The Australian Grand Prix in Melbourne will now launch the beginning of the season. Mark Thompson / Getty Images
The Australian Grand Prix in Melbourne will now launch the beginning of the season. Mark Thompson / Getty Images
The Australian Grand Prix in Melbourne will now launch the beginning of the season. Mark Thompson / Getty Images
The Australian Grand Prix in Melbourne will now launch the beginning of the season. Mark Thompson / Getty Images

Amber light for Australian GP but is Melbourne ready?


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Far removed from Formula One's European epicentre, the Australian Grand Prix in Melbourne has almost always sat somewhat uncomfortably on the F1 calendar.

Be it the problematic time-zone hurting television viewing figures, protests from the public over the move from Adelaide to Albert Park or dwindling attendances in the stands, Australia has never been the favourite race of Bernie Ecclestone, the F1 chief.

Recent comments from Ecclestone in retaliation to an open letter from Melbourne Lord Mayor Robert Doyle would suggest the Australian Grand Prix is ready to make way when the race's contract expires in 2015.

Yet, with the postponement of the Bahrain Grand Prix resulting in Melbourne becoming the de facto season-opener - a privilege the Gulf state had previously paid tens of millions of additional dirhams for - race officials may soon experience a change of heart.

Andrew Westacott, the newly appointed chief executive of the Australian Grand Prix Corporation (AGPC), which is charged with facilitating the holding of motorsports events in the country, said it was impossible to imagine the Melbourne race would not benefit.

"We'll have the eyes of the Formula One world and the sporting world on us," Westacott said. "And without the race in Bahrain, potentially the teams will spend more time in Melbourne after final testing in Barcelona."

Doyle, writing in the SundayHerald Sun earlier this month, had said the annual race no longer represented value for money to the Victorian state taxpayer.

"In 1996 when the race was a combination of a four-day event and corporate sponsorship was far more generous than it is today, the race still needed to be underwritten by about A$1.7 million (Dh6.26m)," Doyle wrote. "Last year it was A$50 million."

The city mayor, who was elected in December 2008, also labelled Ecclestone "notoriously difficult, contentious and cranky," and suggested one outcome for the Melbourne race would see the F1 rights-holder "pick up his bat and ball" and "take the dollars of either an Asian or oil-rich Middle Eastern state".

Ecclestone, who had earlier said "we don't need Australia", retorted: "I haven't dealt with this mayor, we've had a few of them, so I don't know which one is which [but] I [think] I will be dealing with these things longer than he is going to be mayor of Melbourne."

The Herald Sun yesterday claimed seven of Doyle's eight Melbourne councillors are in favour of the race remaining on the F1 calendar.

"I want it to be here as long as possible," the newspaper quoted councillor Carl Jetter as saying. Jetter's colleague Kevin Louey is quoted as having agreed that F1 is "unlike other sporting events" and "it enhances Melbourne's name".

The Australian Grand Prix has experienced a dwindling of television viewership figures in recent years, which has seen the event gradually develop into a twilight race in a bid to nullify the impact the city's GMT+11 time zone has on European television audiences.

In 2007, the race was held at 2pm local time, before moving to 3.30pm in 2008. By 2009 it was 4pm and last year it was delayed an hour once again. This year's race, which takes place on March 27, will start at 5pm, despite drivers having expressed concerns over the issue of fading light for the past two years.

Ron Walker, the chairman of the AGPC, said the race will now achieve an even larger international television audience, however, courtesy of Bahrain's withdrawal. He also said the postponement of the Kingdom's race could result in more ticket sales for Albert Park.

"Good for our branding, that goes throughout Asia at midday to China, Russia and India," Walker told the Australian Broadcasting Corporation yesterday.

"We'll have an increased audience throughout Europe and that's great for our brand Melbourne, it's great for tourism, it's great for the city of Melbourne." Westacott said the race is expected to attract 23,000 visitors to the city and could "take up 70,000 hotel nights".

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”