MACQUARIE Group is set to appoint a human resources specialist to run its troubled agricultural funds business, which is in danger of losing the right to manage a $700 million pastoral fund.
Macquarie has told clients Elizabeth O'Leary, the global head of human resources, will shortly take over its pastoral and cropping funds.
Ms O'Leary will have less than 12 months to convince clients they should not wind up the Macquarie Pastoral Fund or remove the investment bank from its lucrative role as manager.
Macquarie has generated at least $19.6 million in fees from the fund in the last two years, despite it reporting combined losses of $69 million over the same period, due low cattle prices, drought and falling land values. Macquarie did not return calls on Tuesday.
Under the fund's constitution a "Future Strategy Meeting" must be held no later than July 5 next year to determine if the fund will remain in its present form.
Sources said some disgruntled investors may use the meeting as a trigger to strip Macquarie of its management rights due to poor performance and the scandal involving former employees.
The Australian Financial Review reported on May 28 that the former head of the agricultural funds management business, Tim Hornibrook, set up a fake family office in Switzerland to extract confidential information from competitors.
Resignations follow revelations
The revelation led to the resignation of Mr Hornibrook and another employee. Mr Hornibrook used the lure of a Swiss family office with €2 billion ($2.9 billion) under management and wealthy investors, to dupe rivals into handing over confidential information.
"We manage several high-profile clients who prefer to keep their investment strategies out of the public domain," said a letter from the Brook Family Office dated June 29, 2012.
Documents sighted previously by the Financial Review show the family office sent out an earlier request for information in October 2011 from the address firstname.lastname@example.org.
The metadata contained in the email shows it originated from a junior marketing employee at Macquarie Funds in London.
Since the tactics were revealed Macquarie has faced a barrage of questions from clients. It has been forced to provide some with a written statement it had no prior knowledge of the fake family office. That appeared to have pacified investors but the Future Strategy Meeting looms as a far bigger test.
The meeting can be called with seven days notice before July 5 next year. Macquarie cannot vote at the meeting, which is usually routine where investors recommit their money to the fund.Speculation grows
There is growing speculation the meeting could be used as an opportunity to remove Macquarie.
One of the fund's major shareholders, the Dutch pension fund Stichting Pensioenfonds ABP, declined to say how it might vote and what demands it made of Macquarie.
The fake family office has challenged Macquarie's reputation, but the fund has also endured low returns and plummeting cattle station values due to drought and investors shunning the sector. The fund's operating entity, Paraway Pastoral, which owns some of Australia's best farming land, lost $46 million last year due to falling land and water valuations. In 2012 it lost $23 million.
Others in the industry say valuing the management rights would be difficult due to fluctuating performance and acquisition fee revenue received by Macquarie over the years.
Macquarie was paid $9.4 million in 2013 by the pastoral fund and $10.2 million the previous year.