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The managing director of Professional Investment Services (PIS) has questioned the role and value of investment research in light of recent failures in the agribusiness managed investment scheme (MIS) sector.
In particular, PIS managing director Grahame Evans questioned the willingness of research houses to ‘stand by’ one-off ratings given to fixed-term investment products, such as agribusiness MISs.
In discussing recent collapses in the agribusiness MIS sector, Zenith analyst Dugald Higgins said those seeking to attribute blame to research houses must “remember that a ratings house assessment of an agricultural MIS is a point in time snapshot of an illiquid product”.
“Something that rates four stars in 2005 will not necessarily warrant four stars in 2010.”
But Evans said the “suggestion that it is a ‘point in time’ basis underscores the fundamental concept of ‘all care, no responsibility’ proffered by researchers”.
Meanwhile, in an interview with Money Management’s 4minutes program, van Eyk Research chief Mark Thomas notably omitted research houses from a list of groups that had contributed to the loss of investor funds in the sector.
“Who’s to blame? There’s a lot of people to blame, there’s the Government, the advisers, the practices of the operators and, ultimately, they all have to share in it,” Thomas said.
Responding to the comments, Evans questioned how researchers could ‘purport’ to be experts and “accept money under false pretences” if they are not willing to stand by their research.
“There is a reliance on research as part of the value chain for advice. If [advisers] cannot rely on research then what value do [research houses] offer and why should they continue to profit if they offer no value? Researchers, if we – your customers – can’t rely on your advice either fix your processes so we can or stand aside and let someone else fill this important position.”
Morningstar co-head of fund research Tim Murphy said recent debate about agribusiness MIS products did not affect his group.
“We have never issued a research report on agribusiness MISs because we have never seen an agribusiness MIS that has investment merit, and we don’t accept payments from fund managers to rate product,” Murphy said.
“Everyone who has published research reports on agribusiness takes payment for ratings.”
PIS uses Lonsec and van Eyk Research. Van Eyk Research outsources its agribusiness investment research to boutique firm Adviser Edge, a group that does accept payment for ratings.
PIS also used Australian Agribusiness Group research for its agribusiness investments. The group said each of the agribusiness schemes it had invested in had received a rating of three stars or above out of a possible five stars. The group said all FEA projects it had invested in had been rated four stars, although Money Management is waiting for confirmation on which research house issued the ratings.
