The BRW Rich 200 list was once described as “capitalist porn”: a voyeuristic glimpse into the naked wealth of Australia’s super-rich. Its stories on fortunes made and lost, billionaires, newcomers to the list, and the lifestyles of the rich and famous attracted a slew of headlines.
As a former BRW managing editor, I recall hundreds of copies of the Rich 200 having prime positions in newsagents at Toorak in Melbourne and Double Bay in Sydney. And stories about the tax office auditing people based on their estimated Rich 200 wealth, charities hounding rich-listers for money, and Gerry Harvey joking with John Singleton about being a “junior” rich lister.
Those were the days. Today, the Rich 200 is an insert in the Australian Financial Review magazine rather than a standalone issue. But the list, published recently, is still unique and vital information for those who keep tabs on the super-rich.
I always thought the list’s true value was not in the published wealth figures. They are, after all, estimates, albeit well considered ones. The real value was the sometimes subtle, changing dynamics of how the Rich 200 members made more money in the past 12 months – and what average investors could learn from it.
The Rich 200 has captured key macro investment trends in the last three decades. I recall property entrepreneurs dominating the list in its early incarnation, the rise and fall of tech entrepreneurs around the turn of the century, and the fall of some resource barons in the past decade.
Seven investment trends stood out from this year’s list:
1. Invest in the disruptors
It is no surprise that three new entrants on this year’s list are from technology-based companies that are disrupting established industries. Matt Barrie, founder of micro-jobs site Freelancer, debuted on the list with an estimated $255 million fortune. Online electronics entrepreneur Ruslan Kogan debuted with $320 million, and online foreign-exchange entrepreneur Owen Kerr debuted with $250 million.
As technology continues to change industries from print media, to travel, banking, law and everything in between, watch for the disruptors to soar up the Rich 200 rankings. Spotting the disruptors early, and investing in those who list their companies on ASX or other exchanges, can supercharge wealth creation, albeit with high risk.
2. Feed your portfolio some software
I love the line that “software is eating the world”. From one industry to the next, software is changing industry dynamics and reducing the marginal cost of production. Atlassian founders Mike Cannon-Brookes and Scott Farquhar, both aged 34, are billionaires, according to the Rich 200. MYOB co-founder Craig Winkler, a key investor in Xero, the booming cloud-computing accounting software provider, has an estimated $710 million fortune.
Investors seeking fast-growth micro-cap and small-cap stocks could do worse than consider ASX-listed software companies. Yes, there are not many compared with offshore exchanges. But that will change rapidly in coming years as more tech companies use the ASX to list and raise capital.
3. Make money from the moneymen
This year’s Rich 200 again shows fund management is a wealth goldmine for those rare managers who consistently outperform markets over long periods.
Investors Mutual’s Anton Tagliaferro has an estimated $255 million fortune; Paradice Investment Management’s David Paradice has $275 million, and Platinum Asset Management’s Kerr Neilson has $3.3 billion.
ETF Securities’ Graham Tuckwell, whose business offers exchanged-traded commodity funds on global exchanges, is worth $466 million. Others such as retail entrepreneur Naomi Milgrom boosted their fortune by investing in star fund manager, Magellan Financial Group.
The lesson for other investors: identify Australia’s great money managers and invest in their funds, or better still, buy shares in their companies if they are listed. Although returns can be volatile, the great moneymen have a knack of creating plenty of wealth for others over long periods.
4. The queen is dead (resources) – long live the king (property)
Well, not quite. Australia’s duchess of iron ore, Gina Rinehart, again tops this Rich 200 with an estimated $20 billion fortune and Fortescue’s Andrew Forrest has $5.8 billion. I can’t recall seeing so few mining entrepreneurs on the Rich 200, which is no surprise given falling commodity prices and the end of the mining investment boom.
Meanwhile, the Rich 200’s greatest source of wealth – property – is alive and well. By my count, 16 of Australia’s 39 billionaires made most of their wealth from property, or a mix of property and other businesses. As the housing market strengthens, and more foreigners buy Australian property, it’s a good bet that other property moguls will join the billionaires’ club in the next few years.
5. The world is not big enough
The Rich 200 members increasingly make their fortunes in other countries. From James Packer pursuing casinos in emerging markets, to Anthony Pratt’s global packaging business, to Frank Lowy’s global shopping-centre empire, and so on. In fact, 20 of this year’s Rich 200 members are based overseas, according to The Financial Review.
The investment lesson: if you want to make serious wealth, look beyond Australia to larger, faster-growing markets in emerging or developed countries.
6. Don’t stop when you get enough
I love how the average age of the Rich 200 members is 64, and that there are two nonagenarians (Lady Mary Fairfax and Stan Perron) and an octogenarian (Michael Crouch, who debuts at age 81) on the list. Those who believe wealth creation is a younger person’s game, or that you cannot make millions when you are 70 or 80, need to think again.
Time and again, the Rich 200 shows that real wealth for many entrepreneurs is made in their “third act” – when others their age are retiring. Hopefully, the Rich 200 inspires SMSF trustees, who are not content with their retirement savings, to take calculated risks and build serious wealth later in life.
7. Know when to sell
The hallmark of the greatest Rich 200 members. Think of the late Kerry Packer, or his son James, who sold large stakes in SEEK and Magellan Financial Group to concentrate on casino developments. Surprisingly few of the Rich 200 members cashed in some or all of their chips last year, which says something about their view on the Australian economy and share market in the next few years.
When the super-rich start selling, it is time to take a closer look at your portfolio. But for now, their confidence to maintain investments or reinvest in their core business is further confirmation that the medium-term outlook for the Australian share market is healthy.
– Tony Featherstone was managing editor of BRW from 2003-2006 and conceived and launched the BRW Young Rich list.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.
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