DEALTALK-Macquarie's pioneering funds model under pressure

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* Listed funds under pressure to close valuation gap

* More funds may look at ending ties with Macquarie

* Macquarie shifting focus to unlisted funds

By Denny Thomas and Mette Fraende

SYDNEY, June 30 (Reuters) - Australian investment bank Macquarie Group Ltd (MQG.AX) has managed to quell concerns on its capital position but is now bracing for its next big challenge of the global credit crisis: how to prevent its world-renowned specialist listed-funds model from crumbling.

Macquarie pioneered the specialist listed funds model in the early 1990s, encouraging even some Wall Street investment banks to follow suit. Fees from managing specialist funds made up 13.3 percent of Macquarie's total income in the year to March 31, 2009.

But a meltdown in global asset values has raised doubts about the survival of the listed funds business model itself. On Tuesday, shareholders in Macquarie Communications Infrastructure Group (MCG.AX) approved a $1.3 billion deal by Canada Pension Plan Investment Board to buy Macquarie Communications. [ID:nSYD397051].

And last week, Macquarie Leisure Trust Group MLE.AX, one of the smaller funds, cut its ties with Macquarie Group by paying A$17 million ($14 million) to the bank.

Those moves have sparked talk that more from Macquarie Group's stable of about 15 such listed funds may follow suit and break away as they aim to save fees and do a better job than the bank in managing the funds.

"Macquarie Infrastructure Group could be a candidate for that, possibly Macquarie Airports as well," said Tom Elliott, managing director of MM&E Capital, a hedge fund that takes positions in announced M&A deals.

"Those are relatively better-performing funds and it would cost a fair bit to do it. But still, it's possible," Elliott added.

Deutsche Bank estimated in a report last week that Macquarie Group would suffer a net A$33 million loss if 50 percent of all listed funds were to throw out Macquarie as the manager.

STRETCHED THIN?

Using cheap debt, Macquarie Group bought infrastructure assets around the world and bundled them into listed and unlisted funds. The bank earns base fees as a manager of assets and gets performance fees if the funds beat benchmark indices.

Macquarie Group's listed and unlisted funds jointly manage A$160 billion in toll roads, airports, real estate and others. Macquarie Infrastructure Group (MIG.AX) and Macquarie Airports (MAP.AX) are the top two.