AUSTRALIA - European asset managers are showing an increased interest in opening up shop in Australia, said Nick Sherry, the country's former assistant treasurer and former minister for superannuation.
"To some providers Australia has only just come on the map, and a lot of fund providers have rightly been focused, during the global financial crisis, on their own back yards. But Australia's strong economy and projected growth in funds under management...have attracted more providers than in the past," Sherry (pictured), the current minister for small business, told Global Pensions.
The Australian funds management industry is expected to hit A$3trn ($3trn) by 2025, up from A$1.3trn now. A portion of the growth stems from new government regulations that increased the mandatory contribution rate from 9% to 12%.
"I saw a number of fund managers in London who are not currently operating in Australia who expressed an interest to me in being located in Australia. I saw at least two fund managers who are keen to locate in Australia, and a number of managers who have increased their presence in Australia and intend to continue to increase their operations," he added.
He said the potential creation of pan-Asian investment vehicles could also add to the allure.
The investment vehicles would mimic the European UCITS structure, but within Asian markets. The so-called Asian Funds Passport would allow Australian fund managers to offer investment funds throughout Asia Pacific, and provide Australian investors with easier access to funds in the region. (Global Pensions, 15 November 2010)
"There's no doubt the passport, when implemented, will draw to the attraction, but there's already strong attraction of being located in Australia anyway."
The creation of the structure is in early stages with regulators still in informal talks about how to proceed.
Sherry, who also oversees public sector pensions in Australia, was on a personal trip around Europe and the US when he spoke to GP.
He said most of Australia's public sector schemes have already been converted from defined benefit to defined contribution schemes, a move regulators in the UK, US and Ireland have contemplated.
"The closure of DB in Australia was not contentious because we had a strong universal, defined contribution system which had been introduced 23 years ago," said Sherry.
"The fact that we had a long-standing, well developed compulsory defined contribution system... provides a level of reassurance around the closure of DB. This doesn't exist in the US, UK and Ireland, although it's about to start in the UK... It made a difference in Australia."
This week's edition of Professional Pensions is out now
MPs failed to place legislation into the Financial Guidance and Claims bill that would have made pension guidance default, which Just Group director Stephen Lowe said left a "bitter taste".
Aegon has called for the government to double the tax exemption on employer-arranged pension advice, up from £500 to £1,000.
Institutional investor confidence in Europe rose by 8.9 points in April with each region showing growing appetite for risk, according to State Street Global Exchange.