Tuesday, September 2, 2008
"The global credit crunch may be claiming another victim: the listed infrastructure fund. ... The biggest operator of infrastructure funds by market capitalization, Australia's Macquarie Group Ltd., is considered much healthier by analysts, but it faces its own investor skepticism. ... The moves mark a sharp turn in the fortunes of a business structure that has come to be known as the 'Macquarie model.' ... A Macquarie spokesman said the investment bank is committed to its listed funds and that the firm will look for ways to deliver value to investors, a process that could include divestitures, on a case-by-case basis. ... Under the listed-fund model, a company like Babcock buys highly regulated infrastructure assets with generally predictable revenue streams and packages those assets into funds it manages for a fee. Many of the publicly traded funds loaded up on debt to jack up returns. Macquarie, which is credited with coming up with the infrastructure model, designed these products specifically for Australia's ballooning pension assets and pitched them as investments that provide stable returns without falling victim to the vicissitudes of the global economy. ... The Macquarie model soon came under fire from skeptics. Critics say the funds have often relied too heavily on cheap debt and soaring asset prices and pay high fees to the management companies. Dean Paatsch, a Melbourne analyst at RiskMetrics Group, calls the funds 'governance Frankensteins'," Laura Santini at the WSJ, 22 August 2008.
These things are disasters waiting to happen. See my 3 October 2007 post. Connie Yu, are you listening yet? Come home!