Australia’s funds management industry really is enjoying a ridiculous bubble at the moment, as the world’s fourth biggest pool of superannuation savings struggles to find enough places to invest.
Macquarie Bank has led the charge taking Australian superannuation savings into offshore infrastructure but there is literally dozens of people who’ve become multi-millionaires clipping the ticket.
On 23 May we’ll find out exactly how many billions Kerr Neilson is worth when shares in Platinum Asset Management debut. I’ve been given a $20,000 allocation through Comsec and pundits are tipping the $5 shares will come on at a tidy premium.
Our family has also made a quick $25,000 today (half crystallised) piling into a Magellan Financial Group (MFG) capital raising at just 97.5c and then selling 50% of the allocation at an average price of $1.90.
Magellan is the latest of about 140 boutique fund managers that have emerged in the world’s most competitive funds management market, although it has pretensions of being the next Platinum and is today capitalised at $250 million, including options.
Magellan founders Chris Mackay and Hamish Douglass are a couple of top investment bankers now turning their hands to the easy money in funds management. James Packer is the largest shareholder MFG and he’s already doubled his $18 million investment.
After taking Malcolm Turnbull out of his struggling fund manager Pengana and rebranding it Magellan, the lads have raised $378 million for the Magellan Flagship Fund which is today trading at a 6% discount to the $1 issue price.
It’s the same old story – buy into the management company MFG rather than the fund itself because most of the profits get upstreamed through fat fees.
James Packer clearly knows we’re in a funds management bubble as he attempts to raise $500 million floating his Ellerston hedge fund business, whilst also profiting nicely through the booming Challenger Financial Services share price.
When this bubble bursts, the Ellerston raising might look just like the deal in 2000 when Kerry Packer converted the old FXF Trust, holder of his Fairfax stake, into a broader corporate raider with plans to exploit the dotcom boom.
“No one is safe,” Kerry declared as the converted 50c FXF units rocketed to a high of $2.20 after being renamed CPH Investment Corp, before plummeting back to earth a few months later when the tech wreck set in.
Whilst everyone is enjoying riding the bubble, I reckon it’s severely overcooked and the wise move is to remain debt free and take some money off the table.
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