RICH PICKINGS: The young and the restless

A select group of Australia's wealthiest entrepreneurs under the age of 40 have weathered the downturn well and are now positioning themselves to make a fortune from the coming recovery.

The young guns are fighting back. While those entrepreneurs on the list of Australia’s richest investors aged 40 and under have taken a battering during the crisis of the last 12 months, there are signs that there fortunes may be turning.

The 10 entrepreneurs on the list – including Seek boss Paul Bassat, iiNet chief Michael Malone, and PIPE Networks founders Stephen Baxter and Bevan Slattery – have seen their total sharemarket wealth increase 9 per cent since the start of the year, compared with a 1 per cent rise in the All Ordinaries over that period.

NameCompanyCurrent valueValue at Jan 1 12 months ago
Paul BassatSeek$46.51 m$44.01 m$79.96 m
Matthew RockmanSeek$36.05 m$34.11 m$61.98 m
Michael MaloneiiNet$34.12 m$25.80 m$38.81 m
Bevan SlatteryPIPE Networks$30.44 m$24.56 m$36.16 m
Stephen BaxterPIPE Networks$30.25 m$24.41 m$35.93 m
Richard BellReverse Corp$13.51 m$20.08 m$39.07 m
Mick McMullenNorthern Iron$5.61 m$4.51 m$16.95 m
David McMahonVita Group$4.79 m$7.53 m$30.12 m
Andrew McKenzieEuroz$3.82 m$2.83 m$8.19 m
Jeremy ReidEverest Financial Group$3.01 m$3.28 m$31.48 m
TOTAL$208.15 m$191.17 m$378.70 m

Of course, the 9 per cent improvement in the value of this group’s wealth since the start of 2009 is likely to be cold comfort to most on the list. In the last 12 months, the group’s total wealth has fallen from $378 million to $208 million in the last 12 month, a drop of 45 per cent.

For many of these entrepreneurs, this has been their first experience of a real, economy-wide downturn – much worse than the dot com bust, which a few of these guys suffered through.

The biggest loser over the last 12 months is Jeremy Reid, the chief of hedge fund manager Everest Financial Group, formerly known as Everest Babcock & Brown. At the height of the bull market three years ago, Reid’s stake was worth $225 million. But the crash has not been kind to financial stocks, and the value of Reid’s shares have dropped from $31 million last year to just $3 million.

The best performer is Michael Malone, the founder and chief executive of iiNet. The Perth-based company has performed very well in the last 12 months, thanks in no small part to its well-time acquisition of fellow Perth ISP Westnet in 2007.

While many mid-cap technology stocks have been hammered in the last 12 months, iiNet’s share price has fallen just 12 per cent and Malone stake has only dropped by $4 million to $34 million. Since the start of the year, iiNet’s share price has jumped 32 per cent.

Can these young entrepreneurs continue to rebuild their shrunken fortunes? It's a reasonable bet that there is going to be plenty of sharemarket volatility ahead, but here are three reasons to think that these young investors can bounce back faster than some of their older rivals:

They understand how technology is changing business

The slump in employment might be hurting Seek co-founders Paul Bassat and Matthew Rockman right now, but the market will turn and theirs remains the dominant player in the job ads market. I would much rather be in their shoes than those of Fairfax directors and wealthy investors John B Fairfax and Ron Walker, who face the increasingly likely prospect that revenue from their classifieds operations may never recover.

They have invested for the future

Last year, internet infrastructure company PIPE Networks raised $200 million to build an international undersea cable to Guam. It's a crucial piece of infrastructure that will only become more valuable as Australian prepares to build the National Broadband Network. iiNet's takeover of Westnet has also positioned the company to grow through the downturn.

They are in the right sectors

The entrepreneurs come from four sectors: internet, telecommunications, resources and financial services. All have been hurt by the downturn, but all have strong fundamentals – the NBN will change the face of the internet and telco sectors, China's long-term growth will underpin the resources sector and Australia's superannuation system should eventually help the financial services sector out of the mire.

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