VGI’s global fund swings back into black after ‘painful’...

VGI’s global fund swings back into black after ‘painful’ 2022

Joshua PeachMarkets Reporter

Aug 8, 2023 – 1.02pm

Listed investment company VGI Partners Global Investments delivered its first return in more than 18 months, after doubling down on its positions during an “incredibly disappointing” 2022.

The long-short strategy, which is managed by the Regal Partners-owned VGI, delivered a return of 19.7 per cent in the June half of 2023.

That is ahead of the MSCI World Index and the S&P 500, which rose 14 per cent and 16 per cent, respectively, but fell short of the technology-focused Nasdaq Composite’s 32 per cent gain over the same six months.

The LIC’s rise claws back some of a 22.3 per cent drawdown in calendar 2022, the largest annual drawdown the global strategy has recorded since listing on the ASX in 2017.

Last year’s fall was driven largely by a market shift away from loss-making companies.

In a letter to shareholders, the fund said 2022 had been “painful” for managers and investors alike, but had presented an opportunity to “re-underwrite” positions while prices were low.

“The market has provided us with an important lesson in the value of patience, with a number of key positive contributors through the first half coming from positions that had been performance detractors through [calendar 2022].”

The largest contributors to the upswing included e-commerce tech behemoth Amazon, audio streaming subscription service Spotify, and experience management company Qualtrics.

The fund retains its largest positions in Amazon and markets operator CME Group, but has scaled these back to 9 per cent of invested capital each, from 12 per cent each at the end of last year.

Despite shrinking its exposure, the fund remains confident on Amazon as an AI-exposed alternative to artificial intelligence favourites like Microsoft and Nvidia.

“Whilst Microsoft and ChatGPT have captured the imagination of investors looking for AI exposure, the AI business at AWS [Amazon Web Services] is extremely well positioned to increase sales through its combination of software infrastructure products, proprietary training and inference chips,” the fund told investors.

The swing back into black coincides with interest in the LIC from New York activist investors Saba Capital and Geoff Wilson’s WAM Strategic Value, which have bought up positions in the global fund.

Commenting on its performance, the manager said it was pleased with the half, albeit “in the context of a weaker period of overall returns in recent years”.

Shares in VGI Partners Global Investments were up 0.6 per cent to $1.74.

Joshua Peach is Markets Reporter at The Australian Financial Review Email Joshua at joshua.peach@copyright link