MIS not a long-term business model: aquaculture managers

Two aquaculture managed investment scheme managers are the latest to defend their businesses in the wake of the collapse of Timbercorp and Great Southern, saying the business model is more appropriately used as a short-term funding solution than a long-term business model.

The chief executive of Arafura Pearls, Andrew Hewitt, said MIS funding is not regarded as a permanent practice for his business and is only used to partially finance business expansion plans. He said both Arafura Pearls and another major Australian aquaculture company, Australian Bight Abalone, see MIS as an alternative to debt funding, rather than a business model in itself.

Australian Bight Abalone and Arafura Pearls have both said an inquiry into the MIS sector is needed to restore public confidence after the collapse of Great Southern and Timbercorp.

Both managers reported inflows have been hit by uncertainty due to the publicity of the failures.

Australian Bight chief executive officer Andrew Ferguson said the two aquaculture managers have a different approach to business compared to the two timber businesses.

“We are effectively aquaculture companies that use MISs to develop and grow our businesses, rather than funds managers that invest in agriculture,” he said.

“Both companies have low debt ratios and the funds raised from investors are used to develop infrastructure in regional Australia, rather than being used to pay dividends.

“This means the money goes towards the farms rather than to marketing costs or directors' fees.”

Arafura chief executive officer Andrew Hewitt said aquaculture was a relatively new industry with enormous under-capacity and strong international demand for product.

“Both our companies use MIS as an alternative to debt funding and see this as a way of developing the infrastructure needed to produce the level of product being demanded by our customers,” he said.

“We don’t see MIS funding as a permanent practice, but it does provide the short-term funding required to develop our businesses.”