Rob Luciano-led VGI Partners investors back Regal Funds Management merger
The enlarged group, which will be called Regal Partners, will have about $5.6bn of funds under management and close to 100 staff spread across five cities.
VGI Partners executive chairman Rob Luciano may have faced a hostile reception at the ASX-listed fund manager’s annual meeting last Friday – but shareholders still voted overwhelmingly in favour of the company’s merger with Regal Funds Management.
Set to be completed on Friday, the new entity called Regal Partners will have about $5.6bn of funds under management and close to 100 staff spread across five cities.
Mr Luciano told investors at the meeting that the merger with Regal was a big win for VGI and would benefit shareholders. Neither he nor Phil King, Regal’s largest investor and key stockpicker, will be on the board with both to focus on investing. Instead, it will be chaired by Michael Cole, a former Platinum Asset Management chairman.
“With more than 5 decades of combined experience, across a broad range of market conditions and cycles – our combined investment capabilities give us a real advantage and in turn enhance our abilities to deliver for our investors” Mr Luciano said.
Brendan O’Connor, the current chief executive of Regal, will be appointed CEO of the merged group. The chief financial officer at VGI, Ian Cameron, will remain in the role at the merged group.
Mr O’Connor said a combined VGI and Regal business offered growth opportunities across different parts of the company.
“I think (Regal and VGI) are complementary in nature of that both businesses as one create a strong platform for growth, which we are excited about,” he said.
“It would provide a scale and diversified platform for further growth opportunists of which both Regal and VGI are excited about some of those prospects going forward.”
Mr Luciano faced fierce criticism about VGI Partners’ dealings with shareholders, its high fee structure and the gap between its share price and the valuation of its funds from investment bankers turned investors David Kingston and Malcolm McComas.
Mr Kingston proclaimed the “death of VGI as controlled by Rob Luciano”, said shareholder value had suffered under the leadership of Mr Luciano.
“Rob, you have presided over one of the most notorious win-lose fund management regimes in recent years,” Mr Kingston said.
“ You walk away with $150m, plus a lot of recent dividends, when you as the key guy have delivered nasty capital losses to IPO investors across your three funds … You have hurt many shareholders … it may be a game for you, but a lot of people have put their super funds with you; they’ve trusted you and they’ve been slaughtered.”
Mr McComas said VGI’s investment funds were “designed solely for benefit of management” with only management to have “generated wealth” from them.
VGI, which began as a funds management house focusing on a small number of wealthy families, had been one of the market’s most aggressive short-sellers – taking positions against ASX-listed law firm Slater & Gordon and Corporate Travel Management.
The company has recently faced poor returns as the market turned against its largest holdings with its VGI Partners Asian and VGI Partners Global investment funds down by over 20 per cent.
Mr Luciano said VGI Partners had tried to address discounting issues with greater focus on investment returns and performance, but added merged fund would have greater ability to narrow the gap. “Learning from the Regal … success, we have tried to enhance VG1 and VG8 capabilities, which overtime should narrow the discount,” he said.
Mr Kingston’s son, Charlie Kingston of CSK Capital, also attacked Mr Luciano for being “stubborn” for his three stock picks he gave to The Australian in December 2022, in which he Amazon, Pinterest and Qualtrics offered long-term value, which have since tumbled 34.8 per cent, 46.3 per cent and 60 per cent respectively.
“You are heavily skewered to tech stocks – you claim to be a hedge fund manager, but the best ones know how to pivot, such as Phil King with his move to commodities,” he said.
“Is there an argument that you are stubborn.”
Mr Luciano said while his investment picks might have “aged poorly”, he stood by his picks, especially in Amazon. “We saw tremendous value in Amazon at $3000 per share and at $2000 a share it is even better priced and if you do the maths on its cloud computing price you get more value on that than today’s share price – you get e-commerce and everything else for free,” he said.
VGI will acquire 100 per cent of Regal in consideration for ordinary shares in VGI with Regal to have 66.7 per cent control of the new entity, while existing VGI shareholders to have 33.3 per cent. A special dividend of 39.70 cents will be paid to VGI investors on June 2.
Shares in VGI Partners remain 4.7 per cent lower for 2022, but a 9.7 per cent increase last Friday to $4.29.
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