Macquarie launches A$1 Billion Hedge Fund Business under MQ name

Macquarie Bank’s Equity Markets Group today announced that its separate hedge fund businesses, which have now passed A$1 billion in funds under management are being combined under the name MQ Specialist Investment Management (“MQ”).

To an audience of over 150 local and international wholesale investors attending the Alternative Investment Summit 2006 in Sydney, Greg Mackay, the head of MQ and an Executive Director of Macquarie Bank today launched the new business.

Mr Mackay said MQ was already well on the way to becoming a multi-billion dollar manager in the Asian region, offering both local and international investors – from the larger superannuation funds through to retail investors - unique products which enable them to generate returns that have low correlation to more traditional investments.

“MQ combines the Equity Markets Group’s boutique approach to absolute return and specialist equity style funds management with Macquarie’s institutional risk management and operational framework.” said Mr Mackay speaking in Sydney.

MQ will rank in the top 5 Australian hedge fund managers by total assets under management¹. As at 19 July 2006, it has funds under management of A$1.066.billion, including A$327.3 million in single manager funds, A$602.5 million in fund of funds, and A$136.8 million in other fund structured products.

The single fund manager activities, formerly operating under the Macquarie Newton Specialist Funds Management brand, provide investors with access to Australian and Asian hedge fund strategies and draws from the Equity Markets Group’s principal trading expertise. The first funds were established in October 2003. There are now 8 different fund strategies which can be accessed either directly or via a multi-strategy fund. Investors include funds of hedge funds both locally and offshore, local industry superannuation funds and Australian retail investors.

“Our clients like our boutique approach to funds management coupled with the confidence that investing with a larger institution provides. Investors are comfortable taking on the performance risk associated with higher return strategies but do not want the small business risk often perceived with smaller boutique fund managers”, says Mr Mackay.

The funds differ from most traditional fund managers by seeking to generate returns through specialist strategies, often quantitative in nature, in Australian and Asian markets, for example the MQ Special Events Fund and MQ Global Futures Fund.

MQ Capital, the fund of hedge fund activities, formerly called Macquarie International Capital Advisors Pty Limited, has 7 investment professionals on the ground in the Asia-Pacific region specifically to ensure that clients’ capital is allocated to the most capable external fund managers.

“Our approach has been to deploy capital to Asian hedge fund managers with expertise in volatile and inefficient Asian markets to generate higher alpha than managers in the more efficient and mature markets of the US and Europe”, says Mr Mackay.

In March, MQ launched the first open-ended Asia-specific fund of funds for Australian investors. The fund is also being offered to offshore investors. The total capacity of the fund is limited to US$250 million, of which Macquarie has committed US$22 million.

Mr Mackay added “The fund is a unique way to tap into the potential offered in Asia. It is distinct from conventional global fund of hedge funds because of its focus on Asia, higher risk-return profile, concentrated manager exposure, and liquidity and transparency offered to investors.”

About Macquarie and MQ

In Australia, Macquarie is a full-service investment bank providing financial market trading and advisory products and services. In the Asia-Pacific region, the Bank provides a broad range of investment banking services, and in the Americas, Europe, Africa and the Middle East, it focuses on particular business areas in which its expertise delivers value to clients. Worldwide Macquarie Bank Limited has over 8,600 staff in 24 countries.

The Macquarie Bank Group is a market leader in managing specialist investments, with A$94.9 billion of specialist assets under management as at 30 June 2006, including infrastructure, property, private equity and hedge funds. The MQ Specialist Funds draw on this expertise but they are not deposit products or other liabilities of Macquarie Bank.

Prior to October 2003, Macquarie Bank traded a variety of hedge funds via the principal trading desk of its Equity Markets Group. In October 2003, MQ Specialist Investment Management Limited (formerly known as Macquarie Newton Specialist Funds Management Limited) was founded to make these strategies available to clients of Macquarie. The principal traders of Macquarie Bank’s Equity Markets Group joined MQ Specialist Investment Management and became the portfolio managers of the MQ Specialist Funds.

MQ Capital (formerly known as Macquarie International Capital Advisors Pty Ltd) is a wholly owned subsidiary of Macquarie. MQ Capital is a specialist manager of alternative investment portfolios, allocating capital to hedge fund strategies globally, with a particular expertise in Asia.

¹ LCA Australiahedge yearbook 2006, Top 10 Managers by AUM, Source: LCA Group Data as at 30 June 2005

Investments in the MQ Specialist Funds are not deposits with or liabilities of Macquarie Bank Limited ABN 46 008 583 542 (“Macquarie”) or any Macquarie Group company and are subject to investment risk, including possible delays in repayment and loss of income and capital invested. None of Macquarie or any other Macquarie Group company guarantees the performance of the Fund, the repayment of capital from the MQ Specialist Funds or any particular rate of return.

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