VGI comes up short, but not for too long

Cartoon: Rod Clement.

There’s nothing worse than being caught on the wrong side of the market.

At the end of March it was the nation’s band of highly paid long-only managers that were agonising amid the sharemarket correction.

But after April’s results it’s one of the nation’s big-name short-sellers that’s smarting.

Rich-lister Robert Luciano’s VG1 listed investment company had its lowest allocation to equities since the GFC, just as the ASX 200 was set to enjoy one of its strongest rallies in decades. Indeed VG1 had 40 per cent of its 45 per cent equities exposure held in short positions at the beginning of April.

As a result, after outperforming the pack in March, VG1 recorded a -4.5 per cent net return for April, which consisted of a 4.7 per cent positive return from long investments, a 4.9 per cent loss from short positions and a 4.3 per cent detraction from its long-term strategic currency positioning, where it has been long the US dollar.

“We are deeply disappointed to now be writing to you following a month where our performance has fallen well short of the broader market,’’ VG1 advised in the mea culpa in its latest investor letter.

“We have unfortunately made a number of costly unforced errors; firstly, just as we should have been quicker to cut some of our long investments where the facts had changed, we should have increased our short exposure a little earlier than we did in March.

“Then, once we had repositioned the portfolio to reflect our concerns over the impact on company profits of substantially reduced household incomes, we should have been quicker to recognise that the announcement of unprecedented stimulus and wage-replacement programs around the world would defer the negative consequences for a number of companies in which we had initiated short positions.

“While we will learn our lessons from all these mistakes, as noted earlier in this letter we believe we are well-positioned to deliver on our investment objectives over the long-term.”

Luciano and his team have previously named and shamed — think of their attack on Corporate Travel Management — so they win credit for airing their own blemish.

But their investors won’t be complaining too loudly.

The fund’s post-tax returns are an impressive 20 per cent since listing on the ASX in October 2017. Over that time, LICs are up only 4.5 per cent.

Policing Facebook

Australia has a representative on the newly created Facebook oversight board.

It is the board that will adjudicate content moderation decisions on the social media platform founded by Mark Zuckerberg, who is not on the board.

Nicolas Suzor, a professor at the Law School at Queensland University of Technology, is Australia’s representative on the 20-strong board that includes members from almost that many countries. He’ll sit along side Helle Thorning-Schmidt, the former prime minister of Denmark, and Nobel Peace Prize laureate Tawakkol Karman.

Suzor’s own Facebook activity is very light, having not posted anything in 2020, but he does have the blue tick.

Suzor appears keener on Twitter. Indeed when advising of his appointment, he went to the blue bird rather than the lower-case f.

“My research over the last 13 years has focused on how we can make tech companies more accountable,” Suzor tweeted to his 4000 followers.

“I do want to stress that this is an experiment and a work in progress.

“We’re going to try very hard to make it useful, but it’s not perfect, there’s much to learn, and it’s certainly not going to address all the problems we see with social media governance today.”

Initially the scope of review will be limited to appeals against take-downs.

Suzor is the deputy chair of Digital Rights Watch, a non-profit organisation that aims for Australians to be equipped, empowered and enabled to uphold their digital rights.

Agency extension

The real estate network The Agency has secured a five-month extension from its hardball financiers Macquarie Group.

Their reputed $12.5m loan runs until September 30, and has been topped off with $1m “to provide a working capital buffer while the impact of COVID-19 remains somewhat unclear”.

However, the listed company, founded after a series of departures that rocked McGrath Group four years ago, will need to report weekly to Macquarie on the company’s performance.

And they must also supply Macquarie with a detailed business review by May 29 on how it expects to engineer the repayment of its debt, which has an 8.5 per cent interest rate.

The Agency has expeditiously engaged BDO to review the company’s financial model and also mandated Canaccord Tenuity (Australia) to provide future refinancing advice for the board.

The Agency told shareholders the latest extension followed “positive and collaborative negotiations”.

Meanwhile, one of The Agency’s investors has stepped away from his rather brief board spot. Mitchell Atkins, a director of Magnolia Capital, advised he “looked forward to continuing to support The Agency as it focuses on the next steps of growth.”

The Agency’s most valuable tangible asset is its rent roll, last valued at $23.5m pre-COVID-19, followed by its mortgage commission book at $5.2m. Its market cap is nearly $12m.

The group’s four leading founders, Matt Lahood, Ben Collier, Steven Chen and Shad Hassen, have all taken a hit on their investment in The Agency, but do enjoy a larger slice of sales commission than most rival agents.

Only issue is securing stock, although the group did score a bullish $16.6m sale for a Rose Bay harbourfront reserve home credited to their up and coming sales agent, James  Alegre. The Neville Gruzman-designed Lapin house was sold by the Stolyar family to the UK-born foreign exchange dealer Tony Collick.

Clare’s back

Banking veteran Peter Clare, after an absence from senior roles following major heart surgery, is back at the banking vault. Well, actually the boardroom, after his appointment to the board of the Queensland-based Heritage Bank, replacing the veteran board member Vivienne Quinn, who has stepped down after a quarter of a century.

“I am hoping to bring some of my more recent technology experience to the digital and customer experience journey that Heritage is on,” Clare said, having spent the last year at business solution provider RoZetta, where he remains a non-executive director.

Clare had been the top executive at Westpac New Zealand before resigning in 2014 to recover from major heart surgery. He had been its chief executive since 2012, replacing George Frazis, who went on to head St George.

The Heritage board is chaired by Kerry Betros and its chief executive is Peter Lock, the former NAB and CBA banker who has held the post since 2015.

“Peter’s deep understanding of banking, coupled with his experience in the technology industry, will be invaluable to Heritage as we continue our digital transformation process,” Betros said.

And over the weekend Clare’s dad and mum, from their isolation, expressed how very proud they were of their 56-year-old son.

A hill to Clime

Clime Financial Group isn’t necessarily going to have a rails run at acquiring Madison Financial Group from OneVue.

Centrepoint Alliance is tipped to be interested in the acquisition.

With $3bn funds under management, Centrepoint, run by Angus Benbow, is understood to be one of the parties short-listed by Seaview Consulting, which is overseeing the sale process.

Madison, which is home to some 100 advisers, was previously owned by Sargon Capital but fell into OneVue’s hands in February as they looked to recoup money owed by Sargon.

Clime’s Rod Bristow has said the firm was interested in acquiring other funds businesses and advice practices. But Clime’s private wealth business focused on sophisticated clients more so than retail advice.