Macquarie Bank — long the object of jealousy as well as legitimate criticism and not averse to making enemies along the way — is copping flak this morning from strange bedfellows: Babcock and Brown and The Australian.

What both parties may not know is that the constant and building sniping at the “Macquarie model” could be about to spell the end of new listed infrastructure funds with an M somewhere in the name.

B&B has a reputation for ruthlessness and fee charging that can make the Millionaire Factory look a little soft, but that doesn’t stop the head financial engineer Phil Green taking a none-too-subtle swipe at the Macquarie model in the Smage.

“I think at the end of the day infrastructure will get back down to — and to some extent it’s where we started — what is the underlying cash flow, what is it going to deliver, what’s its growth prospects and how good is the manager of those assets,” he told journalists yesterday.

“You can’t keep delivering growth out of revaluing assets and borrowing more money and distributing the cash. We expect over the long term our funds to perform in line with the underlying assets and that performance will be steady, it will be secure, it will be what it should be for infrastructure assets.”

Meanwhile The Oz is taking a harsh interpretation of Macquarie Infrastructure Group’s announcement yesterday of a $500 million buy-back. Says Robert Clow:

Macquarie Bank’s flagship infrastructure fund has been forced to sell stakes in its US toll roads to fund a share buyback and arrest a slide in its share price that would starve its parent of performance fees. The market liked the announcement yesterday – and probably not because of any thoughts about the fees that might flow back to MacBank.

While MIG is trying to get its share price rolling again, Macquarie overall is becoming jaded with the performance of its listed infrastructure funds because it thinks the market doesn’t understand the strength of its model.

The end result is that we’re unlikely to see any more Mac infrastructure funds listed. While MIG will pursue its international toll road business, Macquarie’s many other raids on infrastructure around the world will stay in the wholesale sector – nice, long-term deals with select major investors – usually super funds and the like.

That will provide a smaller target for the MacBank critics and let its infrastructure plays get on with what they should do best – provide long-term investment for funds with long-term aims, rather than the whims and fashions of the market.

Peter Fray

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