In late 1998, following the introduction of the Managed Investments Act which significantly tightened the compliance regime for property fund managers, I was on the record as saying that some of the more unscrupulous operators of property syndicates and other unlisted property products would struggle to meet the new requirements to be enforced by the Australian Securities and Investments Commission. In other words, I said that "the cowboys may well ride off into the sunset". In many respects I was right. With one major exception, the unlisted property trust and property syndicate industry has not uncovered any operators that fit the de scri ption outlined above. And that should be of comfort to the tens of thousands of investors who have their money invested in these products.Rather than point to a number of skeletons waiting to emerge when the next property recession hits, my experience is that the sector is becoming more professional. Some say that this is due to the increasing number of institutional players in the unlisted market. I do not agree. Recent experience in Australia clearly demonstrates that a breakdown in compliance systems (or worse) can occur in the biggest of companies.
Thankfully, in each case of an imploding fund manager, there has been no shortage of competitors ready to pour over the entrails seeking funds under management at almost any price.There has been an element of Darwinism in the funds management jungle. The survival of the fittest in this case relates to those fund managers who focus on continuous improvement as a cornerstone of their business practice. The Australian Financial Service Reform Act has been an important driver of continuous improvement and certainly provides inexperienced or incompetent operators with an even higher hurdle to leap. The problem is that when people looking for short cuts in one area do not find one, they look for one somewhere else. And what has become apparent in the past 12 months is that many of them have found a fertile breeding ground in the property promotion game.I will not comment specifically on the practices of the various property seminar “gurus” around Australia. I have no first-hand knowledge of their activities. But whatever their bona fides, we must ensure that anyone providing advice on an asset class in Australia, property or otherwise, is licensed to do so. What type of licence? I will leave that to the authorities. What is important is that we ensure that cowboys lurking anywhere in the property sector saddle up their horses and find a watering hole somewhere else.
Anton Lawrence is a Director of Managed Investment Assessments.*
