Caledonia’s concentrated investment style produces notably volatile results. Its FY20 triumph was contiguous to a negative 20 per cent return in FY19 (versus the MSCI’s 12 per cent) and an 18 per cent return in FY21 (versus the MSCI’s 38 per cent) – so sandwiched between 3000 and 2000 basis points of underperformance.
Throw in the unambiguous bloodbath that is FY22 thus far (a further 5000 basis points of underperformance) and the past four years have been a misery for Vicars’ investors, yet a veritable gold mine for Vicars himself.
There is a classic business book – Warren Buffett describes it as “truly priceless” – called Where are the Customers’ Yachts? Vicars would feature heavily in any revised edition.
Caledonia, which sprang out of the Darling family office in 1992, has nearly $7 billion of assets under management, down from $16.5 billion in June last year.
Ian Darling resigned as a Caledonia director in October 2019 and his cousin Michael Darling resigned in June 2020, at the same time the business restructured its ownership. It is now impossible to ascertain the division of equity between the Darlings, Vicars, his co-CIO Mike Messara, Caledonia’s original chief Mark Nelson and a smattering of other employees.
Despite the massive FY21 profit (and tiny tax bill), Caledonia didn’t pay a correspondingly stonking dividend to its shareholders. It did, however, loan $417 million to “related parties” – associated with Vicars, Messara and/or company secretary Matthew Moses. These accounting strategies are novel; they certainly weren’t practised in the Darling era.
The news only gets worse in Caledonia’s core holdings. Hot on the heels of Zillow’s grand misfortune (Caledonia is Zillow’s largest shareholder), Just Eat Takeaway is now trying to offload US food delivery player Grubhub, which it bought for £5.8 billion ($10 billion) last year. Caledonia was a Grubhub shareholder and folded its stake into Just Eat.
Just Eat’s investment bank Merrill Lynch is now struggling to sell Grubhub for £1 billion ($1.75 billion). “We are glad to own every share of Just Eat,” Vicars and Messara told their fund investors this month.
“When the facts change, I change my mind,” John Maynard Keynes famously said. When the facts change on Vicars, he just chooses new ones.