Macquarie Group’s Shemara Wikramanayake is ready to invest $24b

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At a time when rival investment banks struggled to make money out of financial markets trading and debt and equity capital markets businesses Macquarie was powering ahead towards what will be a record profit for the year to March 31.

When asked if Macquarie had diversified sufficiently to be able to ride through extreme volatility in financial markets, Wikramanayake gave a lengthy answer that could be interpreted as a firm yes.

“Markets in the last quarter of the calendar year had to be put in the context that it was a very short-term movement,” she says.

“So asset values came off a lot because of sentiment in the financial markets but they’ve corrected a lot into this year.

“As you saw we are exposed to equity markets and debt markets – the value of the assets under management fell, the value of the assets on the platform in financial services fell and in our very small cash equities business in terms of its contribution to earnings.

“The volume for the earnings came off but they were small in terms of the overall Macquarie Group.

“Similarly in debt markets, credit spreads blew out and sentiment in terms of issuance impacted MacCap.

“Having said that you know the underlying markets we were exposed to were way beyond just the financial markets as I mentioned at the presentation today.

“So we’re at a point where we are so diversified in terms of markets for the transportation of physical commodities or markets for bringing capital into renewable energy development that the impacts on us are often not dramatic.”

’As one door closes another opens’

Wikramanayake said the capital raised by Macquarie Infrastructure and Real Assets in the December quarter was significant and showed the inverse relationship between volatile equity markets and infrastructure investment.

MIRA raised $8.7 billion in new equity raised in the three months to December including $7.4 billion in Europe. It invested $1 billion of equity and made $1.2 billion of asset divestments. At the end of December MIRA had $24.3 billion of equity to deploy.

“When the world turns defensive infrastructure is an asset class it likes to go to and that creates good capital raising opportunities for us and the solid investing opportunities exist.

“As one door closes another opens when you have a very diverse business footprint the way we do at the moment.”

MIRA will be run by David Fass from April 1. He was formerly the CEO for Macquarie in Europe, the Middle East and Asia. He will be replaced by Paul Plewman, who was head of commodities and global markets in EMEA. The other appointment made by Wikramanayake was Shawn Lytle who is the new global head of Macquarie Investment Management.

The operational briefing was an opportunity to shed more light on the creativity within various divisions of Macquarie, something that is not well understood by many investors.

For example, the commodities and global markets division run by Andrew Downe out of Singapore had a strong third quarter thanks to its leading position in North American gas and power.

It is the second-largest physical gas marketer in North America. Its futures business showed improved results due to increased client activity and volumes.

‘My learning curve is steep again’

The risks taken in Macquarie’s futures positions are arguably less risky than those of other players because it acts as a physical, financial and logistical intermediary. It purchases cargos of oil and gas from producers, hedges price risks and delivers product to consumers.

Wikramanayake is clearly enjoying her new role. It is apparent reading between the lines that she was up for a bigger challenge given that the Macquarie Asset Management “machine” was functioning well without much need for intrusive management guidance.

“Look, I’ve had 30 years here where for a lot of it I have been on a plane,” she says.

“What I’ve been finding is that my learning curve is steep again.

“So I’ve had 10 years in the asset manager and that was a lot of interesting learning and it broadened my perspective but we’d gotten to the point where we had very good leadership under me and they were just getting on with things.

“So stepping into this role I’ve really had to open my mind again and reach out to people about new businesses, which has been extremely stimulating.

“I’m having to learn again about the investment bank and going around and seeing a lot of our clients which I’m really enjoying and learning about their businesses and industries.

“I’ve also been getting deeper into the CAF Leasing as well as the principal finance business and the banking business.

“The commodities and global markets business is particularly interesting and you know an area that is very stimulating for me to get to know.

“The way this place operates is there are 15,000 amazing people and they’re all getting on with incredible businesses.

“It’s not like my being here for a month is making a huge difference on whether that machine keeps moving. The big thing I’m having to do is get myself in a position where I can make sure those people are empowered to be nimble and keep responding to opportunities or challenges as they see them.”

TONY BOYD

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