cap share prices, he said.
“This, coupled with the limited benefit secondary trades have to facilitate new companies, raises the question as to how long it will be before the government recognises that their knee-jerk reaction to what was clearly a poorly planned framework to begin with will be revised for the third time,” Mr Epstein said.
