Paul Keating’s mandated superannuation
system sure has created plenty of multi-millionaires in the funds
management game. Now two new players have showed how lucrative ticket
clipping can be after “independent” house 452 Capital yesterday did a
deal with industry behemoth, the Commonwealth Bank.

According to
reports today, former Goldman Sachs investment banker Warwick Negus has
sold his 30% stake in 452 Capital to the CBA for about $30 million and
taken a job running Australia’s biggest funds management operation. If
someone gives you $30 million you wouldn’t feel the need to go a work
for a bureaucratic bank, so the CBA has obviously handcuffed Negus for
a number of years.

This
leaves 452 Capital’s majority owner and keen Crikey supporter Peter
Morgan knocking on the door of the Rich List, as he made plenty in an
earlier life running Perpetual’s large equities portfolio before
quitting and causing the share price to tank. With $4 billion under his
control, there’s plenty of fee revenue to justify a $100 million
valuation.

Whilst Crikey admires the corporate governance work
of Morgan and 452 Capital, it is sad to see even more concentration in
a funds management system already dominated by the major banks. Morgan
has retained 452 Capital’s independence in his parting of the ways with
Negus, but the CBA will surely be able to exercise some influence,
especially with one of the 452 co-founders now running the bank’s funds
management operation.

Observers who thought that David Murray
had more than his fill of multi-millionaire fund managers after the $30
million-plus Chris Cuffe “termination” are today surprised that he’s
deposited another $30 million into the pockets of one paper shuffler.
Good stock pickers obviously add plenty of value in a system
approaching $1 trillion under management, but you have to remember that
most of this wealth has come out of the locked up superannuation of
millions of Australians.

Successive governments have stood back
and forced people to lock away their savings for years whilst allowing
a free-for-all on the fees that managers extract to invest this giant
pool of money. In my opinion, no fund manager should be allowed to
charge more than 1% a year on an account that has been mandated by
government legislation. That would end some of the easy money that sees
a business like 452 Capital created by a couple of suits three years
ago suddenly worth $100 million. If only every other industry was that
easy.

452 Capital has sensibly marketed inself to the powerful
and high-performing industry funds so Morgan and Negus have joined Mike
Fitzpatrick in making tens of millions out of Gary Weaven’s army of
low-cost, not for profit, union-related funds. Good work if you can get
it.

Crikey’s funds management talk and Sydney pub night

All of this will make for an interesting talk at the ASX headquarters in Sydney tomorrow. Check out the program of the ASX/SMH “Finance Unzipped” seminar here and drop us a line to [email protected] if you’ve got any thoughts on the topic, “Shareholder rights: Is your fund manager looking after you?”

And
don’t forget the Sydney pub night this evening from 5pm at The Nippon
Club, which is in the basement of 229-231 Macquarie St, just opposite
Parliament House.