Merrill Lynch & Co. last week became the first U.S. asset manager to take advantage of a new Australian tax law that makes U.S. mutual funds more inviting to Australian investors.

The New York-based company has made 11 of its 83 Merrill Lynch Asset Management Funds available in Australia, including a global technology fund, a corporate bond fund, and a euro fund.

Several U.S. asset managers offer Australian-based funds. But U.S. mutual funds have been a particularly hard sell until the new law took effect in June. Before that, tax consequences would have made it too expensive for Australians to buy them in many cases.

"I suspect we'll see a few strong U.S.-based funds marketed down under, and if history is anything to go by it'll be those that get here first that grab market share and keep it," Deirdre Keown, manager of products and communications in Morningstar Inc.'s Australian office, said in an e-mail.

Morningstar's Australian unit has been approached by a number of U.S.-based fund managers wanting to use its "star" ratings to promote their funds in Australia. Alliance Capital Management of New York and Franklin Templeton of San Mateo, Calif., are two of them, Ms. Keown said.

An Australian-based fund manager plans to offer a product made up only of U.S. funds, Ms. Keown said. She declined to name the manager because of a confidentiality agreement.

Merrill requires a minimum investment of $1,000. For now its fund sales in Australia are being handled only through its 160 sales representatives there, said a spokesman for the company, which manages more than $515 billion of mutual fund assets in three families. The Merrill Lynch Asset Management Funds hold $249 billion of those assets.

Merrill plans to sell the funds through third parties, such as independent financial advisers, the spokesman said.

As the fund market in the United States has matured, companies have increasingly turned overseas to increase distribution, to countries like Japan, which in recent years has loosened restrictions on ownership and distribution of mutual funds.

Australia, which has a small market -- with about $400 billion of assets under management -- is growing quickly, and the impact of U.S.-based funds being sold there will be "very significant," Ms. Keown predicted.

By contrast, the U.S. fund industry had $6.031 trillion of assets in July, according to the Investment Company Institute.

Ben Phillips, a consultant at Cerulli Associates Inc. of Boston, said U.S. fund firms could face problems in Australia similar to those encountered in Japan.

Japanese investors want funds that invest in Japanese securities, and "there's not that many of those in the States right now," he said. "It's not an effective strategy" to offer U.S.-based funds in other countries without regard to those nations' unique market conditions.

The Merrill Lynch spokesman, however, said the company found during due diligence that "what we are offering right now is a very representative selection." He said the firm expects demand for the funds to be high and will probably offer additional portfolios later.

Meanwhile, other companies are stepping in to compete.

"You have a public that's very interested in saving for its own retirement, and mutual funds are emerging as a vehicle for them to do that," said a spokesman for Alliance Capital, which plans to sell 20 U.S.-based equity funds in Australia.

They will be offered primarily through wrap programs sold by Australian banks and trust companies, the spokesman said, adding that selling funds overseas is a "convenient way for fund companies to expand distribution."

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