VGI Partners has been quite prolific for its staff and finance journalists. Less so for its shareholders. Here's the latest:
Second VGI breakaway firm to launch as Regal deal nears
A former senior partner of Sydney hedge fund VGI Partners has joined two past colleagues in unveiling a rival fund, marking the second breakaway firm to launch in the past year.
Robert Poiner, who joined Rob Luciano’s firm VGI Partners in 2009 shortly after its launch and became one of its top portfolio managers, left last year. He has since been raising money for his own firm, Edgeworth Capital, according to a draft investor letter seen by The Australian Financial Review.
The Edgeworth Global Fund, the firm’s flagship offering, will invest in small and mid-cap shares globally, in a slight shift from Mr Poiner’s focus at VGI Partners that skewed towards large cap stocks.
The fund has already raised investor capital and will cap assets at $50 million for a period, eventually aiming to attract up to $600 million, according to the letter, which is expected to be sent to prospective investors in the coming weeks.
Mr Poiner will launch the firm with Thomas Davies, a former VGI fund manager who spent nearly a decade with the firm from 2012, and William Bowler, the former head of trading for VGI, who left earlier this year. Mr Poiner is based in New York, while Mr Davies and Mr Bowler are based in Sydney.
The new fund “will be exclusively focused on investing globally in the highest quality small and mid-cap companies”, and will focus on businesses with poor investment research coverage to maximise potential returns.
“We will focus on areas where the market is less efficient, resulting in an increased probability of mispricing. For us, this means a focus on smaller companies that have been largely ignored by professional investors,” Mr Poiner said.
The universe of small and medium-sized companies is far greater than larger listed businesses. Edgeworth Capital will seek to rely on meetings with management teams among companies with poor research coverage to help drive portfolio decisions, an approach that has helped Mr Poiner identify top performing shares in the past.
“Many of the greatest opportunities were smaller companies where we were the first foreign investors to take the time to visit with the management team at their headquarters or where there were very few, sometimes zero, analysts publishing research on the company,” he said.
The firm will charge a management fee of 1.25 per cent and a performance fee of 15 per cent above a 6 per cent annual hurdle rate, which will be subject to a high-water mark. The fund will aim to deliver annual returns of 10 per cent to 15 per cent net of fees.
The new offering underscores the challenges facing VGI Partners, which includes high staff turnover and persistent investor outflows, and comes days before a shareholder vote on Friday to cement its merger with Regal Funds Management.
VGI Partners has shed several of its longest tenured investment staff, with as much as two-thirds of its investor team named in investor documents in 2019 having left. The firm’s assets have fallen from $3.2 billion in March 2020 to $2 billion in March this year, partly because of patchy investment returns through the pandemic.
The VGI-Regal merger will create one of the largest locally listed hedge fund managers and unite Mr Luciano with Regal’s Phil King, bringing two of Australia’s best known investors together for the first time.
The launch of Edgeworth Capital follows a similar move by former top VGI Partners portfolio manager Doug Tynan, who launched GCQ Funds Management late last year.
Mr Tynan was another long-term fixture of VGI and has hired a handful of former colleagues, including David Symons, who took on the role of chief executive of GCQ.
Expand
(20min delay)