The Millionaires' Factory lays bare the good and bad about Australia's millionaire manufacturer – Macquarie bank
- Written by Kevin Davis, Emeritus Professor of Finance, The University of Melbourne
Macquarie Group chief Nicholas Moore leaving the Hayne Royal Commission in 2018.
Joel Carrett/AAP
But Macquarie was also lucky in that the Royal Commission’s terms of reference only required it to look back as far as the global financial crisis. Had it been required to look back further, its findings might have been different.
Prior to the financial crisis, Macquarie (and other banks) created highly financially engineered, structured products and marketed them to retail (and other) investors. Even financially literate investors could not have possibly understood the risks or value of the products they were sold.
A vast majority of these products would not have met current design and distribution obligation requirements[7] aimed at protecting consumers.
This was typical of the time and Macquarie was not particularly different to other purveyors of such products. But whether, in the absence of effective regulation, Macquarie would revert to pushing these boundaries is a matter of opinion!
An Australian success nevertheless
There is no question that Macquarie is an Australian success story.
Its 2022 annual report indicates that A$100 invested in its shares at the time of its stock exchange listing in 1996 would have grown to $10,000 in 2022.
More importantly, it has provided or enabled funding for many investment projects of its customers, which might not otherwise have gone ahead.
By taking an active role in the management and governance of large projects (such as toll roads and utilities), it has enabled more efficient operation of such projects than might have otherwise occurred.
It currently is near the forefront of financiers focusing on “green finance”, where activities generating social and environmental benefits can be consistent with profiting from a first-mover position.
There will, no doubt, remain many critics of Macquarie’s profit orientation and a resulting possible conflict with broader social goals. They would gain much from reading this book, both to find specific instances of that conflict, but also to see that profit-seeking is not always inconsistent with social goals.
References^ Allen & Unwin (www.allenandunwin.com)^ The Millionaires’ Factory (www.allenandunwin.com)^ annual report (www.macquarie.com)^ “cum-ex” dividend arbitrage (theconversation.com)^ The robbery of the century: the cum-ex trading scandal (theconversation.com)^ Hayne Royal Commission (www.royalcommission.gov.au)^ design and distribution obligation requirements (asic.gov.au)Authors: Kevin Davis, Emeritus Professor of Finance, The University of Melbourne
