In what appears to be a return to its roots, Macquarie Group (ASX:MQG) has been listed as the world’s largest owner of alternative assets.
The investment bank’s infrastructure funds grew 7% last year, and gone close to doubling in the past three years, as pension funds, wealth managers and sovereign wealth funds seek investments with stable yields and provide some protection from inflation.
Macquarie’s portfolio now stands at US$95 billion, and outranks hedge funds, private equity funds and real estate funds, run by some of the largest financial services companies on the globe. That includes names like Blackrock, Bridgewater Associates, Goldman Sachs and CBRE Global Investors.
Macquarie made its name in listed infrastructure funds, extracting large management fees as well as other fees, before an outcry from minority investors forced the company to extract itself. At one stage Macquarie was the manager for Sydney Airport (ASX:SYD), and still retains management of the Macquarie Atlas Roads (ASX:MQA).
Now Macquarie’s Infrastructure and Real Assets (MIRA) division manages 49 separate funds, investing in sectors such as utilities, communications, agriculture, pay TV, roads and rail, real estate and transport. 56% of MIRA’s assets are in Europe, with North America accounting for another 30%.
The outlook looks bright for MIRA, as pension and sovereign wealth funds look for stable long-term assets as alternatives to the equities and fixed income asset classes. Pension and sovereign wealth funds tend to invest in assets for decades, rather than the short-term, and infrastructure funds appear to be the perfect vehicles. As an example, toll roads have long leases and generate fairly stable and growing revenues for many years. Likewise airports, power stations, gas pipelines, electricity infrastructure and wind and solar farms all have similar long life spans.
With some of Macquarie’s other divisions struggling, the investment bank appears to have gone back to focusing on what it knows best, while at the same time generating substantial management and other fees. Macquarie could be one for the watchlist.
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Motley Fool writer/analyst Mike King owns shares in Sydney Airport.
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