Managed Investment Schemes Fail Says NFF

Managed Investment Schemes (MIS) are failing to promote sound investment decisions in rural and regional areas and can undermine Australian agriculture as a competitive investment option for people in metropolitan areas, the National Farmers’ Federation (NFF) said today.
Responding to the proposed Taxation Arrangements for Plantation Forestry, the NFF is pressing for the debate to be broadened to deal with the MIS structure and the staggering expansion of non-forestry MIS – growing from 31% to almost 50% in the past year alone.
“Decisions to invest in MIS are largely based on the tax deductibility of the investment, not long-term profitability,” NFF Vice-President Charles Burke said. “Therefore, NFF is concerned that commodity markets and land values are being distorted.
“MIS have seen investment into industries based on unrealistic and unsustainable price expectations, resulting in an over-supply of certain commodities and a distortion of basic market signals – exacerbating the ‘boom-bust’ cycle. On land values, the windfalls generated by management fees of MIS have seen these schemes bid from a position of unfair advantage owing to their access to capital.
“NFF supports the provision of direct and transparent mechanisms that provide targeted assistance to those sectors that require help in managing risk. However, MIS has had a significant impact – beyond its original intent – on the agricultural sector, and we question whether this indirect form of support effectively delivers targeted assistance to an area of market failure.”
The NFF also noted the lack of publicly available data on the performance of MIS, their cost structures and real rates of return.
“While we recognise that some MIS already provide detail on the long-term financial performance of the schemes, NFF does not believe the current system is delivering accurate and independent information which can be commercially evaluated,” Mr Burke added.
“Transparency is essential to deliver market accountability and ensure confidence in agriculture as a reputable and competitive investment option. At present, this is lacking from the existing and proposed MIS structures.”