Millionaires’ Factory – The rise and rise of Macquarie

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For 150 years, Hill Samuel was a respected name in British merchant banking – best known for, among other things, the creation of the oil company Shell. By 1995 it was practically defunct, having been absorbed inside Lloyds Bank and pushed out of its core business lines by the large American conglomerates that dominate global finance today. The same fate befell dozens of other banks, with banks that worked hard to compete on Wall Street — Deutsche Bank, Nomura and Credit Suisse — suffering the most.

So this is more than a curiosity, but rather an important management case study, tracing a small merchant bank of that era that emerged from a peripheral market to become a global giant with a large, highly profitable operation in the US.

That merchant bank is Hill Samuel Australia, as it became known after it became independent in 1985: Macquarie. The company is familiar to financial insiders, and is now becoming known to the British public as a major player in troubled infrastructure businesses.

According to the company’s longtime journalism adherents Joyce Moulakis and Chris Wright, the name change was intended to reflect an aspiration to do pioneering work along with a healthy dose of discretion. Inspiration came from Lachlan Macquarie, the fifth governor of New South Wales, who established the colony’s first currency and retired to Scotland with a reputation for reform.

Moulakis and Wright’s book factory of millionairesTold in a matter-of-fact style and based on a healthy level of access to older generations of Macquarie bankers, it has long been recognized as a separate asset class from the handful of Harvard Business School graduates working on advisory mandates in Sydney. Showcases the rise of the framework to leadership. -term investor, and today, one of the world’s largest financial traders in commodities.

Central management was there for support and monitoring, while strict risk controls were implemented to ensure that no one blew up the bank.

So why did Macquarie prosper while many others did not? The authors point out that Macquarie’s culture was more important than any particular business deal, strategy or innovation, with many of its characteristics being carried over from the bank’s early days. The philosophy of David Clarke and Mark Johnson, who created Hill Samuel Australia in the 1970s, was to “give employees as much freedom as possible while commensurate with security and control”.

There has been little top-down strategy or capital allocation throughout Macquarie’s history. Instead, the company empowered enterprising individuals to develop new business lines ranging from 24-hour forex trading in Sydney to gold bullion arbitrage with London, cash management trusts, cross-border leasing and later ideas in infrastructure and commodities. Makes

Macquarie liked to explore “adjacencies”. If it was doing well in gold bullion, it could make inroads into other metals. Once it pioneered infrastructure funding in Australia, it could adopt the same model overseas, creating smaller bets, each with the potential to grow into a larger business. those that failed, Macquarie closed immediately; Those who succeeded received capital for development and the people behind them became extremely wealthy. Central management was there to support and monitor while enforcing strict risk controls – another early part of the culture – to make sure no one blew up the bank.

Described this way, Macquarie doesn’t sound so magical, but it’s a rare management that truly supports its employees. Macquarie’s approach also differs markedly from the strategies European banks have implemented on Wall Street: no transformational acquisitions, no mass recruitment of mercenaries from large companies, no attempts to buy market share by deploying a large balance sheet. No effort, and no promise to offer the full range of services – all approaches that led to increased cost structures and unwisely taken risks.

Infrastructure is Macquarie’s best-known business line, although today it makes up a small portion of the bank’s revenue. The authors describe how it started with an advisory role on the public-private partnership for Sydney’s M2 motorway, during which Macquarie realized that long-term cash flow from the toll road was ideal for an investor such as a pension fund; second, such a project may have equity value, not just debt; And third, real money was to be earned by acting as a developer, not just a financier.

This led to the infamous infrastructure finance model, where cash flows from such projects are structured and split up, sold and resold, packaged and refinanced, sometimes to the detriment of users. As owner of the UK’s Thames Water from 2006 to 2017, Macquarie saw huge increases in debt while earning double-digit annual returns on investment, but the utility is close to collapse following a recent rise in interest rates. Moullakis and Wright explain clearly how much infrastructure activity is tax-driven and how this allows Macquarie to charge fees at every turn.

essentially, a good portion of factory of millionaires Recalls past controversies, and those parts are a bit drawn out. The book is also short of the banker’s debauchery that would give it wide appeal: the authors discuss a number of Macquarie executives and only a few of them come to life on the page. Still, for readers who want to understand one fascinating financial institution and how it succeeds when so many rivals falter, factory of millionaires comes recommended.

factory of millionaires: The inside story of how Macquarie Bank became a global giant by Joyce Moulakis and Chris Wright, Allen & Unwin £29.99, 432 pages

Robin Harding is the FT’s Asia editor

Join our online book group on Facebook FT Books Cafe

Receive free non-fiction updates

we will send you one myFT Daily Digest Latest Email Rounding non-fiction News every morning.

For 150 years, Hill Samuel was a respected name in British merchant banking – best known for, among other things, the creation of the oil company Shell. By 1995 it was practically defunct, having been absorbed inside Lloyds Bank and pushed out of its core business lines by the large American conglomerates that dominate global finance today. The same fate befell dozens of other banks, with banks that worked hard to compete on Wall Street — Deutsche Bank, Nomura and Credit Suisse — suffering the most.

So this is more than a curiosity, but rather an important management case study, tracing a small merchant bank of that era that emerged from a peripheral market to become a global giant with a large, highly profitable operation in the US.

That merchant bank is Hill Samuel Australia, as it became known after it became independent in 1985: Macquarie. The company is familiar to financial insiders, and is now becoming known to the British public as a major player in troubled infrastructure businesses.

According to the company’s longtime journalism adherents Joyce Moulakis and Chris Wright, the name change was intended to reflect an aspiration to do pioneering work along with a healthy dose of discretion. Inspiration came from Lachlan Macquarie, the fifth governor of New South Wales, who established the colony’s first currency and retired to Scotland with a reputation for reform.

Moulakis and Wright’s book factory of millionairesTold in a matter-of-fact style and based on a healthy level of access to older generations of Macquarie bankers, it has long been recognized as a separate asset class from the handful of Harvard Business School graduates working on advisory mandates in Sydney. Showcases the rise of the framework to leadership. -term investor, and today, one of the world’s largest financial traders in commodities.

Central management was there for support and monitoring, while strict risk controls were implemented to ensure that no one blew up the bank.

So why did Macquarie prosper while many others did not? The authors point out that Macquarie’s culture was more important than any particular business deal, strategy or innovation, with many of its characteristics being carried over from the bank’s early days. The philosophy of David Clarke and Mark Johnson, who created Hill Samuel Australia in the 1970s, was to “give employees as much freedom as possible while commensurate with security and control”.

There has been little top-down strategy or capital allocation throughout Macquarie’s history. Instead, the company empowered enterprising individuals to develop new business lines ranging from 24-hour forex trading in Sydney to gold bullion arbitrage with London, cash management trusts, cross-border leasing and later ideas in infrastructure and commodities. Makes

Macquarie liked to explore “adjacencies”. If it was doing well in gold bullion, it could make inroads into other metals. Once it pioneered infrastructure funding in Australia, it could adopt the same model overseas, creating smaller bets, each with the potential to grow into a larger business. those that failed, Macquarie closed immediately; Those who succeeded received capital for development and the people behind them became extremely wealthy. Central management was there to support and monitor while enforcing strict risk controls – another early part of the culture – to make sure no one blew up the bank.

Described this way, Macquarie doesn’t sound so magical, but it’s a rare management that truly supports its employees. Macquarie’s approach also differs markedly from the strategies European banks have implemented on Wall Street: no transformational acquisitions, no mass recruitment of mercenaries from large companies, no attempts to buy market share by deploying a large balance sheet. No effort, and no promise to offer the full range of services – all approaches that led to increased cost structures and unwisely taken risks.

Infrastructure is Macquarie’s best-known business line, although today it makes up a small portion of the bank’s revenue. The authors describe how it started with an advisory role on the public-private partnership for Sydney’s M2 motorway, during which Macquarie realized that long-term cash flow from the toll road was ideal for an investor such as a pension fund; second, such a project may have equity value, not just debt; And third, real money was to be earned by acting as a developer, not just a financier.

This led to the infamous infrastructure finance model, where cash flows from such projects are structured and split up, sold and resold, packaged and refinanced, sometimes to the detriment of users. As owner of the UK’s Thames Water from 2006 to 2017, Macquarie saw huge increases in debt while earning double-digit annual returns on investment, but the utility is close to collapse following a recent rise in interest rates. Moullakis and Wright explain clearly how much infrastructure activity is tax-driven and how this allows Macquarie to charge fees at every turn.

essentially, a good portion of factory of millionaires Recalls past controversies, and those parts are a bit drawn out. The book is also short of the banker’s debauchery that would give it wide appeal: the authors discuss a number of Macquarie executives and only a few of them come to life on the page. Still, for readers who want to understand one fascinating financial institution and how it succeeds when so many rivals falter, factory of millionaires comes recommended.

factory of millionaires: The inside story of how Macquarie Bank became a global giant by Joyce Moulakis and Chris Wright, Allen & Unwin £29.99, 432 pages

Robin Harding is the FT’s Asia editor

Join our online book group on Facebook FT Books Cafe