Just a short post on some articles that I have been
reading recently on Caledonia Investments Chief Investment Officer’s purchase
of some incredibly pricey real estate.
It has been widely reported in the media that Will
Vicars, the Chief Investment Officer of Caledonia Investments spent $21 million
(last year) on two adjoining apartments in Sydney (one costing $10.9m and the
other $10.1m). Apparently he was planning to join the two apartments together
to form one residence.
Now, unless Will plans to donate those apartments to
charity, or the media reports are incorrect, the purchase raises some
interesting questions:
1.
What does the Chief Investment Officer of
Caledonia get paid? (Perhaps way too much, judging by this lavish expenditure?).
2.
What sort of person would spend $21m on a
residence? (Certainly not a Buffett disciple, expenditure on that scale is much
more closely associated with those who enjoy ego-driven displays of wealth).
3.
Did he get value for money? (I doubt it).
Whatever the answers to these questions, it’s not a
good look for Caledonia (as a firm that is open to investments from the public).
It informs an opinion in my mind regarding Caledonia’s Chief Investment Officer
that is far more revelatory than any public relations material ever could be.
It’s even worse when you consider that Caledonia has (supposedly)
always worshipped at the altar of Warren Buffett, a man who despite being
vastly wealthier than Mr Vicars, would never dream of living in such
ostentatious surroundings.
If I was a Caledonia investor (which I’m not and never
will be), I would be scratching my head about this one. That “simple” purchase
seems to invalidate a lot of what Caledonia supposedly stands for. But then
again, often what people do in their private lives is far more informative than
what they do in public.
Food for thought.
Caledonia Investments are not very transparent about their investment holdings, fees and past returns (income vs growth components) on their website. They boast that they've achieved in excess of 17% pa since 1992 (which is amazing) but don't publish data to prove this.
ReplyDeleteThis seems to be a serious red flag given that every fund manager I know of (eg. BT, Colonial First State, Platinum Asset Management, Warren Buffett etc.) publishes these results. Is ASIC asleep again?
I don't have an issue with how the rich spend their money. Buffett recently stated he spends about $US 1 Million per year on corporate jets for personal / family reasons - not tax deductible. Keir Neilson has spent millions on some Chinese artwork & gallery. Kerry Stokes has also spent millions on questionable artwork. The late Richard Pratt, the late Kerry Packer and James packer have wasted a lot more than $21 Million each on the ex.
ReplyDeleteMy major concern, and I'm sure most astute investors would agree, is why Caledonia Investments will not publicly disclose their past returns (1 year, 3 yrs, 5 yrs, 10 yrs & since inception - net of fees), fee structure and top investment holdings? Which accounting firm is auditing their returns? Is it one of the Big 4 or some obscure one?
Some really good points.
ReplyDeleteI had written previously on this site about Caledonia not disclosing its returns. People can make their own judgments about that, but it is unusual to say the least.
The people mentioned in the comments above are all (or were) billionaires. Will Vicars is a fund manager at a middle ranking firm (in terms of funds under management). I agree that $21m is nothing for all the people mentioned, but it's highly conspicuous for Mr Vicars.
I recall Ian Darling doing a documentary on his trip to a Berkshire shareholder meeting. Conjecture - they must have dumped the majority of their holdings in Berkshire stock to achieve 17% pa since 1992. Even if these returns are pre-fees, it's still a pretty good call. Assume 1.5%pa management fees on their $2.8B fund = $42M per annum. Not a bad income stream.
ReplyDeleteAnyhow, there's no way I would consider sending any money to a firm that wasn't transparent about their results and their auditors / accounting firm (which must be a Top 4 if there weren't owned by a major institution).
Are you looking at any interesting stocks or themes?
Ian Darling made that documentary in 2000.
ReplyDeleteJust think about what earning 17% compound means, it means that if you held all the money in the fund and had no redemptions (or new money coming in), you would double funds under management every 4 years and 5 months. Caledonia hasn't achieved anything like this since opening investments to the public.
In terms of my activities, I continue to trade guided by my algorithms (largely S&P200 companies). I don't have any over-arching themes at the moment.
Conspicuous consumption is very often a red flag. Seems to be a cover for general dopiness, black swans, someone who got lucky once and is showing that fact off, or just being a sad private school wanker who thinks the god times will last forever. I recall Phil Mathews was driving around town in a Bentley - looked successful to all appearances when at the same time he was putting his clients into Elders, Gunns, and coal seam species when the rest of the market were bailing out of these basket cases. Look at Phil now. Conspicuous consumption = red flag.
ReplyDelete"The late Richard Pratt, the late Kerry Packer and James packer have wasted a lot more than $21 Million each on the ex".
ReplyDeleteCan't speak for the Packers but didn't Pratt drop a lot of coin on hookers too? One in particular who is suing his estate?
Conspicuous consumption is very often a red flag. I remember attending a seminar many years ago that was given by a firm of insolvency experts. One of the things they had noticed in many failed businesses that they had been involved with was conspicuous consumption. Regardless of whether it leads to insolvency or not, it is never a good look for investors.
ReplyDeleteAs for the late Richard Pratt's extra curricular activities, I did read something about this a long time ago, but can't remember the details.
Who says he is buying it to live in it? Perhaps from an investment perspective it stacks up; interest rates falling, property market taking off, foreign buyers insatiable demand for off the plan trophy properties etc. Remember that Munger influenced Buffett's investment style from "fair businesses at exceptional prices" to "exceptional businesses at fair prices". The property is no doubt of exceptional quality, but it is the investors call to determine the fairness of the price. Time will tell!
ReplyDeleteAnd as for the reason Caledonia don't publish their returns on their website, it is probably because they don't need to. The fund doesn't need to advertise to raise capital, and they only take new money from serious investors (I've heard it is a 500k minimum investment). My feeling is that if you are prepared to stump up the minimum investment than you will get shown all the data / investment process material you want... all of which would be audited by a reputable firm of course!