Macquarie Bank’s Nicholas Moore was paid $18 million last year and
pulls in more investment banking dollars than anyone else in Australia.
Based on his strong performance during a corporate governance debate in
Melbourne on Friday, he’s worth every penny for the Millionaire

For 90 minutes at Melbourne University, Moore slugged it out with two
of the most prominent sceptics of financial engineering of
infrastructure, Peter Doherty from Capital Partners and Anton Tagliaferro from Investor’s

There was some scepticism of Moore’s claim that only 2 of the 92
infrastructure assets Macquarie has bought since 1998 are in trouble,
or that a fund like Macquarie Communications Infrastructure Group had
knocked back 58 out of the 60 investment opportunities presented to it
by Moore’s 400-strong Macquarie deal making team around the world.

In terms of the appropriate structure, Moore said it could range from
Macquarie Bank doing every deal as a financial conglomerate with no fee
leakage or, at the other extreme, all 92 infrastructure assets being in their own fund.

Instead, Macquarie has settled on the halfway house of 24
infrastructure funds around the world with $31 billion of equity
supporting $60 billion in assets. He stressed that the bank has $1.7
invested to demonstrate its commitment, although much more than that
been extracted in various fees along the way.

Tagliaferro put up a powerful Goldman Sachs chart which suggested the
tollroad giant Macquarie Infrastructure Group (MIG) had paid $729
million or
64.5% of its cash flow over the past five years, although this ignores
the fact that most of the value has come from asset revaluations.

When Moore was asked what the various funds would have
returned without the performance fees, he claimed it would only be about 1-1.5
percentage points higher than the impressive 19.5% compound returns that have actually been
delivered over the years. Hmmm, those two claims don’t appear to add up. And what about the lucrative base fees?

The Age’s Stephen Bartholomuesz attended the debate and devoted his measured column to the exchanges on Saturday, while The Australian’s
Michael West should have been there, given that his feature on the topic
also appeared on Saturday. Alan Kohler was a lot more cynical and quite compelling in The Smage this morning, opening his column as follows:

It is surely only a matter of time before Macquarie Bank’s
management of its stable of infrastructure funds begins to fall like
dominoes. It is so obvious that unit holders in the 24 funds should
sack the Macquarie bankers that it must even dawn on the fund managers
who are under their spell or still grateful enough of the early returns
to ignore the benefits of removing them. And if the existing investors
don’t do it, the funds will be raided by burglars who do understand
what’s in the safe.

Crikey understands that fund manager Maple-Brown Abbott is leading the
charge to tackle the exorbitant fees that MIG has paid to its parent,
but neither they nor Kohler should underestimate the force of some of
the arguments mounted by Moore last Friday, who went into the debate
well prepared and with his eyes wide open.

It would be a major exercise building up the global tollroad talent to
operate MIG internally and then there are the poison pills, such as the
French Government being able to buy back the Autoroute Paris
Rhin-Rhones that MIG, Eiffage and another Macquarie fund recently
acquired for $11.3 billion.

Perhaps a more sensible course in the short term would be to negotiate
a significant reduction in both the base and performance fees, because
Macquarie Bank conceived of MIG and has created a lot of value over the
years – performance which has been handsomely rewarded.

Without access to those 400 Macquarie Bankers delivering deals around
the world, Bermuda-based MIG would have limited growth options,
although maybe it’s time to take a deep breath, slow down and manage
the sprawling empire for cash after a bewildering array of deals since
Macquarie first completely stitched up Jeff Kennett on Transurban 10