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Record foreign investment drives trust creation in Australia

27 July 2022

Andrew Cannane

Executive Director, Corporate Trust, Australia

Andrew Cannane

Executive Director, Corporate Trust, Australia

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Australia’s real and alternative asset sectors give international investors the right balance between security and yield

As the world opens up after the Covid pandemic, it’s clear that Australia remains a key destination for overseas investment. Foreign investment in Australia rose by more than AUD 92 bn in 2021.

That cross-border capital flow is driving equivalent growth in trust creation in Australia. At Intertrust Group, we see that first hand.

We expect our trustee business in 2022 to grow by more than 250%. Investors are turning to outsourced trustee services providers to simplify the operation of their investments into Australia.

However, there are potential headwinds in the market – particularly rising inflation and interest rates.

However, the strength of the Australian real estate and infrastructure sectors  makes us confident that strong growth will continue beyond this year as managers seek a balance between security and yield.

Seeking safe havens in Australia

Inflationary pressures and the potential for global interest rate rises mean cross-border investors want safe havens for their money.

Australian real estate is well suited to this role. The country has a sizeable real estate market, plenty of available assets and good lease covenants that are usually indexed to inflation.

Investors are looking for exposure to Australian real estate as an inflation hedge.

Real estate rental yields are holding up, while industrial real estate growth is fuelled by a growing need for e-commerce fulfilment centres.

At the same time, while the pandemic dragged Australia into its first recession since 1991, it has enjoyed a relatively clean break from lockdown. Unemployment is currently at its lowest level since 1974.

At the moment, Australia looks a good bet for funds needing to deploy capital but darker economic clouds may be gathering on the horizon.

A deep pool of providers in Australia

Political stability, a strong legal sector and a reputation for transparency all add to the country’s appeal as a safe haven for cross-border investment.

Australia came third in the last JLL Global Real Estate Transparency Index, well ahead of competitor jurisdictions in the Asia Pacific region.

Investors conducting desktop due diligence will find plenty of easily available information on the Australian market, another factor that drives confidence and, with it, growth.

The country gives investment managers access to a deep pool of professional services providers, including lawyers, accountants, tax advisors and IT specialists. Trustee services are essential to that mix.

The role of third-party trustees in Australia

The prevailing structure for real and alternative asset investors is a trust.

Australian trusts are popular for several reasons, offering benefits in governance – and as a pass-through vehicle providing tax efficiency.

A trust structure is a tax-effective way to hold real assets in Australia, because tax is paid by unit holders or beneficiaries at their underlying tax rate.

Trusts that wish to qualify for a managed investment trust (MIT) need either a licensed trustee to operate the trust, or a manager to manage it, in order to comply with Australian regulations. Offshore investors most often choose a third-party licenced trustee rather than applying for and maintaining their own Australian Financial Services Licence.

This also provides administrative simplicity. The trust also benefits from the economies of scale and local knowledge that an independent professional trustee can provide.

Trustees with international reach beyond Australia

A third-party trustee can also provide a diverse range of expertise, from anti-money laundering to privacy and managing conflicts of interest.

In effect, it gives investors the peace of mind of a properly set-up company with the necessary segregation of duties and a range of support services.

With Intertrust Group, those services add up to a complete package for investment managers, simplifying the creation and maintenance of trusts and compliance with local regulations.

Third-party providers offering global reach will become increasingly important as international investors look to the security offered by Australian real estate.

We offer equivalent services in all the main fund jurisdictions, from Singapore and Hong Kong to Luxembourg, Jersey and Ireland.

Trustee services in Australia are enjoying sustained growth, because they give international investors easy access to the Australian real and alternative asset sectors.

We expect this to continue despite growing global economic challenges, as asset managers look to develop more balanced and risk-averse portfolios.

Why Intertrust Group

  • Intertrust Group is fully licensed to provide professional wholesale trustee services. We also offer a full range of corporate services to investment trusts, simplifying fund administration.
  • We are a global provider, with a presence in every major fund jurisdiction.
  • As a strategic partner, our proprietary innovative technologies combine with global knowledge and experience to deliver added-value services for all asset classes, while increasing manager visibility of portfolios on behalf of a fund’s investors.

Intertrust Group is a publicly listed company with 70 years’ experience providing world-class wealth management services to clients around the world.