Word: modell
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...investors, all this looked good, because roads and bridges with little competition should produce a steady return via tolls for generations. But with asset prices falling and easy debt a thing of the past, some believe the Macquarie model is in for a shakeup. JP Morgan's Brian Johnson says it is "likely dead...
...Morris, an analyst with stockbroker WiseOwl.com. "Now that the storms have come, they can't help but watch their house subside into the ocean." And Macquarie? More diverse sources of revenue mean "it's better built to weather the storm," Morris says. But the borrow-to-buy infrastructure model "is dead in the water...
...High debt levels aren't the only problem with the Macquarie-model funds, according to a tough review by corporate governance service RiskMetrics. It found that the funds also pay too much for assets and charge too much in fees, and that their operations lack transparency. "Our real concern is disclosure," says director Dean Paatsch. "The investment funds are asset vehicles that have outsourced 100% of the assets' management to a third-party company, but the terms ? are not known...
...Paatsch says that in the current market turmoil, the lack of such information erodes confidence. Investors whose shares in a fund lose most of their value would normally want to sack the manager, but with the Mac model, "you don't know what your options are." In the case of B&B Power, for example, "if you sack the manager you'd end up in the ridiculous situation where you'd pay them 25 years' worth of management fees - that's crazy." The review also noted that the funds are allowed to act in ways that normal companies...
...says it's got the message that it needs to change, but it doesn't agree the Mac model is dead. It is sacking a quarter of its 1,600 staff and selling off assets like Spanish wind farms and a Tasmanian power station. New CEO Michael Larkin says deals will be curtailed and executive pay based solidly on "investment outcomes." It remains to be seen if those remedies have come in time to save the patient...