When I analyse the ASX financial services sector, I believe that Macquarie Group Ltd (ASX: MQG) stands out in a league of its own. Perhaps Challenger Ltd (ASX: CGF) is the only other business that comes close.
Macquarie recently provided an operational update to the market, you can read a summary here.
In the report, Macquarie touched on what, in my view, makes it a stand out business. It is one of the largest and leading alternative asset managers in the world.
Certainly when it comes to infrastructure funds, I believe Macquarie is the best in the business and it is the largest infrastructure asset manager in the world according to a 2017 Global Alternatives survey by Willis Towers Watson.
Looking at the medium to long term, Macquarie sees growth opportunities for its business in the following three areas:
- Infrastructure. Macquarie estimates that infrastructure investment required globally will reach US$45 trillion by 2030. Its dominance in this sector means that Macquarie is best placed to take advantage of this.
- Energy. Macquarie estimates that investment in new power generation will be approximately US$6 trillion by 2030. In my view, the bulk of this new investment will be in renewable energy sources and given that Macquarie is one of the world's largest investors in renewable energy, it is well placed to benefit from this mega trend.
- Technology. As Macquarie's portfolio grows, it aims on using technology to leverage data analytics in portfolio management and automate middle and back office processes. It's not exactly clear to me how Macquarie will achieve this or how much cost savings can be generated from this, but at least management are thinking along the right lines. This could be something to follow up on in future reports.
Acquisitions continue to play a role in Macquarie's growth strategy even though its $483 billion in assets under management means that deals such as the one to acquire GLL Real Estate Partners, a $10 billion German-based manager of real estate assets in Europe and the Americas hardly make the headlines.
Overall, whilst it is sometimes compared to the big four banks the Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd. (ASX: NAB), Westpac Banking Corp (ASX: WBC) and Australia and New Zealand Banking Group (ASX: ANZ); I think Macquarie clearly stands out in a league of its own.
