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Research from Australian Agribusiness Group (AAG) has confirmed the depth of the collapse of the agribusiness managed investment scheme (MIS) market over the past year.
The latest end of financial year (FY) report from AAG painted the picture of a sector on its knees, with investor numbers, projects on offer and funds raised all significantly down compared to the previous financial year, and representing dramatic falls from the peak in 2006.
Fewer than two and half thousand investors participated in MIS offerings in FY2010, a 67 per cent fall from the previous corresponding period. From those investors the sector raised a paltry $103 million, a 59 per cent fall from the $250 million raised the previous financial year and a significant drop from the $1.41 billion raised in 2006.
Those investors who did participate did so with an average investment of $67,400, compared to $31,400 the previous year, but gearing levels were well down. The percentage of investors who geared their investment in 2010 was 38 per cent, compared to 62 per cent in 2009.
“Companies which could offer external finance at competitive rates rather than balance sheet funded finance operations were preferred investments during the financial year,” the report stated.
“The strength in corporate balance sheet positions appeared to be directly correlated to the level of interest in their product offered to the market as investors.”
Those that did receive market share had strong balance sheets, with Macquarie, TFS, Willmott Forests and Rural Funds Management accounting for 81 per cent of funds raised.
Nineteen managers shrank to just 11, with a corresponding drop in projects on offer. The research group described 2010 as the “second consecutive year of industry rationalisation for the MIS sector”.
The group said the collapse of FEA and Rewards Group at the onset of the selling season had “magnified the loss of investor and dealer group confidence in the sector”, and curtailed investment appetite “across all agri-sectors”.
The research house said advisers are now “erring on the side of caution” when considering recommending MIS investments. While a number of operators have amended their product structures to provide more protection for investors’ underlying investments, the group believes “further improvement is required” in this area.
The fall in support from agribusiness MIS investors has had a direct impact on employment opportunities in the sector. The number of new full-time employment positions fell to 36, compared to 115 new positions the previous year. Companies raising funds in FY2010 had 42 per cent fewer employees than FY2009 – just over 2,200 compared to more than 3,800 the previous year.
