Macquarie Group, the Australian bank, has shaken up its infrastructure investment business by cutting more than a 10th of its staff, curtailing the life of its latest European fund and granting investors a discount on fees.
The overhaul at Macquarie highlights how the credit crisis has dented the confidence of even one of the world’s biggest investors in infrastructure assets, with about A$100bn ($98bn) under management.
Dubbed Australia’s “millionaires’ factory”, the investment bank shot to prominence during the market bubble for using large amounts of debt to buy infrastructure assets, such as airports, toll roads and water utilities. The assets were bundled into listed and unlisted Macquarie vehicles designed to offer investors predictable long-term yields.
But, as it grapples with the economic downturn, Macquarie has taken an unusual backwards step by making about 60 people redundant in its 590-strong infrastructure investment team. It has also cut ties with most of its listed funds by selling its interests after asset values dropped and investors complained about high fees.
The restructuring comes after Macquarie closed its third European infrastructure fund to new investors at €1.2bn ($1.6bn), less than a quarter of the initial €5bn target, and far below the €4.6bn raised for its previous European fund.
Its third European infrastructure fund is three-quarters invested but contains only two investments – stakes in Brussels and Copenhagen airports. Some investors are concerned about risk concentration.
With Macquarie hoping to raise €2bn-€3bn for its fourth European infrastructure fund, it has sought to assuage investors’ concerns by cutting its annual management fee on the third fund from 1.5 to 1.25 per cent.
It has also shaken up its top infrastructure team. John Roberts in Sydney has stepped up to become chairman of the entire funds group, handing over the role of global head to Martin Stanley, the London-based former boss of its European infrastructure funds.
Mr Stanley told the Financial Times that the changes stemmed from the recent shift of the infrastructure unit out of its investment bank, Macquarie Capital, and into its asset-management unit, Macquarie Funds Group.
“We looked across the group and said there were some things we could do better,” he said.
Many of the redundancies had been among support staff, such as secretaries, which are now assigned only to top executives. Mr Stanley said Macquarie was still hiring after recently appointing 10 graduate trainees to its infrastructure team.