Inside Money: Trouble down the millionaires factory

Paul Glass. Photo / Supplied

Macquarie Bank is known as the 'millionaires factory' in its home country of Australia but it hasn't churned out too many of those in New Zealand.

In fact, Macquarie group in New Zealand reported a $15.5 million loss in the year to March 31, 2009, following on from a $14.2 million loss the previous year.

However, Macquarie has helped in the manufacture of one or two Kiwi millionaires, including the founders of Brook Asset Management, Simon Botherway and Paul Glass.

Botherway and Glass, who have been in the news of late, collectively pocketed the lion's share of the $22.5 million Macquarie paid for Brook in two tranches - $7 million in 2004 and the remainder in 2008.

Matthew Rady, the Australian-based head of Macquarie Global Investments, said at the time of its complete takeover of Brook in 2008 that "both parties agreed that full ownership by Macquarie would be an extremely positive step".

Well it was for Botherway and Glass, who went on to new adventures, but not so much for Macquarie, who struggled to build on the goodwill created by the two founders. A year after taking full control of Brook, Macquarie wrote down its value by about $4.6 million. According to Macquarie NZ March 2009 accounts, Brook's valuation included just over $16.2 million in goodwill, a very ethereal quality.

This week that goodwill took a further blow with the exit of three top executives from Brook who joined their former boss, Glass, at his new firm, Devon Funds Management. Other staff, and, importantly, clients, are expected to follow.

Devon has already replicated much of the Brook formula and Glass has ambitious plans to grow it further, without the distraction of an Australian bank imposing demands. In doing so it joins a growing band of boutique, independently-owned fund managers in New Zealand such as Mint Asset Management, whose owners jumped ship from ING and Harbour Asset Management, which sprung from the remains of the AllianceBernstein NZ (that was half-owned by Axa).

The marriage of funds management and banking is rarely a happy one, divorces are common, which might be a good thing for New Zealand investors.

David Chaplin