Sydney-based hedge fund Caledonia, which manages investments for some of the city’s wealthiest families, has revealed a reassessment of its key holdings. This move comes as the firm seeks to reassure clients following a prolonged period of disappointing performance, which has led to a significant outflow of funds. In a confidential memo to clients, co-chief investment officers Will Vicars and Mike Messara indicated a commitment to “broadening the long book over time” and confirmed new positions.
Client unease has grown due to the lengthy underperformance of Caledonia’s core holdings, including American real estate platform Zillow and bookmaking giant Flutter Entertainment. Zillow shares have halved since the start of the year, while Flutter has slumped over 63 per cent. The fund also holds a sizeable stake in ASX-listed gaming machine manufacturer Light & Wonder, which has seen its shares fall 17 per cent this year. To diversify, Caledonia has acquired new positions in companies such as Live Nation, a New York-listed entertainment marketing and ticketing business, and Transocean, a Houston-headquartered offshore drilling contractor.
Caledonia, which once managed over $10 billion, has seen its funds under management decrease to approximately $3.7 billion. The fund recorded a negative 32.7 per cent return in the 12 months to June 30 and lost 8.6 per cent in the three months to September 30. Vicars and Messara acknowledged the “deeply disappointing” share price performance of key holdings but asserted that the fall in market values has “far outstripped any fall in their intrinsic value.” They expressed renewed bullishness on Light & Wonder and Zillow, suggesting the market has misjudged the effect of artificial intelligence on the latter. While admitting forecasting errors with Flutter, they outlined a strategy shift towards a portfolio with “more core longs, each at a smaller weighting than over the past five years,” adding new positions opportunistically.
