Regal Partners, a significant investment powerhouse that manages various funds including hedge funds and invests in Australian and global companies, has attributed a challenging twelve months to rising interest rates and the Australian sharemarket’s missed global artificial intelligence trade. The firm’s Australian-focused hedge fund saw a substantial 18.9 per cent decline in the year to September, underperforming the S&P/ASX 300 Accumulation Index by 21.28 percentage points. This marks a difficult period for the $21 billion investment manager, leading to what it called an ‘annus horribilis’.
Regal linked its underperformance to the S&P/ASX 200 Index, which is dominated by banks and miners, thus missing the robust gains seen in tech-heavy markets globally. The Reserve Bank of Australia’s aggressive rate-lifting cycle, impacting housing and retail spending, was also cited. The firm noted that Australian equities underperformed globally, weighed down by sectors like materials, financials, real investment trusts, and consumer discretionary, with analysts downgrading forecasts for household-facing companies amid falling property prices and declining retail sales.
This period also affected the hedge fund’s longer-term performance, now lagging its benchmark over three, five, and ten years, though it retains a 3.21 percentage point outperformance since inception in August 2009. Specific investments that dragged performance included a 37 per cent fall in rare earths hopeful Lindian Resources, amid Malawi mining law uncertainty, and declines in buy now, pay later provider Zip and gaming machine maker Light & Wonder. In contrast, Regal’s emerging companies opportunities fund returned 23.3 per cent over the past year, benefiting from an early backing of Firmus. Chief Executive Brendan O’Connor highlighted the $10 million Firmus investment that grew to $300 million, with $170 million already sold and a $130 million stake remaining, calling it “a good return by anyone’s measure.”
