Demystifying Venture Capital – SIV event held in Hong Kong

Many in the migration industry are still coming to grips with the new Significant Investor Visa (SIV) requirements. From 1 July, 2015 applicants are required to invest a portion of their complying investment into Venture Capital (VC) and small public company shares. Speakers from the January 2016 Think Global “Invest in Australia” mission spoke to around 50 local industry participants including members of Austcham Hong Kong and Macau. 

Moderating the session was Stacey Martin, arguably Australia’s most prominent SIV specialist and chair of NAB’s SIV Concierge Service. Founder of Expat Advisors Community for professionals with internationally connected clients, she authored the SIV educational booklet “Smooth Road to Travel – China to Australia.”

Stacey_MC at SIV Hong Kong seminar

The objective of the session was not only to provide some insight into VC and emerging companies, but to consider a range of needs for those making the decision to migrate to Australia, and how we can make the journey as smooth as possible.

Making the case for Australia, was Suren Pather of SUMO Group who’s business interests span Australia, Asia, US and the Middle East.

SIV_suren pather

Suren provided an overview of economic history and key issues for global economies going forward. We are in unprecedented economic times with the magnitude of global debt as investors search for high-yield and acquisition of real assets.

Australia is the 12th largest economy in the world and has been growing consistently. It has the 8th largest stock exchange and has weathered recent crises such as the 1987 stock market crash, Asian currency crises and GFC relatively well. The biggest inbound investment actually comes from the U.S.

Click to enlarge
Click to enlarge

With an enviable lifestyle versus the rest of the world according to the OECD Better Life index (pictured), Australia is a great place to live, work and access leading education. With strong governance and regulations, Australia has been increasingly the focus for those looking to diversify their wealth and purchase real assets such as property.

You can view the Suren’s presentation slides here.

NSW is a sister city of Guangdong Province, and Cher Jones, Commissioner for South China & Hong Kong, Trade and Investment at New South Wales Government, is based in it’s first tier city, Guangzhou.

Cher Jones provided an overview of the NSW economy and opportunities for foreign direct investment. As the largest state in Australia by population and GDP, NSW has experienced continued growth over the last 24 years. It has a stable and diversified economy, including focus on innovation. The workforce is highly educated and Chinese is the second largest language spoken.

Cher Jones_speaking

The capital of Sydney is culturally diverse and provides a secure environment for families with excellent infrastructure. There is robust tourism with 41 flights from China into Sydney each week.

Sydney and NSW are leading suppliers of education services, with 57,000 Chinese students and many institutions collaborating with partners in China as part of their engagement with Asia.

SIV Cher on NSW priorities

Cher said that growing SIV migration is a priority for the NSW Government. Applicants will have a dedicated Relationship Officer to establish and build long-term relationships and encourage further investment and business in NSW.

You can view Cher’s presentation slides here.

Cher also provided some Information Sheets including a Summary of the Business, Investor & Skilled Migration Program here, Significant Investor Visa here, and NSW Nomination requirements here. The NSW Nomination Application form can be downloaded here, or accessed via our blog post when the new form was launched last year here.

There are a number of pathways to obtain Australian residency according to Ivan Chait of Santa Fe Migration.

Last year there were 190,000 migration places. Skilled migrants made up 68% and the balance in family visa streams. The Significant Investor Visa (SIV) is part of the Business Innovation and Investment Program or 188 streams. It requires state nomination and to date this has been dominated by Victoria with double the amount of NSW and the balance spread across the other states. So far 1,125 primary visas have been granted with 87% coming from China.

SIV_ivan chait

SIV is still an attractive pathway as unlike other visas there is no upper age limit, no English language requirement, and it is tax friendly given the temporary status. Applicants are only required to be in Australia for a minimum of 160 days over the four year temporary term (or six months a year for their spouse). An alternative is the Business Talent or 132 streams, however these require active business interests.

Choosing a migration agent – it is important to ensure an agent is licensed, has appropriate experience, and is a member of a professional association. Navigating the migration landscape can be complex and it is important to keep up to date with current criteria and regulations, and have a transparent process from start to finish to avoid costly mistakes.

You can view Ivan’s presentation slides here.

Thomas Tang , NAB Advisor licensed in Hong Kong and Australia, ran through portfolio construction for the $5M SIV complying investment.

The new investment regime requires a minimum of 10% into venture capital and 30% into emerging companies. For the remaining $3M, SIV applicants can decide the allocation in line with their own risk profile and investment objectives from the complying investment sectors of Australian fixed income (bonds), equity and property funds.

SIV - Thomas Tang - investment philosophy

The core philosophy for construction of any investment portfolio is diversification, to enhance the risk-reward ratios for different investor risk appetites. This includes diversification of investment sectors, and having a robust and diligent process for selection of underlying fund managers.

Whilst some investors may choose the most conservative option of directing the remaining 60% to fixed income, by increasing exposure to property and equity funds, depending on the applicants risk appetite, applicants will have a more diversified or growth oriented approach for their complying investment which has a four year minimum investment time-frame.

SIV_Thomas Tang_range of services

Thomas also outlined the range of professional services that applicants may need in planning their move to Australia. From selecting a migration agent to manage the process, arranging an Australian bank account and considering the tax implications, not just of the complying portfolio, but putting in place strategies to manage overall wealth.

NAB Migrant Banking and the SIV Wealth Advisory team in Hong Kong and Australia can provide access to a range of internal and external specialists for a coordinated approach. NAB’s SIV flyers are available in English and Chinese.

You can view Thomas’s presentation slides here.

David Stevens, founder and Managing Director of Contango MicroCap Limited provided an overview of the mandated Australian small companies sector.

SIV Applicants are required to invest a minimum of $1.5M into the emerging companies sector into managed funds or listed investment companies that meet specific criteria.

David explained that fund managers in Australia are regulated by the Australian Securities and Investment Commission (ASIC).  There is a strong governance and compliance regime in place with continuous disclosure and independent auditing of companies and unit trusts.

Hong Kong small caps index VS ASX small industrial shares
Hong Kong small caps index VS ASX small industrial shares

Australia offers good risk adjusted returns for investors in the smaller companies sectors with diversification, access to a broad range of industry sectors, and lower volatility than some markets in Asia.

David Stevens_A2 milk

A recent success story is the A2 Milk Company which currently only has a relatively small share of the overall market for milk and infant formula. There is strong demand from China for clean, green Australian and New Zealand products. The share price has seen a substantial rise over the last year, with further growth expected in light of ChaFTA.

You can view David’s presentation slides here.

Stephen Hardy, Executive Director of Hindmarsh shared his experience setting up their new SIV complying fund, as well as the requirements the 132 visa stream.

SIV Applicants are required to invest a minimum of $500,000 into an Early Stage Venture Capital Limited Partnership (ESVCLP) or Venture Capital Limited Partnership (VCLP) which is a government program providing tax benefits to encourage innovation.

Steve explained that Significant Capital Ventures Ltd (SCV) is a joint venture between Hindmarsh and the Australian National University (ANU). It has been established with support from the ACT government’s CBR Innovation Development Fund.

Steve Hardy

Steve shared his extensive experience in the sector and outlined the various requirements of the Australian regulators to become an SIV compliant fund. These include:

  • Ausindustry approval – government body that ensures the fund meets the regulatory requirements including the business plan for the fund, qualifications and experience of the managers and type and size of investment
  • Australian Securities and Investments Commission (ASIC) – standards for Financial Services Licensee holders (AFSL) include issues such as the structure for holding investments and the financial experience of the team
  • Australian Venture Capital Association Ltd (AVCAL) – not all venture funds are members of the industry body. You can find a list of complying funds on the website here.

With the new investment requirements some potential applicants are also exploring the Business Talent (Permanent) Visa Subclass 132 pathway. In the ACT this requires a $2M investment and permanent residency is granted at the outset.

The difference is that SIV is a passive investment, where the 132 stream requires active participation including involvement in decision making and Board meetings of the investee company. Further the visa is subject to review after the first two years of investment.

You can view Stephen’s presentation slides here.

IMG_0002For More Information

If you have any questions about the SIV  program or would like introductions to professional services in Australia please feel free to contact Expat Advisors Community here. You can also download the SIV booklet  “Smooth Road to Travel – China to Australia” , view blog updates on the SIV program and sign up for the Expat Advisors Community Newsletter.

For the list of speakers from the session, their bios and contact details go to the blog here.