Macquarie Group, the largest private manager of infrastructure assets worldwide, is seeking to distance itself financially from its listed specialist funds, many of which have been trading at record discounts to their net asset values in recent months.
“Macquarie has no outstanding capital commitments to its listed specialist funds. It has no plans to increase its investment in the listed funds,” the firm said in a statement.
Last year, the firm continued to buy shares in its so-called “satellite”, or specialist listed funds. It nearly doubled its stake in Sydney Stock Exchange-listed toll road developer Macquarie Infrastructure Group (MIG) from 9.8 percent in January to 17.3 percent in July before MIG announced a share buyback of up to 10 percent of its securities in August.
Despite the buyback, shares of MIG and many other listed funds managed by Macquarie have continued to plummet, prompting speculation that the firm would need to raise capital amid mounting losses from the funds. Amid this speculation, Macquarie shares fell to a 10-year low of A$15 (€7.5; $9.5) in early trading on the Australian Stock Exchange on Monday.
Macquarie responded by saying that it has no plans to raise further capital and that its listed funds will provide less than 5 percent of its operating income before impairments for the year ended 31 March 2009.
Macquarie’s holdings in its specialist funds have been at the forefront of the nearly A$2 billion in write downs and impairments the firm announced for its latest fiscal year.
During its half-year ended 30 September 2008, Macquarie recognised more than A$1.1 billion in write downs and impairments, of which 60 percent were attributable to its strategy of co-investing in its funds and assets, according to an operational briefing.
Last month, the firm announced an additional A$900 million in impairments, of which $700 million came from assets under management, co-investments and trading provisions.
Not all of Macquarie's investments in its listed funds have resulted in write downs. The firm has not written down its holdings in MIG and Macquarie Airports (MAp), saying that their share price doesn't reflect the underlying value of the assets they own.
MIG, MAp and other funds have various initiatives under way, including major asset sales, debt refinancings, share buybacks and fund privatisations that are “likely to result in a return of capital” from them over the next six months, Macquarie said in a statement.
Macquarie shares recovered 10 percent in Tuesday’s trading, closing on A$17.4 per share as various market reports surfaced that the firm met with some of its big institutional investors to address market speculation.
Reports have also surfaced that the firm will be cutting more jobs in addition to the 1,000 jobs it eliminated between 30 September 2008 and 31 January 2009.
Sources within Macquarie’s New York office confirmed that people have been laid off this week within Macquarie Capital Advisors, Macquarie’s advisory arm.
A spokesperson for Macquarie did not return a call seeking comment.