Macquarie’s focus turns to Europe

Macquarie’s head of Europe has shrugged off Brexit fears but stepped up the asset manager’s growth focus in the region.

David Fass, Macquarie’s head of Europe, Middle East and Africa, in Sydney yesterday. Picture: Adam Yip

Macquarie Group’s head of Europe, David Fass, has shrugged off fears about Brexit but stepped up the asset manager’s growth focus in other economies in the region, which confronts a €335 billion ($534bn) annual infrastructure spending shortfall.

Mr Fass, who is also responsible for the Middle East and Africa, told The Australian that while the protracted deliberations over Brexit had been “a distraction” internally they had not caused a negative impact on Macquarie’s European business.

“The drain is really one of an anxiety that hangs over decision making,” he said of Macquarie’s customers in the UK.

Macquarie’s operational briefing yesterday showed it doesn’t expect the UK’s withdrawal from the European Union to be a material event for the group.

“Progress on licence applications to supplement existing EU licences is well advanced and work with regulators to secure these prior to March 29, 2019, is ongoing,” the presentation said.

“Macquarie is subject to application processes that may cause one or more licences to be issued in the second quarter of calendar year 2019. Contingency arrangements are being put in place for a small number of clients.”

Europe, the Middle East and Africa account for about 27 per cent of Macquarie’s total income, behind the Americas at 31 per cent and Australia at 33 per cent.

Mr Fass said Macquarie was broadening its focus in Europe in markets including Germany, France, Spain, The Netherlands and Scandinavia, and particularly the larger of those in terms of gross domestic product.

“If you have your act together in those four large GDP markets you are going to be doing OK,” he added, saying strategic hiring would occur but depended on what the existing teams in those markets felt was required.

Mr Fass pointed out to analysts and investors that annual spend on infrastructure in Europe amounted to €353bn, compared to a required €688bn, on numbers compiled by the EU’s lending arm.

“Most of the European sovereign balance sheets got very stretched over time,” he said.

That presented “a big opportunity” for Macquarie alongside leveraging its Green Investment Group division to ramp up development projects and assets in the renewable energy sector. Macquarie’s acquisitions in Europe over the past five years — often spearheaded by its investment funds — have included German fund manager GLL and the UK government’s Green Investment Bank, which has since been rebranded.

“We really do view it [Europe] as the hotbed of where this energy revolution started,” Mr Fass said of a transition away from traditional forms of energy generation to renewables.

He sees “plenty of opportunity” for Macquarie to deploy capital in Europe and emphasised the bank’s preference for self-originated deals.

But Macquarie’s growth in Europe has also caused headaches after the group was caught up in an investigation of more than 100 financial institutions operating in Germany that conducted complex share trades to assist clients to opaquely gain tax rebates.

Macquarie stopped the practice in 2012 but the inquiry has entangled chief executive Shemara Wikramanayake and former boss Nicholas Moore.

Yesterday the company said “no current staff members” had been interviewed by German authorities to date.

“German authorities have formally classified 22 current and former staff members as persons of interest or suspects under German law, including the group CEO and the former group CEO,” Macquarie’s presentation said. That number had fallen from about 30 employees previously.

The operational briefing also included some senior personnel changes, with Mr Fass moving to head of Macquarie Infrastructure and Real Assets for the Americas, from April 1. Paul Plewman replaces Mr Fass as EMEA boss while Shawn Lytle becomes head of Macquarie Investment Management after Ben Bruck shifted to chairman of the division.