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There are many ways to wealth creation even if money is not your end goal. For BRW Young Rich lister Mark McConnell, wealth has been a by-product for doing what keeps him awake at night and excites him.
A serial entrepreneur with three companies that have made the BRW Fast 100 lists in recent years, McConnell has a knack for backing the right ideas and people or pushing his own creative ideas into corporate success.
He also has a lifestyle many would envy. He is wealthy, healthy, not yet 40 years old and enjoys with his wife of 17 years exhilarating sports such as heli-skiing.
But for a wealth adviser he is a bit of a nightmare.
McConnell shared with BRW an outline of his investment portfolio, which is diversified but focused on high-risk assets – not surprising for an angel investor and private equity opportunist who actively chases risk.
He has a mixed bag of other assets, including a share portfolio he has not added to for some years, and various assets that have been squirrelled away in his superannuation. Tellingly, there’s no investment property.
McConnell likes to chase risk but argues he “paddles furiously to mitigate it once acquired”. He admits during the dot.com era he took “all-or-nothing risks” with little due diligence and is lucky that most of those investments came good.
McConnell’s strategy is to purchase, found, invest in or take a board seat in companies and help them grow. His investments in recent years have been in information and technology, contracting, recruitment, migration, resources, agriculture, and investment advisory.
“[These days] generally I start from a perspective of ‘how much do I need to get a board seat?’” he says.
“If it’s 10 per cent and I do the due diligence and can only justify 5 per cent, I look to bring in other investors to get that level of influence.”
He also manages local investments for a number of wealthy Chinese families, and over the past five years has distributed $600 million into listed investments and an additional $50 million into private equity opportunities.
In some cases, the Chinese investors back companies where McConnell already has an investment, such as cloud computer group UberGlobal. Or they may give him a mandate to find opportunities in a sector such as mining. McConnell had to learn the industry but he now sits on the boards of Kagara Mining and Mungana Goldmines and has invested some of his own capital to have “skin in the game”.
His latest venture is in agriculture. To learn the industry he bought a farm 20 minutes away from his house in Canberra with the aim of setting up a co-operative with surrounding farms to secure product for Chinese restaurants. Being a hands-on entrepreneur, he helps out with the droving and running of the farm.
McConnell is the son of immigrants from Belfast who came to Australia with the dream of a better and safer lifestyle, but little else.
A gifted sportsman, he gained selective entry to the exclusive Melbourne High School thanks to his cricket prowess. It was here McConnell learned that education is more than study. Although he skipped a year and found himself in the Australian Defence Force Academy at the age of 16, the contacts he made at school have been a persistent part of his professional career.
McConnell spent eight years with the Royal Australian Air Force as a commissioned officer, providing plenty of time to learn he was no great flyer but did have a flair for logistics and property. He began picking up blocks of land and before long was getting contracts for small retirement villages. The business became too difficult to manage with his RAAF career, so he sold it to a couple of master builders.
After the RAAF, he was picked up by the airline industry and by his mid-20s was national operations manager for Ansett, under then chief executive Rod Eddington.
Eddington saw potential and pushed the young McConnell into Hong Kong with investment house Bain & Co. It was here he developed a large network of Asian contacts and friendships with some colleagues that would go on to form a loosely associated investment hub for pooling funds and making strategic investments.
The way McConnell looks at wealth is as follows: “You have to pay off the house and set up the college education fund for the kids, but after that you’re the active manager of your own portfolio and you have to back yourself, deploy your funds and work furiously to grow the value of the portfolio, because that’s your job.”
McConnell is already looking to a time when he will take fewer risks. He is mentally shifting away from the start-up technology sector and is looking to get more active in the listed company space. Long term he wants to gain board seats on a few big companies.
Just how that shift goes remains to be seen, but McConnell’s past suggests he will always have a different view to risk than consensus. And this is not surprising as he is an originator of capital.
In the wealth advisory business, McConnell’s archetype is the most difficult to deal with. Families that have inherited wealth or have branches of an extended family relying on a single source of wealth are more aware of the consequences of losing capital and naturally steer towards the large investment banks or family offices to manage their capital.
If an investment bank got its hands on McConnell, it would tip his wealth into a “diversified portfolio” likely to consist of 75 per cent international and domestic shares and 25 per cent bonds or some form of fixed interest. It may also offer entry into some private equity opportunities, but McConnell already gets plenty of those.
A family office would probably steer a more conservative course, perhaps taking as much as 70 per cent of accumulated wealth and sticking it in fixed interest products to offset the 30 per cent they would consider high risk in McConnell’s various investment activities. The focus would be on protecting the wealth that’s been made for current and future generations, while still leaving funds for high-risk activities.
But given his age and view that if an investment wiped out his business interests he would still have the time and knowledge to start over again, it’s likely McConnell will continue to steer his own path for years to come.
He can best be viewed as an inspiration and a warning beacon to those who want to follow in his wealth-creating footsteps. As McConnell acknowledges, luck has played its part in his success, and not everyone can expect a share of that luck.
But there are likely to be more aspiring McConnells in the future. The era of working for a company for life and moving from clerk or equivalent to senior management with regular pay rises spaced out over the years is gone.
Younger people look to move quickly up the ranks or move on and are more prepared to try starting a small business.
While a lucky few will achieve their goals, inevitably many will fail, so maintaining some core wealth – separated from business interests, consistently added to from the start of an ambitious career – is a good protective measure.