"It's been a slow start," said Douglas Loh, head of equities at Acorn Capital in Melbourne, which oversees about $600 million. "The bottom line is that SIV applicants want to be able to get permanent residency in Australia. They are not really looking to make a lot of money from the equity investment, but rather to protect their capital." Millionaire migrants, almost all from China, ploughed $3.8 billion into Australian assets since the government created the visa category in 2012. UBS, Eight Investment Partners and Acorn Capital are among firms with new small-cap equity funds to cater for the anticipated demand. So volatile "It will take some time to get the message through that equity risk can be managed -- that the Australian market is not a trading market like you see in China," said Acorn's Loh. "The Chinese market is so volatile but if you look at the Australian market it's steady as she goes." Australia retooled its Significant Investor Visa away from government bonds and residential real estate, assets that already attract large capital flows, toward investments that boost the country's long-term economic future.

Under the new rules, applicants must spend $500,000 on funds investing in startup and small private companies, $1.5 million on small-cap equity funds, and the other $3 million on managed funds across Australian listed securities, eligible corporate bonds or notes, annuities and property. They need to stay invested for four years and live in Australia for 160 days of that period. Wealth preservation "The cost of the visa has gone up the risk curve," said David Chin, the Sydney-based managing director of Basis Point Consulting. While Chinese people are willing to make risky investments in other circumstances, they view their immigration decisions differently, he said. "The visa is about wealth preservation and quality of life." Chinese nationals accounted for 91 per cent of applications under the old program, Goldman Sachs estimates. Australia's rule changes came just as the world's second-biggest stock market started to crash. The Shanghai Composite Index, which tumbled 43 per cent before rebounding 24 per cent through Tuesday, is more than twice as volatile as the Australian benchmark equities index. For smaller stocks the disparity is even bigger. The S&P/ASX Small Ordinaries index traded Tuesday at 15.5 times estimated earnings, compared with 61.8 on the ChiNext Composite Index in Shenzhen. The ChiNext soared as much as 179 per cent this year through its peak in June before sliding 54 per cent to its September low. The measure is still up 97 per cent in 2015.

Low risk "The revised settings for the Significant Investor Visa may impact on demand from applicants attracted to the previous framework's openness to residential real estate schemes and low-risk assets," the Department of Immigration and Border Protection said in an e-mail. "It is too soon to identify any ongoing trends." While direct purchases of real estate didn't count toward the $5 million total under the old rules, migrants could invest in residential property through managed funds. This has now been capped at $300,000, or 6 per cent of their total investment. Chinese demand for Australian property is waning as an economic slowdown at home dents confidence, according to Credit Suisse. Australia isn't alone in its bid to tempt wealthy investors in exchange for some of the rights that its citizens enjoy. In the US, EB-5 visas, set up in 1990, have a minimum $US1 million ($1.4 million) requirement to create jobs and boost capital investment from foreigners. In the UK, overseas nationals who want to invest £2 million ($4.3 million) can get a decision on a visa within 3 weeks, though they need to apply to extend that after three years and four months. New fund

Kerry Series, chief investment officer at Eight Investment Partners, is looking to raise between $18 million and $50 million by November 16 for an SIV compliant fund that will list in Sydney in December. It will be able to keep as much as 20 per cent of the fund's assets in cash, and use futures or options to hedge bullish positions, he said. UBS started a fund in September targeting SIV holders needing to invest in small-cap firms. Australia granted 751 of the visas between November 2012 and March 2015 from 1679 applications submitted, government data show. "The change in requirements has led to a little bit of a hiatus," said Eight Investment's Series, who manages about $130 million. "We will see a slow ramp up in the remainder of 2015 but this is really a 2016 story." Bloomberg