Macquarie Plans to Shut Down Trust

Submitted by Jim Thesiger on 5 March, 2010 - 08:13

One of the largest financial institutions of Australia, Macquarie Group (MQG) is planning to close down its management trust that worth $10 billion and direct the investors into a deposit account which is market focused. Macquarie held the Government deposit guarantee as the reason due to which funds drained out from the trust. However, the transfer into a deposit account which is managed by the banking division of the group will be offering a boost in funding for the investment bank as it is preparing to rule off its full-year accounts on the last day of this month. It is to be mentioned that the funds that have been in the cash management trust will be considered as a part of the overall funding mix of Macquarie Bank.

On Thursday, a letter was issued by Macquarie Group to the cash management trust unit holders in an attempt to get their support to convert units into an at-call deposit account with Macquarie Bank. In a statement, Macquarie stated that the retail investors have moved their funds increasingly into bank deposits from the cash management trusts over the last two years in line with the retail deposit guarantee scheme of the Government. It is to be mentioned that, as much as $20 billion worth of cash was available in the cash management trust during its peak.

The cash management trust is not covered by the blanket government guarantee on deposits of up to $1 million due to the fact that the trust is not a bank deposit. However, the trust has investment in bank bonds and Government debts which are covered by the whole sale funding guarantee, something that is offered by the Government despite the fact that it is due to expire at the end of the month. Macquarie Group so far has managed to attract as much as $3 billion worth of fund transfers over the last one year by encouraging the investors to shift into the cash management deposit account by offering them higher interest.