Key points:
█ Since 2012, SIV has attracted many High-Net-worth families in China. From November 2012 to June 2020, Chinese applicants ( from mainland China and China Hongkong) account for 89.9% in total SIV applicants.
█ The executive chairman of Atlas Advisors Australia, previous Global Head of Macquarie Private Bank, Australian financial industry experienced professional -- Guy Hedley demonstrated that the Chinese plays an important role in the SIV program. Those Chinese entrepreneurs will be the most important factor to connect Australia with China in the future.
█ Guy Hedley believes that the SIV program has been one of the most important visa programs Australia has undertaken.
█ In 10-20 years time people will look back at this program and understand how critical it was for integrating Australia with Asia and helping to generate long term economic growth for the country. Over time, the benefits for two countries will be huge.
█ Guy Hedley also stated that the current significant complying investment framework can be further improved; he also predicted that the SIV program will have several changes in the near future.
The following is the ACB News interview report with
Mr. Guy Hedley, Executive Chairman of Atlas Advisors Australia
ACB News《澳华财经在线》：Hi, Guy , Welcome to ACB News CEO interview column . As a well-respected expert in the Australian financial industry, Prior to founding Atlas Advisors Australia, you were the Global Head of Macquarie Private Bank, you also held different roles in several private banks. Can you please briefly introduce yourself and tell us the reason why you found the Atlas Advisors Australia (AAA)?
Guy Hedley Atlas Advisors Australia：I grew up in New Zealand and I started my career in finance in New Zealand in 1987 with an Australian leading Stockbroker firm -- JB Were as their Head of Stock broking. In 2000 I took a role as the CEO of BNP Paribas’ retail stock broking business in Australia. In 2002 I shifted to Macquarie Group to establish their private banking business.
I built the No.1 award winning private bank in Australia for high net worth investors (those with over $5m to invest). In 2006 I set up Macquarie Private banking in Asia based in Singapore and Hong Kong. Our target market in Asia was ultra high net worth investors (those with over US$30m to invest). At the same time, we found out the growth market and more opportunities were actually from China. We found great success in working with Chinese entrepreneurs who were looking to IPO their companies through HK and then manage their wealth.
In 2012 I decided to focus on the China market and set up a business myself that could support private investors from China investing into Australia (As Chinese capital were interested in investing into Australia but there wasn’t a natural reason for them to do that.) Fortunately, I realized that the Australian Government was designing a new visa category, which is the SIV program. Therefore, I offered to help them and worked with the Australian Government on the investment policy for the proposed SIV program prior to its launch in November 2012.
I formed Atlas Advisors Australia in early 2013, with my partners Fiona Zhuang and Jade Bao, as a specialist SIV funds manager and partnered with China Construction Bank to promote the SIV program in China to their private banking clients. We have done a lot of roadshows and marketing in China, and we trained around 3000 private bankers in China Construction bank for the SIV program. My team also set up the business in Shanghai to deal with the banks, meet the clients to solve their problems.
ACB News《澳华财经在线》： As one of the first fund managers that provides SIV complying investments in Australia, Atlas Advisors Australia has a clear focus on SIV program since the policy came into effective in 2012, how’s the business going so far?
Guy Hedley Atlas Advisors Australia： For the past 8 years, Atlas Advisors Australia has become the largest funds manager
focusing on the SIV program. We have acted for over 400 families who have received
a SIV since 2012 and we manager over $1.7b in assets under management through our funds for these investors.
The government has made some changes in the complying investment framework in 2015. With the change in the SIV policy, many funds managers who were designing the products for SIV program actually stopped because it was too complicated.
There was also a large reduction in the number of visas applied for and granted. The
reduction is largely because of the increased complexity of the investment framework post July 2015 (Balancing, Emerging Company and VC) and a much slower approval process timeline by the Department.
We have a significant number of clients who have now received their 888 visa (permanent residency) , many of our investors are looking at non-SIV investments (property, FX, shares and bonds etc) with us.
ACB News《澳华财经在线》：What differentiates Atlas Advisors Australia from its competitors?
Guy Hedley Atlas Advisors Australia：Culture. This is one thing that differentiates us from our competitors. We are an Australian company with the Chinese heart, we have a great amount of respect and awareness of the Chinese culture when when dealing in all aspects of our business. When it comes to one of our core competencies as a fund manager: designing complying products, we focus on designing SIV compliant products that brings economic benefit to the Australian Economy while at the same time meets the investment preference of a typical visa applicant. This is achieved through having a team with extensive knowledge and experience in advising UHNW Chinese investors (we have 3 ex senior Chinese private banker staff member on our team with combined over 50 years’ experience working with Chinese UHNW in China) , and stronger local Australian product market knowledge through our three directors who were ex Macquarie divisional heads , as well as over 8 years’ experience in dealing with the SIV program. We are regarded as the industry specialist in SIV investments.
Another example of us keeping the cultural awareness in our core business is the investment reports we produce. Many of our clients are not fluent in English. Our quarterly investment reports are prepared bilingual in their preferred language choice (simplified Chinese or traditional Chinese). We do invite our investors into celebrate important festivals in both Chinese and Australian calendar.
ACB News《澳华财经在线》：SIV program has been launched for nearly decade since 2012. Can you please share your opinion on the SIV program? How does Australian economy benefit from the SIV and BIIP program?
Guy Hedley Atlas Advisors Australia：We see the SIV program as a generational thing, and the
economic benefit will be showing in the long-term.
I believe that the SIV program has been one of the most important visa programs Australia has undertaken. The cohorts who have received SIV visas, of which 95% are from China, will be one of the most significant factors influencing Australia’s future economic prosperity in Asia, far beyond the $5m they invest to obtain their 888 visa. Many of the visa holders represent some of the most successful entrepreneurs in China and as they establish residency in Australia with their families, they will start to engage in business activities and their children will establish generational change to Australia’s outlook.
Normally, for SIV applicants, they will start business trading in Australia once they understand the Australian environment. The SIV applicants have capital, networks and business knowledge, they might export Australian goods to China, or import Chinese resources to Australia, they are the people who will build the connection between China and Australia.
In 10-20 years time people will look back at this program and understand how critical it was to integrating Australia with Asia and helping to generate long term economic growth for the country. Over time, the benefit for two countries will be huge.
ACB News《澳华财经在线》： Currently, other countries also provide the similar investor Visa programs, such as UK 1 Visa and USA EB5 Visa, what are the competitive advantages of Australian SIV and BIIP policy?
Guy Hedley Atlas Advisors Australia : The major competitive advantage of the SIV program is the attraction of Australia as a destination for families and its geographic proximity to Asia. Only 2-3 hours time difference from China whereas the USA, UK and Europe normally have longer time difference compared to Australia.
The importance of this is evident from our own experience – our SIV investors already have significant business activities in China and are looking at the SIV program as a family lifestyle choice.
While the universities in the US and UK out rank Australia, the school educational system here is very attractive, and Australian universities normally have big Asian talents cohorts.
Australia has well developed Chinese communities, inclusive environment without guns, violence and an attractive climate, all of which supports Australia’s competitive advantages against the US and UK. A lastly, the way that Australia has managed the Covid 19 pandemic relative to the US and UK, will provide a significant competitive advantage.
ACB News《澳华财经在线》：You and your team has been working closely with the Australian Federal and State Governments on the SIV program and relevant development of the investment policy over the past 8 years, do you think that the Australian Government will make any changes in the current framework? If so , what would be your suggestions?
Guy Hedley Atlas Advisors Australia : Yes, I do believe that there will be some changes. Announcements will be made over the next few weeks for some changes to both visa investment policies to be effective 01 July 2021.
We have made a number of submissions to the Government over the current review in supporting of two initiatives – firstly an increase in the amount of the Significant Complying Investment Framework that is allocated to Venture Capital from 10% to 20% or $1m.
The second recommendation is for the Investor Visa to use the Significant Complying Investment Framework (SCIF) rather than State Government Bonds. We understand both recommendations may be adopted. We have made these recommendations after considering both the economic benefits the framework brings to Australia and the potential impact it has on the overall success of the program in terms of its competitive advantage at a global level.
The third recommendation is to shorten the visa waiting period for investors who are willing to allocate more of their funds towards VCPE to reward them for the extra economic benefit they are bringing to Australia.
ACB News《澳华财经在线》：Atlas recommends and encourages the Government to increase the proportion of VCPE from current 10% to 20% , what is the major consideration for the proposed change？
Guy Hedley Atlas Advisors Australia : Our rationale is that this is the market that needs the most capital support (start up and seed stage) and the hardest to get funding for. We support the Stat-ups at C-stage, those companies have already approved their business model and have demonstrated that they have good business opportunities.
It is also the area that creates the greatest amount of job creation and economic benefit for Australia.
Some wonderful companies like Atlassian, Canva have come about through early stage investors backing them.
We currently partner through our venture capital fund, Stoic Ventures with the major university venture arm, Uniseed, to fund the best research commercialization out of University of Queensland, Sydney University, UNSW, Melbourne University and CSIRO.
By doubling the amount allocated to VC we would be able to fund 2x the number of university startups while also encouraging researchers to stay in Australia. We have got 18 companies that we funded in our university portfolio, all of them are growing enormously and they are doing incredible things in agriculture, robotics, life science etc. (https://www.stoicvc.com.au/).
ACB News《澳华财经在线》：It is clear that most of SIV applicants are sophisticated Investors, from the risk management and Return of Investment point of view, whether the proposed increase in VCPE will be a good strategy for them as well?
Guy Hedley Atlas Advisors Australia : Our recommendation to the Government was to increase the allocation to VC at the expense of a reduction in the Emerging Companies component. The risk/return equation for micro cap listed securities versus VC is not a significant shift.
The reality is that the quality of the venture capital businesses should offset the risk, and I think it is possible to manage the risk within the framework to allow the lower risk for the investors by getting stable return from the balancing investment and emerging companies funds. It is difficult for the investors come to do themselves, that’s why they need experts to help them to manage the risk.
ACB News《澳华财经在线》：What kind of financial products AAA provides in balancing investment? What is the average ROI?
Guy Hedley Atlas Advisors Australia：The range of Balancing investments we provide would be from Corporate Bonds, which are investment grade rated and offer returns from 0.5% to 2.5% per annum (It used to be 3%-4% per annum, nowadays the average return is 1% per annum because the yield on bonds have come down) to investments in established Commercial Property funds holding assets like shopping centers, or private hospitals and health care facilities or mortgages which provide around 6% per annum return and they will get the capital back in the end of the 4 years.
Investors are free to mix and match exposure to these different asset types to achieve the best risk/return goal for them or simply use our Balancing Fund that blends exposure across these assets.
I am a strong believer in if you can’t explain your product to a potential customer in 5 minutes, then your product is probably unnecessarily complex. As I mentioned earlier, we have very senior bankers that have been working in Chinese market for decades, they provide the product team with invaluable insights with what our investors seek, as a result of that understanding we built products that's simple, transparent, and easy to understand. We want our investors to be able to explain to their friends what they have invested.
So our product offerings are simple: fixed income, corporate bonds, mortgage and stable core yielding commercial assets, each caters to a different risk/return need of a potential investor.
ACB News《澳华财经在线》：Can you please share with us a little bit about the assets allocated to the small-mid cap components under Atlas’s SIV program?
Guy Hedley Atlas Advisors Australia：Sure, in short, we build what is the leading product.
For this component, we provide investors with exposure to the whole risk spectrum. There are two funds that we offer, the investment universe include the whole range of small cap stocks listed on ASX, from fixed income ETFs to more traditional Software & Services, Media & Entertainment, Telecom. Services, diversified Financials businesses.
Another one is the Deep Value fund, the Deep Value fund mainly focuses on Opportunistic buy of high-quality, debt free and profitable businesses experiencing pricing dislocation that has secured cash flows that operates in attractive sectors or holding strategic assets that have a strong balance sheets & cash flows.
ACB News《澳华财经在线》: AAA partners with one of the Australian University-owned seed stage venture capital funds, can you please give us a brief introduction of Uniseed?
Guy Hedley Atlas Advisors Australia：I have been working in venture capital industry probably 20 years now. From my experience, the typical venture capital funds normally raise money when needed and close when reach the predetermined amount of financing, it doesn’t sit well with the SIV investors because they might miss the good opportunity to invest in the good companies once they closed. Therefore, we set up the original venture capital fund structure: fund-to-fund to enable investors to invest and comply with the rules.
We went to a Venture Capital funds manager to become their general partner, and ask them to stay open and we work with them to ensure the money goes to the good investments.
Since 2015, we have been working with my previous MBA professor, Dr Jeff Waring as head of our Venture Capital Investment Committee, who has close relationships with different universities. Because of his academic background which gives us the benefit to understand the universities, we started to work with Uniseed in 2018, which is the major Australian universities venture capital body.
Uniseed used to fund the best research commercialization out of University of Queensland, Sydney University, UNSW, Melbourne University and CSIRO. Uniseed is the limited partner of the universities, they have their own management team to decide the investments for the PHD students with great ideas.
Our venture capital fund, Stoic Ventures has a partnership with Uniseed to invest into all companies coming out of these universities. To date we have invested in over 18 ventures ranging from life sciences (oncology, addiction therapies etc) to robotics to technology.
Through our venture capital fund of funds, Atlas Adviosrs Venture Capital Fund of Funds ILP we partner with “Follow the Seed” another early stage venture capital fund and so far we have funded 40 companies; some of those companies really come with great ideas, such as Virtual Desktop Infrastructure, , Monitoring service for farms and remote environments (IoT solution), Cybersecurity for the railway industry etc. They all make a big difference for the society and some of them are planning to expand the businesses to a global level. (https://followtheseed.vc/portfolio/)
ACB News《澳华财经在线》:Do you still remember Atlas’s first client who got the PR visa granted? How long did it take for this client to get PR? Does Atlas provide ongoing wealthy management service for clients after they obtain the Permanent Residency?
Guy Hedley Atlas Advisors Australia：Yes I remember our first investor well as we travelled with China Construction Bank to their Shijiazhuang private bank Centre for the first client ceremony.
It was a very proud day for everyone, and it was my first time to visit Hebei. This client invested in December 2013 and received their PR in 2018. When this client applied for PR, it took 3-4 months. Currently to our knowledge the 888 permanent residency process tends to take between 12-18 months. With the strong relationship we have built with these investors over the past 4- 5 years period, they often would like to continue investing with us.
We’d like to say that we provide “Life management” service to our clients. We have helped our clients in every aspect in their lives, such as helping their kids go to school, helping them buy houses, dealing with government regulations etc. Because when our clients have got their PR, Australia is still a new place for them, they still need help to get them well-established in Australia.
Plus, we offer them investment options that are not exclusive to SIV investors. They are free to choose any mix they would like. Through our accounting divisions, we also offer them tax services after obtaining the permanent residency.
ACB News《澳华财经在线》: Chinese investors account for a big proportion of the total SIV applicants; do you think this situation will remain the same in the future? What would you suggest for Chinese investors who want to obtain PR through investing in Australia? What should they be careful with?
Guy Hedley Atlas Advisors Australia：Chinese applicants account for 95%-96% in SIV applicants. I think the SIV will always be attractive to Chinese applicants as Australia remains a very desirable destination for education and quality of life for their families and the structure of the program allows flexibility for the primary applicant, typically a business person in China, to retain their China operations while the family transition to Australia across the 4 year period. We are certainly continuing to invest into supporting the China market for the foreseeable future.
Plus, our clients are also happy to refer their friends to apply for the PR in Australia once they move to Australia, they will encourage their friends to come, which is another important factor.
For Chinese investors wanting PR in Australia, the SIV is the easiest and the most flexible option as it does not require immediate residency nor does it have the points test, English language requirements or age limitations.
As with all investing, understanding the nature of risks associated with investments is the key to success. We often see investors chasing returns without fully appreciating the risks associated with them, particularly in a foreign market like Australia.
The market here is well regulated so the risks are more easily understood but it always pays to work with experienced investment managers who understand the Australian market. The suggestion will be – Choosing the right partner who understands what they are doing.
BY / Guy Hedley & Hannah Zhang & David Niu
