The agribusiness industry will continue to show all the hallmarks of an immature branch of the investment industry unless it aligns itself with Australian equities rather than its own separate asset class according to Fiduciary managing director Graham Rich.
Speaking at the Resnik Commiunications Agribusiness Forum in Sydney yesterday, Rich says financial advisers, who ultimately reflect the attitudes of their clients, see agribusiness products as either too risky or too unknown, and products about which there is very little research.
The problem, according to Rich, is in the marketing of the products, which is not made any better by negative reports in the media about the Australian Securities and Investments Commissions slamming agribusiness schemes for having misleading prospectuses.
Taking as a given that perception is reality, Rich says agribusiness is battling for positioning in the minds of consumers.
“Consider the expression: ‘safe as houses’. The idea is you can bank on it. This shows tangibility is important for people’s consciousness to latch onto,” he said.
Rich says the agribusiness industry is yet to establish tangible images in the investment community, and importantly, the marketing of agribusiness products fails to point out benefits and at the expense of features.
“My perception of this industry is that the returns that are presented seem unrealistic, for example, 89 per cent out of an olive plantation. Risks are therefore seen as extremely high, which gives the industry the hallmarks of an immature industry which are all too evident, much like the problem facing managed funds in the early 80s.”
Rich said research conducted by Fiduciary showed that investors begin to get suspicious about prospectuses projecting returns above 15 per cent, even despite there being a very good chance that the business could make that figure.
Rich also asked whether those in the industry had done much market research about the advisers and dealer groups they should be targeting for distribution. In all his time at the helm ofMorningstar, he said he was never approached by any representative from the agribusiness industry.
“You have to get to the mind of the financial advisers, bearing in mind that 95 per cent of advisers are with major institutions dealing with the perceptions of ordinary investors.”
As an agribusiness product falls into the category of unlisted, domestic, direct shares subset of equity, it is “a long, long, way down the food-chain in an adviser’s perception”.
Rich said the more agribusiness tries to establish itself as an asset class unto itself, the more it would remain at the bottom of the food chain.
