Alan Kohler – How Mayfair 101 is becoming a non-bank bank
Higher-yielding term deposits.
Alan Kohler speaks with James Mawhinney, regarding the company’s investment practises and push for higher yielding investment returns.
James Mawhinney is the Managing Director of a business called Mayfair 101. Now, he started this business 10 years ago. It’s become a non-bank bank. He models himself on a bank, and he basically provides term deposits to investors, ranging from three months to five years, and obviously the yields, the returns on those investments are much higher than normal bank term deposits.
The catch, I guess, is that the minimum investment is $100,000. He’s basically looking for money from high net worth individuals, looking to park their money into high yielding term deposits, and he then invests that money in a variety of assets around the world.
He’s based in London. He’s an Australian, born in Perth, based in London. The business invests in I don’t know, 12 countries, in a very wide range of assets. Largely companies, 90 per cent private companies, but backed to a large extent by property mortgages, and what drew my attention to him is that he recently bought Dunk Island in Queensland, as well as a whole lot of property on Mission Beach which is just on the mainland near Dunk Island, and has made a huge investment in North Queensland which he now says he’s going to turn into the mecca of Australian tourism.
James, is it fair to say that Mayfair 101 is an investment manager that provides fixed term and fixed yield returns as opposed to variable ones?
Yes, that’s right. Our focus has always been in the fixed income space.
Right. What are the returns and what are the terms of the investments that you provide?
Yeah, so we provide investors with a range of options ranging from three months up to five years in duration. Most of those returns are in the range of low 3 per cent up to high 6 per cent, depending on duration and obviously investment amount.
You regard yourself obviously as being in the term deposit space. You’re just trying to obviously provide a similar product to a term deposit, but just higher yields?
Yeah look, it’s a space where there’s obviously a lot of movement at the moment. A lot of customers are migrating and wanting to move away from banks, looking for alternatives, just because the returns and yields are so low. That being said, we’re obviously not a bank. We don’t fall within APRA’s guidelines. That being said, we still operate under quite a heavily regulated regime.
There’s a big influx of money at the moment for people wanting to move away from banks for two reasons. Typically, it’s the rates and the second reason is customer service. Those are really two key things that we focus on heavily as a group.
But obviously bank deposits under $250,000 are guaranteed, but yours are not guaranteed, right?
No, that’s right. Yeah, and it’s an important distinction. We don’t deal with retail investors, so all of our products and our licences are focused on the wholesale market. Our average investment size is typically around 4-500,000. If we look at some of the larger investors, basically every dollar above 250,000 isn’t government-guaranteed, and I think a lot of people forget the government guarantee is actually limited to $20 billion per financial institution. Now, not implying that our banking system’s in for a rude shock or anything like that. It obviously is having its challenges at the moment, but the government guarantee is certainly great for protecting retail investors, but potentially not so much for the wholesale market, which is exactly where we focus.
What’s your minimum investment?
Our minimum investment across most of our products is $100,000. One of our more recent products is $250,000 and above.
And what about in IPO Wealth which is one of your entry vehicles?
Yes. With IPO Wealth, the minimum investment is 100,000. That’s available to Australian wholesale investors.
Right. Let’s talk about safety and risk. What happens if you get a run?
Yeah, sure. We manage quite tightly our liquidity reserves across both that fund and the group. We invest in both long term and short term assets. We have some secure shorter-term loans that we provide, which provides us with a strong yield. At the same time, we also have longer-term investments obviously, which matches up with those investors that typically park money on a longer basis with us, too.
Is it correct to talk to you about liquidity ratio? I mean, do you have a percentage of cash that you could talk to us about?
Yeah, sure. In the group and in the IPO Wealth Fund, we typically maintain a cash reserve ratio of at least 10 per cent. It’s generally a lot higher than that. Obviously in our business, and any similar business, the ratios do fluctuate, but we’ve always maintained a reserve of at least 10 per cent within the IPO Wealth fund, and that obviously provides us with access to adequate liquidity should we need to. A lot of other funds that operate in a similar space operate on a ratio typically much less than that.
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Online Investments Pty Ltd t/a Mayfair 101 (ABN 981 34 785 890) provides investment and corporate advisory services including funds management, asset management, capital raising, corporate advisory, M&A (merger & acquisition) advisory, and direct investment either directly or via its wholly owned subsidiaries. Mayfair 101 is a Corporate Authorised Representative (CAR # 001274568) of Quattro Capital Group Pty Ltd (AFSL # 334653). Mayfair 101’s authority under its Corporate Authorised Representative Agreement with Quattro Capital Group Pty Ltd is limited to the provision of financial services to Wholesale clients only pursuant to the Corporations Act (Cth), including advice relating to deposit products, foreign exchange contracts, derivatives, interests in management investment schemes, and securities. Mayfair 101 and its wholly owned subsidiaries are not deposit-taking institutions in Australia or the United Kingdom and are not authorised to conduct retail banking activities as specified in the Banking Act 1959 (Cth). Mayfair 101 Limited is an Appointed Representative of Sapia Partners LLP, a firm regulated and authorised by the Financial Conduct Authority in the United Kingdom. Mayfair 101 Limited’s activities in the United Kingdom and the activities of Mayfair 101 in Australia, should be considered as separate activities.