“The world needs capital even though it’s flooding to certain areas. There are capital-starved areas.”
Opportunities in wind and waste
Onshore and offshore wind developments in Europe, offshore wind developments in Taiwan, and waste to energy projects in Korea were among the areas she said Macquarie was investing its own capital in.
Another area of focus was infrastructure, a traditional strength for Macquarie, and Ms Wikramanayake identified a build-out in Asia and the need to replace ageing assets in North America as areas where Macquarie was active.
Ms Wikramanayake said that much of the panic that hit equity and credit markets towards the end of 2018 had reversed in 2019 and markets were reflecting a “slight slowdown in a still well-growing world”.
“What we may see more of this year is more volatility as we are in the late cycle and people are nervous.”
She said Macquarie did not foresee a recession in the United States this year, based on investment, employment and wage growth trends of the businesses they had invested in around the world.
“But it could be a volatile year and certainly a slowing year.”
Ms Wikramanayake said it was possible the global economy could enter a recession in the next two years, but she said certain businesses within the Macquarie empire tended to perform well in economically challenging circumstances.
“Macquarie has been around for many, many cycles and because we are so diversified by region by sector by product we tend to be able to cushion any sort of impacts.”
She said even “big markets with big sectors” such as real estate in North America were presenting attractive opportunities to deploy capital, and highlighted areas such as manufactured housing, and multi-family accommodation.
“When you have a specialist expertise in a huge market like the US, you really can be adding value for stakeholders, clients and communities and justifying compensation,” she said.
During the operational briefing, Macquarie touted its growth in income from international operations, which had tripled over a decade to $7.3 billion in 2018 and had outpaced earnings growth from its Australian operations.
But Ms Wikramanayake said she believed Macquarie was still at an “early stage” in its offshore push, given its market share relative to the total size.
For instance, it manages about $85 billion of assets in international markets, but has market shares of less than 0.5 per cent in each market, 10 times smaller than its 5 per cent market share of the Australian asset management market.
In mergers and acquisitions, Maquarie has a 27 per cent market share of advisory and underwriting by deal flow, compared with a share of about 1 per cent in Europe and about 2 per cent in the Americas.
‘Trading conditions satisfactory’
In a trading update before the briefing, Macquarie said it expected an increase of up to 15 per cent in the FY19 result compared with FY18.
Shares in Macquarie gained 2.3 per cent following the trading update and briefing to close at $124.78
“Trading conditions were satisfactory with significant realisations across the group in the December 2018 quarter,” MsWikramanayake said.
Macquarie Capital has sold its 21.8 per cent interest in Quadrant Energy, and its 23.9 per cent interest in PEXA, or the online property transfer company Property Exchange Australia.