Cover Story: Mark Carnegie - Out with the old

FS Private Wealth
By Elizabeth McArthur
Nov 15, 2021

Venture capitalist Mark Carnegie was born into a wealthy and successful family and is attune to his exceptional privilege. Here he shares with Elizabeth McArthur his investing philosophy, philanthropic work and why he thinks the smart money is in cryptocurrency.

Mark Carnegie is an entrepreneur, investor and businessman with an Oxford education and deep roots in Australia's business and finance world.

His father, Roderick Carnegie, led CRA Limited (now Rio Tinto) from 1974 to 1986. He was awarded a knighthood in 1978 and an Order of Australia in 2003.

Roderick Carnegie was himself private school educated, at Geelong Grammar and Trinity College, and would go on to attend Oxford University.

Mark Carnegie and his two brothers were doubtless born with some level of expectation upon them. Expectation that seems to have been met. One of the brothers now leads Blackstone's private equity business in Australia and the other runs a successful advisory firm.

Carnegie's career journey is dotted with opportunities afforded to him through connections and he acknowledges these privileges.

He also acknowledges that, perhaps because of his pedigree, as soon as he was exposed to the world of finance through a summer job while studying, he could readily "see how it worked".

"I am absolutely one of those people who has to leave Middle Earth - I am the white, privileged male. I am all those things that are now too lucky," Carnegie says.

But Carnegie didn't always have money on his mind. When he left school, he went to the University of Melbourne to study animal physiology.

"I wanted to be Jacques Cousteau. I wanted to be a marine biologist and sail the world... But I was a terrible research scientist. So very quickly, I realised that was not going to work," he says.

He admits that he's still been able to sail the world, but through being "fortunate" in life. He never did parlay sailing into part of a serious academic pursuit.

It wasn't long after starting at the University of Melbourne that Carnegie realised he might have chosen the wrong degree. And it seems he put a certain amount of pressure on himself despite being a teenager fresh from high school.

"I realised the first week I arrived. There's a guy called Andrew Gibbons, who is the professor of anatomy at Charles Sturt at the moment, and he did a tour for physiology students of the zoo, and I just realised 'You are so much better at this than I am ever going to be'," Carnegie explains.

"I just had massive anxiety. It was only the fact that I used to row boats up and down rivers that took my mind off it."

He made it through the bachelor's degree though and then at 21, went to Oxford to study law. Throughout his studies it was the summer jobs that would help him see finance was where he could make a living.

After his first summer job with a stockbroker, Carnegie went and worked for Jim Wolfensohn, who he would subsequently work for again in New York.

"Jim was probably Australia's most famous and successful investment banker. And he ran a boutique, which we tried to recreate at Carnegie Wiley all those years later," Carnegie says of the experience.

"It was really during those two summers that I knew I could do finance a lot more easily than I could have done animal physiology.

"I could see what was going on, and I could see what was required much more easily."

Carnegie got those perspective-altering summer jobs through connections, which he concedes as a privilege of attending a prestigious school.

"It's relatively easy off the bench at Oxford to get summer jobs," he says.

"So, you get into this situation where the privilege of going to Oxford, means you've got the privilege of getting summer jobs and the flywheel starts to go."

As a result of this experience, Carnegie says his firm has tried to be "open architecture" about the internship programs it offers.

"We feel like people have gone on to all sorts of different things in all sorts of different ways," he says.

He cites Afterpay founder Nick Molnar as an alumnus of the MH Carnegie network.

The parable of Afterpay states that Anthony Eisen met Molnar when they were neighbours; Molnar was just a teenager, but his father told Eisen about his son's entrepreneurial pursuits.

Eisen got to know Molnar's father "taking out the bins" in front of their Rose Bay homes.

Apart from his summer on Wall Street with Wolfensohn, Carnegie would end up working in the US for a couple of years before returning to the UK, where he worked in property in private equity syndications.

Then he returned to Australia, where for a decade he worked with John Singleton in media and advertising and with Hellman & Friedman in private equity.

Then in 2000 he started Carnegie Wylie with partner John Wylie. The firm was acquired by Lazard in 2007 and, following the sale, Carnegie was made chief executive of Lazard Australia Private Equity.

Just three years later, he would leave to establish MH Carnegie & Co. The firm now manages more than $900 million across eight platforms - investing in venture capital, private equity, real estate, debt and now cryptocurrency.

Some of his investing advice is conventional wisdom: "You tend to sell your winners too early and find some way to put more money into your losers."

But in some ways his point of view is more esoteric. He thinks that to be successful in investing you must be well read and read broadly. Carnegie himself is a prolific reader. At the time of this interview, he says he just finished The Great Debate: Edmund Burke, Thomas Paine, and the Birth of Left and Right by Yuval Levin.

"The lessons out of behavioural psychology are well learned and important and I think the other lesson I've learned is that I don't know anyone who is a good investor who doesn't read constantly," he says.

"So, my strong lessons are not lessons of needing to understand about how to deal with, you know, an accelerated depreciation schedule or be super good on Excel, none of that's going to help you. I think you need to understand people and you need to read widely."

He adds that the first thing he tells people interested in investing to read is Charlie Munger's Poor Charlie's Almanack. The collection of speeches by Warren Buffett's investing partner offers wisdom from one of the foremost investment minds.

"And I assume that anybody who's thinking about investing has read all of the Berkshire Hathaway letters," Carnegie says.

As for how he invests his own money, Carnegie says  "you need to eat your own cooking".

"But basically, I have almost all my money in the business. I have this small amount of money in a diversified portfolio of equities. And then I have money in the funds that I manage - both the crypto funds and the mainstream funds and the debt funds,he says.

Carnegie thinks there will be a Munger and Buffett for the new generation; a crypto investor, perhaps one who is popular on Twitter.

MH Carnegie & Co has so far launched two crypto funds in 2021 - the MHC Digital Asset Fund and MHC Digital Market Neutral Fund.

Carnegie admits that a generous proportion of the Australian investing landscape - from family offices to super funds - are showing little interest in understanding crypto. In fact, he theorises some of them are hoping it will go away so they don't have to educate themselves.

But he insists the smartest money is in crypto and he thinks eventually family offices and institutions will either see the opportunity or be dragged kicking and screaming into the new era.

"It's worth noting that these early-stage opportunities won't be around forever. Eventually, once the large cap traditional players overcome their hesitations on crypto, they will come around in droves and take the same positions we have (but in much greater size) to close these price gaps," Carnegie says.

"Until then, a combination of derivative strategies and liquidity provision affords us the opportunity to take advantage of pricing anomalies not seen in traditional markets for many years."

He admits the pandemic has complicated his ability to get investors interested in these funds, with Zoom calls not cutting it for a lot of the more old-school Australian investors.

That said, Carnegie is pushing on with his next project in the field - this time diving into non-fungible tokens (NFTs). NFTs are emerging as a new way of selling art through blockchain technology. At this stage it is a philanthropic venture, with artists in control of any profits.

Carnegie has teamed up with Justin Miller, a long-time friend and art advisor, and Ross Harley, a researcher and producer of new media art, for this venture. They are offering the Mark Carnegie NFT Fellowship Award, a pilot project exploring the possibilities in fine art NFTs.

The artists will produce a series of NFTs and will each receive $5000 remuneration towards the project. The project will cover all fees in creating the NFTs and purchase carbon credits to offset environmental impact.

By working with early career artists, the idea is that this project could help establish the value of fine art NFTs and help the artists and crypto experts involved understand how to navigate this market.

While this project will see Carnegie mix business with philanthropy, he does have pure philanthropic pursuits too.

He is involved in the Time + Tide Foundation which operates in Zambia and Madagascar, and another philanthropic project, IDEA - which stands for Inmate Domestic Economic Assistance Programme, that he is funding in Zambia.

The former is a philanthropic arm of the Time + Tide tourism brand that invests in the future productivity of wildlife economies through community and school-based learning. It offers female empowerment, health support, home based education, student scholarships and wildlife conservation.

IDEA aims to financially empower rural women and women inmates in correctional facilities in Zambia by creating economic value from natural forest resources.

The vision of the IDEA project is to see women inmates serve and eventually leave correctional institutions economically stronger and more skilled by extending them the human right to work and income.

Madagascar is where Carnegie ended up spending much of 2020. He was at the Time + Tide tourism lodges, seeing whether there was more the foundation could be doing in Madagascar in community development, climate, and ecology when the lockdowns in response to the pandemic began.

He says as far as places to get locked down go, Madagascar wasn't bad.

"We need to be doing more to arrest the environmental slide and putting more human capital and infrastructure into Africa remains the second biggest challenge of our time after climate change," Carnegie says.

Perspective on his privilege appears to be one of Carnegie's gifts. He is of the view that "our best days are behind us, we need to leave stage left" when it comes to men of his background.

"I feel privileged. I do. All the things people accuse the patriarchy of are to some extent true," he says.

"It's all true to an extent, that we're trying to rig the deck on behalf of the patriarchy to make it harder for women. The fact that women in Australia have stood up and said no more is a good step forward."

Carnegie's three daughters, all in their mid-twenties, have not followed him into finance but they seem to have inherited his thirst for knowledge. His youngest daughter has a disability and wants to work with disabled people herself; she is currently studying at the London School of Economics studying history and international relations. The eldest is doing PR in London and the middle child is studying the classics, working on popularising them for the general public.

It seems the next generation will be no less driven and educated than the last.