Bumper $100m profit for Will Vicars’ Caledonia

The $10bn Sydney hedge fund manager enjoyed a big surge in earnings for 2020 after a record performance by the global stocks it owns.

Caledonia’s Will Vicars.

A record performance has turbocharged profits for $10bn Sydney fund manager Caledonia, which has parlayed bets on global gambling and other digital stocks into a bumper financial result and big dividends.

Caledonia’s pre-tax profit for 2020 surged to $101m, a five-fold increase from the $20m result the private firm headed by star Sydney stockpicker Will Vicars recorded a year ago.

Documents lodged this week with the corporate regulator and obtained by The Australian reveal Caledonia also paid its owners, including The List – Australia’s Richest 250 member Mr Vicars, Michael Messara and the Darling family, almost $80m in dividends.

The dividend payments were made in three transactions and were related to the 2018 and 2019 financial years for Caledonia (Private) Investments Pty Ltd, but the firm’s 2020 result was even more impressive.

Caledonia, which has a series of big holdings in US-listed firms including real estate company Zillow and London-listed Flutter Entertainment, enjoyed a record result in the year to June 30.

The firm’s combined strategy performance of its Global Fund and its Global Co-Invest fund was up 38 per cent in the June quarter, as markets surged back after big falls in March when COVID-19 hit, and up 31 per cent for the full financial year, after fees.

“On all measures, Caledonia had a great June quarter, capping a rather extraordinary fiscal year,” the firm wrote in a recent note to clients written by Mr Vicars and Mr Messara. “Since 2012 … Caledonia combined strategy has returned 279 per cent.”

Its benchmark, the MSCI World Index, was up 4 per cent over the past 12 months.

The performance, the Caledonia duo said, was built around a 37 per cent contribution from core holdings in US food delivery business Grubhub, global gambling company Flutter Entertainment (it had a big stake in The Stars Group, which merged with Flutter) and US real estate brand Zillow.

“Flutter and Zillow are by far our largest holdings, and we think they will be the biggest drivers of wealth creation for us over the next decade. We have done years of research to underwrite the concentration risk. That is why they are our largest positions,” Caledonia said in the investment note.

“At Caledonia, we invest in a very small number of companies and focus on them like they are our children, shepherding them through good times and bad, always with an eye to helping them realise their fullest potential.”

Caledonia’s 2020 accounts show the firm made $91m in fees for the year, likely to be mostly performance fees, up from only $15m in 2019. Service fees were $20m compared to $16m a year earlier. Caledonia also had about $31m cash in the bank as at June 30.

This year the firm has taken a large position in the global music streaming sector, emerging with a strategic shareholding in Warner Music in July.

Caledonia made an even bigger splash in September when it anchored the $1.2bn purchase of a large stake in Scientific Games, which operates in gaming, lottery, social and digital gaming industries in the United States and around the world.

The deal was for the stake held by US billionaire Ron Perelman, and Caledonia reportedly is emerging with a 9.9 per cent share of the business worth about $360m.

The Scientific Games buy was a continuation of about four key themes that have emerged in the Caledonia portfolio: gambling, sports and entertainment, real ­estate and financial services – with most of the holdings focused on the US and North American markets.

Caledonia also has a stake of more than $1.5bn in Grubhub and shareholdings in two online car classifieds companies.

Its Flutter stake gives Caledonia an exposure to the European betting market, to Australia, where Flutter’s Sportsbet brand made a $200m profit this year, and also the US, where online gambling is being legalised across several states.

Caledonia also has about $1bn invested in Liberty Media Formula One, the owner of the global motor racing series, and wrestling business WWE.

Other holdings include real estate businesses, with Caledonia having a $6bn shareholding in NASDAQ-listed Zillow.