Agri-MIS still too risky for advisers
The structure of agribusiness managed investment schemes (MIS) would need to change radically before they become attractive again to financial advisers, according to Professional Investment Services (PIS) managing director Grahame Evans (pictured).
Furthermore, agribusinesses would have to be "well diversified" with "substantial funds under management" and institutional ownership to complement retail investors, he said.
PIS had taken off all agribusiness MISs from their Approved Product List (APL) in March last year following the collapse of Timbercorp and Great Southern, announcing they would review the position in 12 months.
However, those products have not yet earned their spot on the dealer group's APL, with Evans saying he did not want investment schemes to rely on next year's investments to "pay the bills for this year".
"I think it is unfortunate that there are a couple of reasonable players like Macquarie and TFS who are collateral damage in respect to the industry, but I think the risks are far too great to put our toes back in the water," Evans said.
Managing director of researcher Adviser Edge, Shane Kelly, agreed the market required the next generation of MISs in terms of the structures and protections that are put in place.
"Until the market settles down and the failed projects are either restructured or purchased by other investment houses, the focus won't come on to MISs," Kelly said.
The researcher expected the agribusiness MIS inflows to be around $80 million this year, whereas that figure three to four years ago was over $1 billion.
However, Adviser Edge is seeing the remaining players in the market increasingly focus on investor protection and "putting in place structures that are more likely to allow the projects to actually reach their conclusions."
Nevertheless, neither Kelly nor Lonsec's head of agribusiness research Jim Blackburn anticipated that the agribusiness MIS sector would bounce back to its pre-global financial crisis position any time soon.
Lonsec is not covering the agribusiness MIS this year, due to "structural and corporate issues" within the sector yet to be resolved, according to Blackburn.
However, he said the model was still sustainable, as long as it was used only as part of the funding, instead of being the only or the dominant form of agricultural asset and operations funding - supporting Evans' claim.
"Over time, we expect things like [direct] land ownership and other structures become more evident," Blackburn said.
Analysts also agreed that greater investment in the sector would not occur until the aftermath of the failed schemes had completely played itself out.
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