By GILES PARKINSON
Down at the millionaire factory at Macquarie Bank, one man's fee is known as another man's Porsche. But when you rake in fees as effectively as the MacBank executives, there aren't nearly enough Porsches in the country to fill the Macquarie garage.
Macquarie is an unusual specimen among the nation's investment bankers. As the only institution of its type to be publicly listed, it is the only one obliged to reveal to all and sundry the huge pay packages it bestows on its leading executives.
The latest annual report reveals 11 of its executives pocketed more than $A1 million ($1.25 million) in the 12 months to March 31. Chief executive Allan Moss gets well over $A5 million, more than double that received by the heads of the four main retail banks in the country.
This has, of course, sparked its usual dose of admiration, envy and disgust from MacBank rivals across town.
Nothing, however, can quite match feelings expressed about MacBank's achievements at the Macquarie Infrastructure Group, where it has elevated fee-taking to more than just a fine art.
Macquarie Bank, it was revealed last week, stands to collect more than $A200 million in performance fees over the next three years for its management of the group. That is on top of the around $A40 million it pockets annually from day-to-day management fees.
Since MIG was listed in late 1996 - it was formerly known as the Infrastructure Trust of Australia - its fee structure has been a source of fascination to certain aficionados in the market.
There was much talk of the $A18 million in performance fees it pocketed in its first few years as a listed entity - fees earned by achieving certain benchmarks against overlaying stock exchange indices.
There have also been questions about the rate of the flat management fee - 1.25 per cent of net assets - which is higher than other fees in the industry.
The latest performance fee bonanza is the result of the huge jump in the value of MIG securities in the past 12 months. They have gained 152 per cent, well above the 8 per cent achieved by the All Industrials Index.
The gains are mostly attributable to its purchase of the Midland Expressway in Britain, which was considered to be a bargain and has already been the subject of a substantial revaluation.
The problem MIG faces now is that some analysts believe it may not have enough cash flow to pay the fees it owes its masters.
Some see it as ironic. Others as appalling. There is talk that MIG is under pressure to review the performance fee arrangements, but Macquarie argues that it is a fraction of the wealth it has delivered to MIG investors over the past three years.
Well, it's about 10 per cent actually.
Add in the management fees and the original performance fee and it approaches 20 per cent, a fee that wealthy investors are quite happy to pay the great hedge funds of international finance.
One solution to the fee-induced cash-flow crisis may be to go to the market to raise more equity.
That would suit Macquarie quite nicely. It would no doubt underwrite and manage the equity issue and pocket more fees in the process. And MacBank's detractors would once again have the opportunity to choke on their envy and frustration.
* Giles Parkinson is editor of AFR.com
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