- BRW Lists
Published 22 March 2013 10:56
“The days when there was an arbitrage in saying, ‘Don’t worry I’ll buy you a meal when I come to Australia and you buy me one when you come to London.’ It’s gone the other way around,” says billionaire Michael Hintze. Photo: Angus Mordant
Australia is expensive even for a billionaire. Michael Hintze, Australia’s wealthiest and most successful financial markets export with an estimated personal fortune of $US1.6 billion, says coming home from his hedge fund’s London base is not as cheap as it used to be.
“The days when there was an arbitrage in saying, ‘Don’t worry I’ll buy you a meal when I come to Australia and you buy me one when you come to London.’ It’s gone the other way around,” says Hintze, the founder of the $US11.5 billion hedge fund CQS and a well known donor to the UK’s Conservative Party.
With the British pound at a 28-year low against the Australian dollar, British tourists and returning hedge fund titans are clearly feeling the pinch. “The Australian dollar certainly feels fully valued,” says Hintze, who owns farmland in Australia. “I wish the dollar were lower as it would be easier in farming.”
A philanthropist and patron of the arts, Hintze was back on home soil to address an audience at the Advance Awards function in Sydney on Thursday. Advance recognises the achievements of Australians abroad.
Hintze was born in Harbin, China, in July 1953 to Russian refugee parents. Later that year, his parents fled the Chinese revolution and moved to Sydney. He was educated at the University of Sydney and University of NSW. After a three-year stint in the army, a Harvard Business School MBA and a career as a trader, he set up CQS in 1999. It has since become one of the world’s premier hedge funds. Hintze is the portfolio manager of CQS Directional Opportunities fund which in 2012 posted 35.9 per cent returns. Since 2005, his fund has had annualised returns 20.24 per cent.
Hintze gave his address as the political winds of change were swirling through Canberra. It’s a time when leaders across the heavily indebted Western democracies face a huge political dilemma. “Here’s the problem: How on earth can you do the right the thing and then get re-elected after it? Is it possible for hard-decision leadership to be done in our current democracy?”
The extent to which policymakers balance growth and austerity is the biggest challenge facing Western politicians and no more so than in the UK. “I believe austerity is necessary but I don’t like the word austerity because I think it’s much more about doing the right thing . . . We’ll see whether there’s the political will or the political ability to see it through to its logical conclusion.”
He says it is important to note that a country’s gross domestic product comprises of government spending (G), investment, consumption plus exports minus imports. “The problem is if you are wasting money in ‘G’, by definition GDP will go down. If we don’t get that ‘G’ under control, we will create problems for our children,” he says.
Hintze has been taken aback by events in Europe as depositors in Cyprus were initially roped into a bailout of the small island nation’s banks. “Cyprus is important because of the signalling in terms of what they could be doing throughout the rest of the European banking system. It is a change that was not expected, so that’s why it unnerved people.”
Beyond Europe, Hintze is upbeat about the US economy, particularly as its banking sector rights itself. “The US economy is going to be the engine for growth for a number of reasons. They’ve got energy sufficiency, and cheap energy, they also have agricultural and water sufficiency so they’ve got the natural resources under control.”
At a time when most hedge funds are warning of the increasing risks of a slowdown in the world’s second-largest economy, Hintze says he is a “a big fan” of China. On his calculations, China used as much steel between 2007 and 2012 as the US did in the whole 100 years beforehand.
“They’ve been investing in infrastructure dramatically,” he says.“Where they do have challenges is with their environment. They’ve got a big water problem, they have a food security problem and they’ve got a number of issues around their banks in terms of non-performing loans.
“What is really, really, positive however is when you talk to people at very senior levels, they understand all those things and they are doing their best to address them.”