Macquarie chief to face disgruntled shareholders

MACQUARIE GROUP will face investors today to defend a business model that remains under siege after unparalleled tumult in the world's financial markets.

MACQUARIE GROUP will face investors today to defend a business model that remains under siege after unparalleled tumult in the world's financial markets.

The group's new chief executive, Nicholas Moore, will face the general meeting in Melbourne this morning after the group's shareholders have experienced a drubbing alongside its US investment banking peers.

Macquarie Group's shares have fallen 52 per cent from a peak of $97.10 last year to close yesterday at $46.59.

It marks a significant change for Macquarie and its investors, who attended the general meeting last July enjoying a full-year total return of 52 per cent.

Macquarie Group has warned that its full-year profit of $1.8 billion is unlikely to be exceeded this year, amid the credit crisis pushing up the cost of debt and threatening to restrict broader corporate activity.

Analysts' consensus on profit forecast this financial year is $1.73 billion, which would represent the bank's first fall in profits in more than 15 years.

Investor concerns have also focused on Macquarie's highly geared investment funds as sentiment has turned against complex structures, high levels of debt and distributions paid out of capital rather than cash flows.

The poor performance of its private equity fund, Macquarie Capital Alliance Group, has led to its proposed privatisation and removal from the Australian Securities Exchange.

Macquarie's two listed flagship funds, Macquarie Airports and Macquarie Infrastructure Group, are trading 45 per cent and 41 per cent below their highs of last year.

Macquarie Group has used this poor performance as a buying opportunity in both funds, in the case of MIG spending more than $500 million and prompting speculation that it, too, would be privatised.

Despite public stumbles by those that would like to emulate externally managed funds, including Babcock & Brown and Allco, Macquarie Group has staunchly defended the business model it pioneered.

After its full-year results earlier this year, Mr Moore said there would be little change in strategy from that of his predecessor, Allan Moss.

An infrastructure analyst at JPMorgan, Kirsty Mackay-Fisher, said yesterday the sharp fall in the share prices of the listed infrastructure funds meant, in effect, that they were unlikely to be able to raise fresh equity. But she said she believed the negative short-term investor sentiment meant the sector was offering good value to long-term investors.

An equity strategist with UBS, David Cassidy, was uncertain about how externally managed infrastructure funds would recover from the rout.

"I'm not sure how that's going to play out," he said."The market's appetite for that model, in terms of capacity to raise funds, is pretty close to zero."


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