page_title: Great Southern Group
section_title: Great Southern and the regulation of managed investment schemes (MIS)
hierarchical_section_title: Great Southern Group / Great Southern and the regulation of managed investment schemes (MIS)
caption_attribution_description: English: Eucalyptus globulus (habit). Location: Maui, Piiholo
context_page_description: Great Southern Group was a group of Australian companies that was notable as the country's largest agribusiness managed investment scheme business.
  The company was founded in 1987 and became a public company in 1999. It expanded its MIS business rapidly in the 2000s, supported by favourable tax regulations for these types of investments. Most of the Group's business was in plantation forestry to supply woodchips for the pulp and paper industry, but in the 2000s it diversified into high-value timbers, beef cattle, olives, viticulture, and almond production. The company's after-tax profit peaked at A$132 million in 2006, but by 2008 had deteriorated to a A$63 million loss.
  The Great Southern companies attracted debate and criticism associated with the operation of managed investment schemes generally, and the environmental performance of their Tiwi Islands operation in particular. On 16 May 2009, as a result of worsening economic conditions and regulatory issues, the GSL, GSMAL, GSF and other subsidiaries of GSL entered into voluntary administration. Ferrier Hodgson was assigned as liquidator of Great Southern Group.
context_section_description: Great Southern and its nearest industry rival Timbercorp were estimated as having 43 per cent of all managed investment schemes (MIS) business in Australia. In contrast to other MIS industry participants, for which MIS activity is only a small part of their operations, managed investment schemes were 100 per cent of Great Southern Group and Timbercorp's business.
  Agribusiness MISs offer certain advantages to investors, dispersing investment risks across a large pool of investors and, through tax concessions, sharing those risks between the private investor and the taxpayer. The schemes were intended to overcome failures in the market for risk, and in the area of forestry reflect the fact that Australia has always subsidised plantation development.
  MIS schemes however have a long history of criticism. Reports from the Rural Industries Research and Development Corporation (RIRDC) in 2000 and 2004 were reported to have found the schemes performed relatively poorly, in one case relating an analysis "of schemes offered to the public in 2002–03 [that] found that less than 10 per cent were sufficiently sound investments to warrant their recommendation". In 2006, another RIRDC report in 2006 observed:
  Along with other studies, our analysis suggests that the MIS sector (but not all MIS) continues to
  perform poorly with respect to realistic or actual rates of return versus marketed rates. There are
  limited rights for investors. Issues arising from the large number and small economic size of the retail
  
  investor population and those arising from asymmetric information dominate the economics of MIS.
  The Australian Securities and Investments Commission (ASIC) was also reported to have identified issues with inadequate disclosure of information to potential investors, poor performance of the investments, and high management fees for agricultural MIS schemes. In 2003, the commission commented that it "has deployed a disproportionate percentage of its resources to the regulation of this sector, which represents only a minority of funds under management". In 2010 it commenced revision of disclosure rules, prompted by "recent turmoil in the agribusiness scheme sector".
  The Great Southern Group relied significantly on financial planners and accountants recommending their MIS products to investors. The company was paying commissions of ten percent – high by industry standards, and similar to those paid by other failed investment businesses including Westpoint Corporation and Storm Financial. It was also spending a lot of money on recruiting financial advisers to sell its products. One report indicated that A$137 million was spent on "commissions, marketing and promotion in two years to 2008". Some accountants, with Great Southern's support, were recommending the agribusiness investment schemes, though they did not have a financial services licence; one report suggested over half of Great Southern's MIS sales were coming through accountants, often tax specialists from small practices. These practices had been questioned for several years by the corporate regulator ASIC and some market analysts, and were widely criticised following Great Southern's collapse. Some experts were critical of the lack of knowledge and expertise of the investment advisers recommending agroforestry MIS schemes.
caption: Eucalyptus globulus, the main plantation species grown by Great Southern in Victoria.
  Image: Forest & Kim Starr
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