1.It has survived a number of downturns and still made a profit including 1987 when we had 50% decline and the tech wreck in 2000 and 2001 where we had a 22% decline on the ASX.
2.It has a clearly delineated risk management policy called the “Freedom within Boundaries” philosophy from the 2008 annual report p40 .. Risk management report http://www.macquarie.com.au/au/about_macquarie/acrobat/annual_report2008_MGL.pdf v v “Risk is an integral part of the Macquarie Group’s businesses. Management of that risk is therefore critical to Macquarie’s continuing profitability. Strong independent prudential management has been a key to the Group’s success over many years. Where risk is assumed, it is within a calculated and controlled framework. Risk is owned at the business level with business heads responsible for identifying risks within their businesses and ensuring that they are managed appropriately. The aim is to give business heads a high level of entrepreneurial freedom to develop and implement business unit strategy, new products and services, new market initiatives and domestic and international alliances. However, boundaries exist in relation to credit, market, operational, regulatory and reputation risks. These areas have implications outside the businesses and are tightly controlled by the Risk Management Group (RMG). This is referred to as the “Freedom within Boundaries” philosophy.”
3. the company employs 331 risk management specialists in what is called a Risk Management Group
4. It attempts to always have enough liquid assets readily at hand to cover all debt obligations over a 12 month period Recently it increased the level of liquid assets to $18 billion
“Group Treasury maintains portfolios of highly liquid assets in both MBL and MGL to ensure adequate funding is available under all conditions. These liquid assets are held to cover both known and contingent sources of funding outflows. The assets are predominantly held in the most liquid asset classes – short dated interbank deposits and stock eligible for repurchase with Central Banks. Group Treasury and RMG undertake regular reviews of the liquidity characteristics of the Group’s balance sheet. This provides an understanding of the liquidity characteristics of assets and liabilities against a backdrop of changing market conditions. The analysis ensures that the balance sheet is able to be appropriately funded and the liquidity ramifications of market moves are clearly understood. In response to the current funding market disruption, the Group has increased its level of liquid asset holdings to $18.3 billion as at 31 March 2008 (31 March 2007: $6 billion). In addition to the liquid asset holdings, MBL has other trading assets, many of which are liquefiable at short notice.”
5. the group constantly stress tests its business via modelling at the highest levels of stress.
eg they talk about the “market contagion” scenario
The “Market Contagion” scenario considers the impact of a stock market crash, with simultaneous effects in global foreign exchange, interest rates and corporate margins. Downward shocks of up to 30 per cent are applied to equity markets and hedge fund values, foreign exchange and precious metals are moved by 5 per cent, interest rates are shifted by up to 200 basis points, corporate margins are shocked by 50 to 500 basis points and energy, agricultural commodities and base metals are shocked by up to 20 per cent. With associated moves in implied volatilities and correlations, the “Market Contagion” scenario accounts for all the significant markets to which Macquarie is exposed. The assumptions in this scenario are considerably more severe than the conditions that have prevailed in the recent period of market volatility. Although the new ‘Market Contagion’ scenario is very conservative, exposure to the MEL scenarios remained only a small percentage of the Group’s capital throughout the financial year.
Did you notice anything interesting about this post? All the comments were referenced and supported with evidence Unlike a number on here who seem to have inflated opinions of themselves and make unsubstantianted opinions as if they were George Soros, Marc Faber or someone of that ilk.
MQG Price at posting:
$20.20 Sentiment: None Disclosure: Held
(20min delay)