Zillow, Flutter, Just Eat Takeaway wipe out Caledonia returns by nearly 30pc in 2021

The intensely private Caledonia, which manages billions for Australia’s rich-lister investors, had a difficult 2021, hurt by its investment in Zillow and Flutter.

Will Vicars, co-chief investment officer at Caledonia (Private) Investments.

Caledonia Investments, the fund manager of choice for some of the nation’s wealthiest families, shed nearly 30 per cent last year, a confidential update shows, as it was hit by a fall in its largest holdings, Zillow and Flutter.

In all, Caledonia’s funds had a negative 27.2 per cent return for 2021, and are down 22.7 per cent in the first six months of the ­financial year to December 31.

That compares to its benchmark MSCI World index, which rose 24.7 per cent in 2021.

Four of the private investment house’s top five holdings were in the red for the financial year to date – with Zillow’s 46 per cent share price drop the worst.

Just Eat Takeaway’s 38 per cent plunge over the same period was another sore spot for the fund manager that counts some of Australia’s wealthiest as its clients, as was the 11 per cent drop from Scientific Games.

But co-chief investment officers Will Vicars and Mike Messara sought to reassure investors, asking for patience through the current slump.

“We seek to hold onto our core longs through drawdowns and buy more shares when our guidelines permit,” they told clients in a letter.

“As a result of this practice, the fund returned 83 per cent and 42 per cent in the next 12 months after the drawdown in 2018 and 2020 respectively.” The recovery from the current drawdown “could be similar or greater in magnitude”, they predicted.

The fund says it is confident in its top positions, telling clients it expects these holdings to deliver a threefold increase in the value of the fund by 2025.

The only bright spot in its top holdings over the six months to the end of December was the 35 per cent share price jump in Formula One Group.

The dismal performance comes after the investment house posted a bumper profit for the 2021 financial year. According to accounts filed with the ­financial regulator, Caledonia made a $529m profit as revenue surged to $603m.

This compares to 2020’s $92m profit on revenue of $112m.

The intensely private Caledonia, which manages about $7bn for the Darling family and a smattering of other rich-lister ­investors, is Zillow’s largest shareholder, having invested in the real estate platform a decade ago.

Some of Australia’s wealthiest also have stakes in Zillow, having been introduced to the stock by Vicars via Caledonia.

This includes billionaire Gretel Packer, who reportedly received more than a million shares in Zillow after she reached a settlement – with the help of Vicars – with billionaire brother James Packer over the dividing of their family fortune in 2016.

All will be smarting from the real estate company’s recent share price pain: after hitting an all-time high of more than $US200 a share early last year, Zillow began a steady decline before a larger fall in November, when it plunged 40 per cent as it closed its algorithm-based home-flipping outfit, Zillow ­Offers.

Its shares are currently trading at about $US48, leaving it with a market cap of $US12.6bn, compared to its peak market cap of $US48bn in February 2021.

In a note to clients last month, Mr Vicars said the share price ­reaction to the closure of Zillow Offers was overdone and that the investment house would be retaining its stake in the real estate online marketplace.

Other Zillow shareholders are less positive, with the company now facing class actions from disgruntled shareholders who claim they were misled on the state of the home buying business.