Fernando MonteiroWhere is Macquarie Heading Now?
June 16th 2009 05:34
For 16 years up to 2008 Macquarie Group roared ahead. Its earnings, its satellite fund valuations and its share price at almost $100 where the envy of the market. Alan Moss was the man at the rudder of the ship. Then, suddenly, it all came to a halt. The credit crisis ensued, capital was not anymore cheap and plentiful as it used to be, infrastructure started losing money, valuations came down, and the whole thing looked like in tatters.
The business model that gave Macquarie the success that distinguished it was this: it would buy infrastructure assets around the world with credit and paying always a much higher price than the competition; then it would sell these assets to one of its various satellite funds which then sold their units to retail and institutional investors. These, then, beared the investment risk.
Buying at high prices was possible because Macquarie used credit, then cheap, but it also had the effect of jacking up valuations and allowing it to charge hefty management and other fees calculated on these valuations of the satellite funds.
It should be noticed though, that at least in bull markets, Macquarie makes the bulk of its money from its investment banking activities, namely advising on mergers and acquisitions. This has now dried up.
It is not foreseeable any change in the credit panorama and the current economic recession will be with us for some time to come. Macquarie has had to make large downward re-valuations of its funds assets which are still undervalued in terms of their unit price, its net profit halved, its share price, though rising, is now around $37.00.
Macquarie has plenty of liquid assets, around $20 billion, and has been buying some opportunistic assets around the world. But, on the whole, Macquarie is today a far cry of what it used to be.
The question now is this: is Macquarie going to re-make itself, create a new business model, have a new idea and aim high or is it just going to keep buying some assets here and there as they come by, booking de-valuations, falling victim of short-sellers, reassuring the market and the like? The people at Macquarie is known for being extremely smart, Mr Nicholas Moore, M.D. included. Could someone answer my question: where to from here?
The business model that gave Macquarie the success that distinguished it was this: it would buy infrastructure assets around the world with credit and paying always a much higher price than the competition; then it would sell these assets to one of its various satellite funds which then sold their units to retail and institutional investors. These, then, beared the investment risk.
Buying at high prices was possible because Macquarie used credit, then cheap, but it also had the effect of jacking up valuations and allowing it to charge hefty management and other fees calculated on these valuations of the satellite funds.
It should be noticed though, that at least in bull markets, Macquarie makes the bulk of its money from its investment banking activities, namely advising on mergers and acquisitions. This has now dried up.
It is not foreseeable any change in the credit panorama and the current economic recession will be with us for some time to come. Macquarie has had to make large downward re-valuations of its funds assets which are still undervalued in terms of their unit price, its net profit halved, its share price, though rising, is now around $37.00.
Macquarie has plenty of liquid assets, around $20 billion, and has been buying some opportunistic assets around the world. But, on the whole, Macquarie is today a far cry of what it used to be.
The question now is this: is Macquarie going to re-make itself, create a new business model, have a new idea and aim high or is it just going to keep buying some assets here and there as they come by, booking de-valuations, falling victim of short-sellers, reassuring the market and the like? The people at Macquarie is known for being extremely smart, Mr Nicholas Moore, M.D. included. Could someone answer my question: where to from here?
| 41 |
| Vote |
subscribe to this blog
