Future Fund boss defends vertical integration

Speaking as part of a panel discussion at the FSC Summit in Melbourne, Mr Neal argued that business models are not inherently problematic, and regulators should be wary of taking action against particular organisational structures.

“The business models themselves aren’t really the issue, so if [regulators] start to play in the zone of trying to find the right business model or the wrong business model, or outlawing a particular type of business model, that doesn’t seem right,” he said.

“The fundamental issue is an alignment issue.”

Mr Neal said conflicts of interest “occur in any chain” and regulators should look further than the business model to find where and how conflicts arise and address these issues instead.

“In any value chain you’ve got a whole series of principals and agents that have to deal with each other and manage each other’s interests,” he said.

“It’s really about that process, and so I don’t know what the industry is going to look like at the end of this, or what the commission’s recommendations will be, but I would hope that the industry is allowed to find the right solutions.”