Principal of boutique investment research house Capital Partners, Peter Doherty, stressed that listed infrastructure was a new asset class and investors should be cautious in approaching it, despite the impressive return characteristics of some listed vehicles to date. He also argued that while the large fees paid to the managers and promoters of these vehicles had attracted considerable attention, investors should remember that promoters of infrastructure funds took big risks in purchasing assets and launching these funds.

The other two panelists were Executive Director of Macquarie Bank, Nicholas Moore, a major participant in the growth of listed infrastructure funds, and the Investment Director of Australian equities funds manager Investors Mutual, Anton Tagliaferro.

Tagliaferro said Australia's accounting standards and corporate disclosure rules had not kept pace with stapled securities. He said the complexity of the listed infrastructure funds-usually attributed to attempts to seek the best possible financing structure for investors-did make it hard to assess their accounts and called for new regulations and accounting rules specifically designed for the sector.

Attendees also heard from ISS Australia's Managing Director, Dr Geof Stapledon, who raised several emerging concerns about new features of executive compensation in Australia. Australian companies over the past four years have largely abandoned traditional options from remuneration packages, instead preferring to use 'performance rights': zero priced options that vest based on company performance against a range of indicators, the most common of which is total shareholder return against a peer group of companies.

Dr Stapledon also highlighted the results of research undertaken by ISS Australia into the 'real' value of executive share options. The study examined option grants made to CEOs of ASX 100 companies, and compared the value the company attributed to the options at the time they were granted, with the actual value realised by the CEO when exercising the options 3 or 4 years later. The study revealed that the average 'fair value' attributed to options at grant date turned out to be only 31% of the actual value realised by the CEO. A policy issue stemming from the research is that there is inadequate disclosure about the assumptions made in the determination of 'fair value' of options. In particular, there's a lack of transparency about the 'discounts' applied to the value of the options to reflect the possibility that they won't vest (due, for example, to performance hurdles not being satisfied, or the executive resigning before the vesting period has elapsed).

And in some cases Dr Stapledon said companies were not disclosing the performance targets against which long term incentives were awarded, instead saying these targets were "to be determined by the board." This occurred when companies used internal measures of performance such as earnings per share or return on capital employed.

While investors were sympathetic to companies' qualms about not disclosing specific internal performance targets against which short term incentives were judged, Dr Stapledon said investors were not sympathetic to long term incentives, especially equity grants, being awarded based on hurdles that were not clearly disclosed and transparent.