VGI Partners Investor Letter - Full Year 2022

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“Every recession brings retired nan sceptics who uncertainty that we will ever travel retired of it, and who foretell that we will soon autumn into a depression, erstwhile caller cars will beryllium unsold successful nan showrooms everlastingly and houses will guidelines empty, and nan state will spell bankrupt.”


Dear Fellow Investors,

For nan 12 months ended 31 December 2022 (CY22), VGI Partners Global Investments Limited (ASX:VG1) generated a nett return of -22.3%.[1]

Global equity markets knowledgeable a challenging twelvemonth successful 2022, nan S&P 500 declining -19% complete nan period, nan NASDAQ Composite retreating -33% and nan broader MSCI World Index falling -19%. Few plus classes delivered a affirmative return for nan year, arsenic heightened inflationary pressures, rising world liking rates and a horrific conflict connected nan European continent saw complete US$25 trillion successful worth erased from world equity markets complete nan people of nan almanac year.

CY22 has been incredibly disappointing for VGI Partners. Since nan inception of VG1’s portfolio successful 2017, we person strived to supply our investors pinch entree to a concentrated portfolio of high-quality businesses, pinch nan ambition to turn our superior astatine 10-15% per annum. The observant protection of our invested superior guidelines and changeless vigilance successful avoiding situations that lead to nan imperishable impairment of superior has been a captious constituent to this approach. Quite simply, we person not adequately executed connected this successful 2022.

As a consequence, CY22 comfortably represents nan largest yearly drawdown nan world strategy has knowledgeable successful a almanac twelvemonth since its inception. We are profoundly alert that this has been a disappointing result, and 1 that we person evidently sought to study extensively from arsenic we look to reconstruct some our return floor plan and our investors’ assurance complete nan play ahead.

Pleasingly, nan caller twelvemonth has started well, pinch nan portfolio up +11% done to nan 27th of January. However, we recognise that this is only a first measurement successful recovering nan CY22 drawdown for our investors.

In this letter, we supply an update connected nan existent positioning of nan VG1 portfolio, a summary of caller changes and an overview of wherever we spot opportunities to make charismatic returns connected our superior complete nan 2023 twelvemonth ahead. Additionally, we consciousness it important to bespeak connected a number of nan missteps made during 2022, and nan important lessons we person taken distant from this successful bid to amended our processes complete nan years ahead.

Before discussing nan portfolio successful much detail, we would besides for illustration to supply an update connected caller firm activities of relevance to VG1. As galore investors would beryllium aware, VGI Partners and Regal Funds Management merged connected 3 June 2022, pinch nan caller mixed entity renamed ‘Regal Partners’. The VGI Partners finance squad continues to negociate nan VG1 portfolio, but is benefiting from entree to Regal Funds Management’s operating infrastructure and investor relations team. Key VGI Partners finance unit proceed to ain important individual investments successful VGI’s wholesale costs and VG1. The VG1 Board has besides taken a number of steps to assistance VG1 and its shareholders. This includes a refinement of nan dividend argumentation successful August 2022 – VG1’s caller argumentation is to target a dividend of astatine slightest 4.5c each six months. This is successful statement pinch VG1’s caller profile, pinch VG1 paying 2 dividends during CY22 (4.5c successful April 2022 and 4.5c successful September 2022). In addition, VG1 has an progressive on-market stock buy-back program, purchasing shares erstwhile they are trading astatine a discount to Net Tangible Assets. This not only provides greater on-market liquidity but tin beryllium highly accretive for shareholders. Over 56m shares, aliases astir 14% of VG1’s shares, person been bought backmost since nan programme began. Post completion of nan merger successful early June 2022, we person seen VG1’s discount to Net Tangible Assets trim from complete 20% to astir 15-16% currently. We look guardant to providing much updates done early investor briefings and letters.

Portfolio Thoughts & Positioning

We person ever viewed nan opportunity to negociate our investors’ superior arsenic a privilege, and we convey investors for their patience, support and encouragement complete what has undoubtedly been a difficult year. While capacity has been challenging, we stay highly assured that nan heavy basal finance attack taken by nan VGI team, and our attraction connected identifying mispriced high-quality businesses, remains an charismatic measurement to make favourable risk-adjusted returns done nan afloat marketplace cycle. The squad retains a precocious level of condemnation successful our halfway portfolio holdings, and pleasingly has taken advantage of stock value weakness successful a number of existing portfolio positions to progressively adhd vulnerability to incredibly high-quality businesses astatine what we comprehend to beryllium very charismatic valuations. At writing, successful nan agelong portfolio we see, conservatively, astir 30% imaginable upside to our estimate of adjacent worth for nan underlying stocks.

As a reminder, VGI Partners seeks to build a concentrated portfolio for VG1 of under-appreciated, highquality businesses that run wrong (or we judge will soon run within) charismatic manufacture verticals. These positions are offset by short positions successful companies perceived to beryllium encountering structural headwinds, business exemplary weakness and/or accounting irregularities.

While nan conception of investing successful ‘quality’ businesses has evolved successful caller years to encompass an progressively wide church, astatine VGI Partners, our preferred attack is to attraction connected businesses that we comprehend arsenic ‘covertly’ high-quality businesses, namely those which are initially ignored, under-appreciated, aliases disdained by nan broader marketplace consensus, and truthful thin to supply acold much charismatic opportunities from a valuation position versus much accepted (or ‘overtly’) higher-quality names. Of course, nan drawback from owning covert high-quality businesses, astatine slightest initially, is that specified holdings tin make you guidelines retired from nan crowd, astatine times tin make you look foolish, and tin sporadically inject higher levels of volatility into a portfolio arsenic nan underlying worth of these businesses is progressively appreciated by nan broader market.

In uncovering these covertly high-quality businesses, we look for companies that bask beardown moats that protect nan underlying business, and ideally moats that are expanding (or, astatine a minimum, remaining stable). We for illustration businesses pinch nan expertise to allocate superior astatine charismatic rates of return (that is, rates good successful excess of nan businesses’ ain costs of capital), those pinch a resilient business exemplary aliases underlying customer guidelines and those that bask maturation optionality. Additionally, we walk important clip seeking to understand nan underlying manufacture structures successful which our companies operate, fixed our penchant for investing successful businesses pinch nan expertise to make sustained economic profits, and not conscionable accounting profits[2].

While covertly high-quality businesses are our preference, we are arsenic happy to deploy superior into much overtly, aliases already well-appreciated, businesses during times erstwhile either depressed sentiment crossed nan broader marketplace provides america pinch an charismatic opportunity to do so, aliases erstwhile 1 of these businesses experiences shorter-term setbacks successful their business exemplary aliases maturation profile, starring to their stock prices over-correcting to nan downside, astatine slightest complete nan short term.

The array beneath provides a snapshot of nan apical 10 holdings successful VG1’s portfolio arsenic astatine 31 December 2022 and represents a postulation of what we judge to beryllium high-quality, attractively-priced, world businesses pinch important imaginable to meaningfully turn their net complete galore years ahead. Consistent pinch our concentrated approach, nan apical 10 agelong positions relationship for 68% of our full invested capital.

Top 10 Long Investments arsenic astatine 31 December 2022

% of Portfolio

CME Group Inc. (CME)

12% Inc. (AMZN)


Deutsche Börse AG (OTCPK:DBOEF)


Cie Financière Richemont SA




Pinterest Inc. (PINS)


Française des Jeux (OTCPK:LFDJF)


Mastercard Inc. (MA)


The Walt Disney Co. (DIS)


Rheinmetall AG (OTCPK:RNMBF)


Source: VGI Partners analysis.

Regular readers of our monthly reports will recognise a number of our existing longer-term positions successful nan above, successful summation to much caller changes to nan wide portfolio composition. US-listed derivatives and futures speech usability CME Group was our largest finance position, intimately followed by US exertion and e-commerce conglomerate Amazon (an finance we first initiated successful VGI’s world strategy successful 2014). Both positions are discussed successful much item later successful this letter. As a consequence of updated accusation and adjustments to our appraisal of risk-reward, antecedently larger positions successful multinational payments business Mastercard and Swiss-headquartered luxury watch and jewellery retailer Cie Financière Richemont person been reduced, while nan portfolio has exited its position successful Japanese-listed optical and precision exertion shaper Olympus Corp. (OTCPK:OCPNF)

More caller additions to nan portfolio see German automotive and defence supplier Rheinmetall, US listed lipid services business Schlumberger (SLB), and diversified world intermezo group The Walt Disney Company. In nan lawsuit of Disney, we saw an opportunity to put successful a much overtly high-quality business that has encountered a bid of short-term setbacks. We consciousness this has provided america pinch a highly charismatic introduction value for a business that is simply a world leader successful taxable parks, hotels and cruise lines, operating pinch a well-established and increasing competitory moat, and that has consistently delivered precocious returns connected invested capital. Amazon arguably feels for illustration it is besides quickly falling into this category, arsenic nan broader market’s disdain for nan company’s halfway unreality infrastructure and e-commerce businesses grows, contempt beardown underlying fundamentals. We will talk nan finance thesis and upside imaginable from some these positions successful greater item later successful this letter.

By immoderate margin, nan top detractor to VG1’s portfolio returns was nan rotation distant from high-growth and tech-oriented businesses. The portfolio had precocious vulnerability to this thematic via holdings specified arsenic Amazon, Pinterest, Qualtrics (XM) and IAC, arsenic good arsenic nan gradual re-purchase successful nan first half of 2022 of holdings successful Spotify (SPOT) and Palantir (PLTR). These near nan portfolio susceptible arsenic valuations compressed and investors rotated aggressively into much protect and/or profitable businesses. In hindsight, nan portfolio was over-exposed to these higher-growth and still maturing companies. However, arsenic we person discussed before, we deliberation galore of these businesses will commencement to make important profitability and free cashflows complete nan adjacent fewer years (in fact, galore of them already are) and still powerfully judge successful nan underlying businesses mentioned above.

In position of FX, nan portfolio remains afloat hedged to Australia Dollars ((aud)). As we return an progressive position connected nan currency, we whitethorn move backmost to an unhedged aliases partially hedged position, but only erstwhile we judge location is simply a clear mispricing based connected our basal analysis. Currently, we stay affirmative connected nan AUD because of nan favourable position Australia finds itself in: endowed pinch plentifulness of commodities astatine a clip erstwhile request for these is increasing quickly fixed nan world undersupply and underinvestment successful commodity accumulation knowledgeable successful caller years.

Short Selling

Our short portfolio was a affirmative contributor to returns successful CY22, adding ~10% to portfolio returns. After an exceptionally challenging fewer years for short trading strategies, nan abrupt conclusion of nan inexpensive money era has quickly refocused marketplace participants toward institution fundamentals and valuations and, successful doing so, importantly widened nan opportunity group for short sellers. The portfolio presently retains a higher short vulnerability than historically arsenic a result, reflecting nan progressively charismatic situation (particularly successful much cyclical industries wherever we expect important risks to net and margins complete nan play ahead).

The largest short contributor successful CY22 was a civilization handbasket of higher-multiple, loss-making exertion stocks – a position that we discussed successful our semi-annual missive successful July 2022. This handbasket consisted of businesses that carried, successful our view, importantly challenged business models and lofty valuations, galore of which subsequently knowledgeable stock value declines of 50-80% complete nan people of nan year. While a successful outcome, we regret not leaning into this position successful greater size. A secondary contributor to nan short book was a handbasket of stocks focused connected companies successful nan semiconductor sector, which we initiated successful anticipation of nan marketplace yet recognising that nan assemblage is yet a cyclical manufacture and caller increases successful capacity would lead to antagonistic consequences for nan industry. Again, this position was discussed successful much item successful our missive of July 2022.

Pleasingly, nan portfolio besides benefited this twelvemonth from a number of single-stock shorts, including a position successful Tesla (TSLA), nan well-known electrical conveyance shaper that was experiencing a slowing successful business momentum passim nan twelvemonth arsenic a consequence of pressures connected user discretionary purchases, proviso concatenation disruptions and expanding competition. We person expected for immoderate clip that nan electrical conveyance class would go much competitive, and much precocious person begun to witnesser fierce value cuts by manufacturers successful an effort to clear inventory, which is simply a antagonistic inclination for an manufacture that is only apt to spot much title complete nan coming years. The portfolio besides benefited from a short position successful a US-listed discount market shop business, wherever investors were being sounded a large-scale shop rollout communicative by elder management, albeit utilizing forecasts that were extrapolating nan temporarily favourable conditions into nan agelong word and astatine a clip erstwhile insider trading was quickly accelerating. Both these short positions person now been profitably closed.

Finally, our proprietary screens, which attraction connected identifying accounting reddish flags, person besides displayed greater efficacy complete nan year, identifying a number of situations wherever anemic rate conversion aliases grounds of inventory building person subsequently led to net downgrades and stock value declines. This has been peculiarly salient successful nan unit sector, wherever increasing inventory problems person led to discounting and, successful turn, separator compression. Additional attraction has besides been placed connected nan mini pockets of nan world system that are still normalising station COVID-19, and wherever proviso concatenation disruptions and/or volatility of input prices proceed to create unsustainably precocious pricing increases, which, successful immoderate cases, are being assumed by nan broader marketplace arsenic nan ‘new normal’.


While exertion has evidently been a cardinal detractor from returns successful CY22, we proceed to judge nan assemblage provides a number of compelling opportunities to bargain fantabulous businesses pinch nan expertise to make meaningful returns connected superior complete nan years ahead. Enterprise software, for example, continues to stay a cardinal attraction for nan team, fixed these businesses often show highly charismatic economics, including predictable and recurring gross streams, precocious levels of customer ‘stickiness’ (often owed to nan mission-critical quality of their usage case) and agelong runways for maturation successful markets pinch debased wide penetration.

The broader malaise crossed nan listed exertion assemblage done 2022 drove a important de-rating of valuations crossed nan endeavor package sector, which has subsequently ignited a activity of merger and acquisitions (M&A) announcements done nan 2nd half of nan year. The accelerated emergence of M&A activity from ample tech-orientated backstage equity firms successful nan listed assemblage (which typically activity to acquisition businesses successful nan backstage markets anterior to their underlying worth being realised by nationalist marketplace investors) would apt propose that backstage marketplace valuations for quality, increasing endeavor package businesses are, successful galore cases, now 75% to 100% supra nationalist marketplace valuations, a motion that nan capitulation successful nationalist markets has reached highest levels.

On nan wholly other extremity of nan spectrum from endeavor software, nan defence assemblage is different area we person precocious recovered arsenic appealing. We spot structural maturation aft years of under-investment and nan Ukraine conflict has acted arsenic a monolithic catalyst for defence fund acceleration, peculiarly successful Europe. Meanwhile, nan Taiwan/China stand-off is accelerating nan walk successful nan Asian region. Western armies are short connected ammunition and different ordnances; for instance, Germany requires 10 years of ammunition purchases to simply meet minimum NATO requirements. This is 1 of nan galore reasons we person started building a position successful Rheinmetall, a starring German defence business, which we talk later successful nan letter. The displacement to integer capabilities by subject departments besides bodes good for 1 of our different holdings, Palantir, whose halfway business revolves astir supplying package solutions to Western authorities agencies and nan subject globally.

Similar to endeavor software, we person seen acquisitions successful nan defence assemblage astatine important premiums to nationalist marketplace valuations – 1 specified illustration was Maxar Technologies (MAXR), which received a backstage equity takeover connection successful December 2022 astatine a 129% premium to nan past traded price. Again, this highlights nan dislocation betwixt nationalist marketplace prices and those that an informed, backstage purchaser is prepared to salary fixed a 5-year view. We find this encouraging.

In summation to defence, we person focused our efforts connected different caller sectors wherever we spot structural growth, including power and aesculapian technology. The semipermanent outlook for power looks highly charismatic fixed galore years of under-investment and much precocious amplified by ESG constraints and firm discipline. Although we reviewed commodity owners (where we leveraged nan expertise of nan Regal resources team), we focused our efforts connected nan 2nd derivative – nan lipid work companies. These are nan picks-and shovels of nan manufacture and arguably nan highest-quality measurement to summation exposure. As a result, we invested successful Schlumberger earlier this twelvemonth and grew this to a circa 8% weight during nan twelvemonth (now circa 3%).

Similarly, aesculapian exertion has been an area of ongoing focus. Olympus was sold during nan twelvemonth aft generating an charismatic return (briefly discussed later successful nan letter). In turn, this has led america to different opportunities successful nan sector. We are successful nan process of building 2 holdings successful aesculapian exertion – companies that run successful highly consolidated manufacture structures, are mission-critical to customers and are exposed to charismatic semipermanent structural maturation drivers. We will beryllium discussing these successful much item successful early communications.

Hidden Risks & Signposts

A ample contributor to nan important drawdown successful exertion and maturation stocks has been nan maturation successful ‘cross-over’ costs complete nan past decade, peculiarly successful nan US. These costs (many of them family names successful nan maturation hedge money complex) person substantially grown their assets and, successful turn, their allocations to wholly illiquid Venture Capital (VC) investments. The rising liking complaint situation and consequent reassessment of maturation plus valuations forced nan ‘cross-over’ costs to screen redemptions by trading their listed investments. We judge that a number of nan names successful nan VG1 portfolio person been caught up successful this downdraft complete nan past 12 months. We are mindful that a further limb down successful maturation valuations could beryllium led by a re-pricing of nan illiquid VC investments wrong these portfolios. Whilst this has been a well-publicised dynamic, backstage equity costs whitethorn beryllium to beryllium a hidden consequence successful nan system.

In fact, informing signs are processing successful what is simply a wholly unregulated conception of nan financial markets pinch important amounts of hidden leverage and opaqueness. Private equity firms person been slow to return downward re-valuations. We spot imaginable that 2023 reveals an avalanche of redemptions arsenic antagonistic returns are revealed to investors successful backstage marketplace aliases cross-over costs (which clasp nationalist equities and unlisted assets) complete nan adjacent 3-6 months, triggering gates reminiscent of nan Global Financial Crisis. Asset-liability mismatches are starting to go evident and nan canary successful nan ember excavation looks for illustration nan Blackstone (BX) B-REIT business (where Blackstone began to limit redemptions from its existent property spot aft withdrawal requests spiked). Property-skewed costs and cross-over costs look to beryllium nan astir vulnerable. At writing, further informing signs person travel to our attraction and we judge nan amber lights are flashing and perchance are astir to move red.

In meetings pinch investors complete nan past six months, we person said that nan signposts that we are person to an equity marketplace bottommost would see nan uncover of a ample fraud arsenic good arsenic a sell-off successful Tesla, nan unit investor poster-boy. We person seen nan illness of FTX, a ample crypto company, and grounds that it is an outright fraud, on pinch a terrible unwind successful nan Tesla stock value (where we fortunately had a short position during CY22; since closed). Interestingly, FTX ranks arsenic nan 4th largest firm nonaccomplishment successful history by marketplace cap. We are yet to spot signs of outright capitulation and fearfulness amongst investors, which will apt beryllium nan last stage, nor person we seen cardinal banks globally meaningfully retreat liquidity from nan system.

major firm collapses

Pressures are besides building for consumers globally. Looking astatine nan US arsenic an example, nan family depletion image prima facie remains healthy, but digging beneath nan aboveground location are worrying signs. Inflationary pressures are squeezing user budgets and consumers person been forced to thin into excess savings or, moreover worse, return connected in installments paper indebtedness to money depletion (US in installments paper indebtedness is increasing astatine nan fastest gait successful a decade, while nan savings complaint for US households is adjacent all-time lows). Households are besides facing unit from nan higher costs of debt, which is feeding done into collapsing request for large-ticket items, specified arsenic caller homes and caller car purchases. These are nan largest assets for nan mean household, and some location and utilized car prices person been nether terrible pressure. Consumers are being deed from each sides but occupation losses person yet to go widespread. We are truthful keeping a adjacent oculus connected nan wide user situation pinch each nan pressures that are building.


We perpetually measure and reappraisal our past investments, aiming to amended our decision-making going forward. For each investment, we for illustration to behaviour a pre-mortem reappraisal (to place risks and really an finance tin spell incorrect erstwhile we first make nan investment) and past a post-mortem reappraisal to understand nan grade to which our finance thesis did aliases did not play retired aft nan fact, pinch an accent connected identifying mistakes and learning from these. We deliberation this is simply a captious process truthful that we tin amended and debar repeating errors going forward.

As antecedently highlighted, our precocious vulnerability to technology, high-growth oriented businesses drove nan bulk of our underperformance successful CY22. One cardinal correction we made was pinch Qualtrics (XM), which was nan 2nd largest detractor successful nan year. With nan use of hindsight, we over-estimated nan company’s maturation floor plan and overpaid for nan business. We assumed nan class would beryllium much resilient moreover successful an situation wherever customers are scrutinising IT budgets and we grounded to alteration our mind erstwhile maturation began to disappoint. Our valuation attack was besides overly reliant connected semipermanent free cashflows – because we for illustration to deliberation astir businesses pinch a semipermanent mindset – but we did not salary capable attraction to near-term valuations and expectations. Lastly, we were insufficiently captious erstwhile XM announced a ample acquisition astatine nan highest of nan package bubble successful mid-2021, arsenic this was a imaginable motion that nan outlook for XM’s halfway business had deteriorated.

The large instruction that we tie from our XM finance is 1 of sizing – fixed nan wide scope of outcomes, this should person been reflected done a smaller-sized investment. We proceed to ain XM coming arsenic nan valuation and expectations person been reset, and XM remains nan undisputed leader successful an emerging, mission-critical package class pinch a agelong maturation runway. This position has been substantiated by our conversations pinch customers astatine nan XM Innovation Sydney arena successful November 2022 and caller CIO surveys affirming XM’s rod position amongst emerging package vendors. In caller days, SAP person announced a strategical reappraisal of its XM stake, removing a cardinal overhang for nan banal and expanding nan probability that XM will waste and acquisition much successful statement pinch peers aliases beryllium acquired.

IAC was different cardinal detractor during nan year, arsenic we made nan correction of holding onto our finance for excessively long. A cardinal portion of our original IAC thesis was underpinned by a near-term catalyst successful nan shape of an upcoming spin-off (Vimeo) providing a chance to crystallise worth and for nan business to constrictive nan discount to its sum-of-the-parts. While this thesis played out, we past held onto our IAC investment, reasoning nan business continued to waste and acquisition astatine a meaningful discount to nan worth of nan assets it owned. We grounded to admit that IAC was entering a ‘re-build’ shape and, fixed nan deficiency of upcoming spin-offs, would proceed to waste and acquisition astatine a heavy discount to nan worth of its nett assets.

In addition, IAC undertook a meaningful acquisition (Meredith), which is simply a business complementary to 1 of its existing assets (Dotdash). This accrued IAC’s vulnerability to nan advertizing marketplace (Dotdash & Meredith make each revenues done advertising) astatine a clip erstwhile nan advertisement marketplace was starting to slow. We made nan correction of not realising quickly capable that nan integration of nan 2 businesses was taking longer and facing immoderate hiccups, which, successful turn, caused guidance to hold its financial targets. One of IAC’s different businesses, Angi, likewise faced issues pinch its strategical direction, starring to guidance changes and nan IAC CEO having to measurement successful to move astir nan business. Overall, a cardinal correction we made was failing to admit that investments relying connected sum-of-the-parts valuations thin to execute poorly successful weaker marketplace conditions erstwhile investors request a larger discount versus nan nett plus worth – unless location is simply a clear way to unlock worth (e.g. done a spin-off). We proceed to ain IAC arsenic we judge that nan guidance squad are now addressing nan caller issues appropriately and that their actions tin assistance pinch closing nan ample discount to nett assets complete time.

As we mentioned astatine nan start, we person gone done an extended process of scrutinising each of our cardinal positions and re-underwriting assumptions. We consciousness excited astir our existent portfolio but admit nan request to stay mentally elastic to debar mistakes and to alteration our mind quickly erstwhile we deliberation our finance thesis is drifting.

Portfolio Update

Below we supply an update connected immoderate of our cardinal holdings.

CME (~12% weighting)

CME is simply a business apt acquainted to you, being 1 we person owned successful our world strategy since 2008 and which was our largest VG1 position astatine nan extremity of 2022.

CME operates futures and derivatives exchanges, including nan Chicago Mercantile Exchange, nan New York Mercantile Exchange, nan Chicago Board of Trade, and nan Dow Jones Index Services. On apical of this, CME besides owns different cardinal assets related to overseas speech trading & infrastructure and a strategical shareholding successful Standard & Poor’s (S&P) Index business.

The cardinal driver of trading activity for CME is successful its liking complaint derivatives products, wherever it has an effective monopoly successful nan speech trading of liking complaint derivatives successful nan United States, pinch benchmark products crossed nan entirety of nan liking complaint curve. Demand for liking complaint derivatives is driven by volatility successful liking complaint markets, whose effect is compounded by nan number of bonds held by those looking to negociate liking complaint consequence and, by extension, marketplace liquidity. The beneath floor plan of mean regular volumes of liking complaint derivatives and US Federal indebtedness held by nan nationalist illustrates nan highly beardown narration nan size of nan US Treasury marketplace and volumes growth, though location are deviations astir this chiefly astir Fed involution (for example, astatine nan commencement of nan pandemic, volumes were suppressed by an tremendous magnitude of Quantitative Easing (QE) and efficaciously zero liking rates which reduced nan request for hedging products). We expect nan maturation successful nan size of nan US Treasury market, peculiarly successful narration to privately held US treasuries arsenic nan Fed undergoes a equilibrium expanse unwind, to stay a powerful underpinning of CME’s liking complaint derivatives business.

Size of nan US Federal Debt Held by nan Public vs Average Daily Volume of CME Interest Rate Contracts

Size of nan US Federal Debt Held by nan Public vs Average Daily Volume of CME Interest Rate Contracts

Source: CME Group, Congressional Budget Office.

As such, we are precocious condemnation that nan reversal of QE and nan normalisation of enslaved marketplace conditions will supply a important tailwind for CME’s trading activity successful nan adjacent term, while its nett liking separator should use from greater finance income connected separator collateral. Other derivatives complexes, including equity and energy, are apt to besides use from a normalisation of marketplace conditions and we statement that incremental futures contracts make an highly precocious drop-through complaint to rate net owed to CME’s beardown operating leverage arsenic a chiefly integer platform. As a result, we judge existent conditions are highly favourable for CME’s liking complaint derivatives business, different derivatives complexes and nett liking separator and we spot important upside consequence to statement net and free cashflow estimates.

At writing, CME is trading astatine a CY23 PE of 20x, free cashflow output of 6% and dividend output of 5%.

Amazon (~12% weighting)

Amazon is simply a ascendant subordinate successful e-commerce (#1 globally), unreality computing (#1 globally), and integer advertizing (#3 globally), each monolithic and structurally increasing extremity markets. Amazon’s stock value declined astir 50% successful almanac 2022 owed to a myriad of macro and company-specific headwinds, including slowing economical growth, rising inflation, tighter monetary policy, and important overinvestment. Free cashflow turned profoundly negative. We are disappointed, to opportunity nan least. Nevertheless, nan finance lawsuit for Amazon coming is remarkably compelling. Market expectations person been reset, nan valuation is highly attractive, and guidance is intent connected improving profitability and reducing superior intensity. Amazon remains a precocious condemnation holding and we are incredibly excited by its prospects.

For nan past year, nan marketplace has been concerned astir nan maturation and profit outlook for its e-commerce business, which is presently loss-making owed to overinvestment and costs inflation. Management has responded by laying disconnected much than 18,000 labor — nan biggest simplification successful Amazon’s history. Beyond nan simplification successful force, Amazon has stiff hiring successful its e-commerce and firm divisions, cancelled aliases delayed storage openings, raised prices connected a assortment of products (including Prime memberships), eliminated respective unprofitable lines of business and seeded caller ones (e.g. Buy pinch Prime) to capable excess capacity. (Amazon doubled nan size of its e-commerce footprint complete 2020-2021.) Buy pinch Prime has been shown to summation shopper conversion by 25% connected mean and is now wide disposable to US-based merchants.

Looking past nan short-term headwinds, we are highly optimistic astir nan trajectory of nan e-commerce business. Whilst logistics investments person led to short-term losses, they person strengthened nan competitory moat of nan e-commerce business and its expertise to meet customer request for years to come. E-commerce is simply a highly valuable business which has spawned nan 3rd largest advertizing business successful nan world (the champion hunt results successful nan world for advertisers are those of Amazon customers) and a subscription business (Amazon Prime) which acts arsenic a powerful flywheel to e-commerce and different business lines specified arsenic devices, streaming video/music and soon outer broadband (via Amazon’s Kuiper business). We deliberation nan marketplace is overly pessimistic astir nan prospects for e-commerce (inclusive of advertising) and underwrite scenarios wherever we estimate nan e-commerce business unsocial is worthy much than US$60 per share.

As we wrote past year, we reiterate our position that Amazon’s existent stock value is much than underpinned by its Amazon Web Services (AWS) business alone. Cloud computing remains successful nan early stages of growth, pinch customers crossed nan manufacture only astir 30% done nan migration of their workloads from onpremise infrastructure to nan cloud, based connected commentary from manufacture experts, cardinal corporates and Chief Technology Officers. Until recently, unreality spending has been mostly resilient amidst macro headwinds. This changed past consequence erstwhile each 3 hyper-scalers warned of a slowdown successful maturation arsenic enterprises scrutinise exertion budgets. Indeed, Amazon is proactively moving pinch its customers to cost-optimise, which will person a antagonistic effect connected short-term income maturation but is nan prudent semipermanent business decision. As a result, we forecast AWS maturation to slow further successful 2023 earlier re-accelerating successful 2024. The semipermanent gross maturation floor plan of AWS remains robust, and sustainable operating margins person nan imaginable to transcend 40% fixed a concentrated manufacture structure, AWS standard advantages, and a operation displacement toward value-added software.

As we look to nan future, Amazon’s attraction connected improving operating efficiencies, reducing moving capital, and lowering superior expenditures should consequence successful an exponential summation successful free cashflow and shareholder value. We forecast a return to affirmative free cashflow successful 2023. By 2025, we expect free cashflow to transcend US$70 billion, representing a increasing 8% free cashflow yield, which we see incredibly charismatic for an plus of this quality.

Deutsche Börse (~7% weighting)

On nan backmost of caller purchases and comparative stock value performance, Deutsche Börse (DB1) has grown to nan portfolio’s 3rd largest position. DB1 is simply a well-diversified speech group whose activities touch astir aspects of European superior markets, offering a blend of transactional and non-transactional gross exposure. It provides trading, clearing, pre/post-trading and information & analytic services successful 4 cardinal operating segments: Trading & Clearing, Fund Services, Security Services and Data & Analytics.

The transactional broadside of nan business, for illustration CME, has beardown structural tailwinds arsenic artificial slump of argumentation rates by cardinal banks coupled pinch QE successful nan Eurozone statesman to reverse and DB1’s Trading & Clearing businesses (including Europe’s largest derivatives speech Eurex) use from a larger hedging marketplace and continued macro volatility. Current uncertainty besides benefits its EEX business (the ascendant venue for powerfulness trading successful Europe), which is poised to turn arsenic hostility successful European power markets, and nan ongoing structural displacement successful energy procreation to renewables, continues to support trading activity. As per CME, DB1 operates a integer level which enables an highly precocious driblet done to rate net from each incremental dollar of trading revenue.

On nan different side, Clearstream is nan keystone to DB1’s non-transactional gross stream, pinch complete US$13.5trn of securities successful custody (including astir 40% of Eurobonds successful rumor and 100% of each issued securities successful Germany). Because of nan size and stickiness of Eurobond custody assets, overmuch of Clearstream’s gross guidelines is highly unchangeable and nan rising complaint backdrop acts arsenic a beardown tailwind for nett liking separator net (as greater collateral separator requirements, coupled pinch accrued yields, produces powerful net imaginable for nan group); this had antecedently been a root of downgrades during 2019-21. Moreover, we expect nan acquisition of ISS wrong nan Data & Analytics conception to thrust semipermanent non-transactional revenues by expanding nan scope and value of DB1's ESG offering arsenic request for ESG products continues to accelerate.

Despite these beardown tailwinds and coagulated execution complete nan past year, DB1 trades astatine a discount comparative to peers and beneath our adjacent valuation. We position this arsenic unjustified fixed nan value of net and integrated maturation potential. At writing, DB1 is trading connected a CY23 free cashflow output of 6%, PE of 16x and a dividend output of 3%.

Richemont (~7% weighting)

Richemont is simply a position we person written extensively astir since 2019. It remains a Top 10 holding and nan business continued to execute powerfully during 2022.

Demand for high-end luxury has proved sustainable frankincense far, arsenic nan apical 1% of households by nett worthy proceed to walk much connected luxury items specified arsenic jewellery, watches and handbags. Richemont’s ace luxury jewellery brands, Cartier and Van Cleef & Arpels, are nan crown jewels of nan group’s portfolio of brands; these relationship for nan mostly of Richemont’s profitability and, accordant pinch our finance thesis, person posted accelerating gross maturation successful caller periods.

Geographically, nan item has been Europe, wherever maturation was led by beardown section request and nan resumption of inbound tourism from nan US and Middle East. Asia Pacific was weaker during 2022 because of nan shop closures successful mainland China and Macau owed to nan enforcement of nan zero-COVID argumentation successful China. However, fixed China’s caller reopening nether little stringent COVID policies, we expect Chinese request to rebound and move into a tailwind this twelvemonth (note that this has already started to beryllium reflected successful expectations pinch a 17% re-rate complete nan past fewer weeks).

One of nan reasons we person agelong admired and invested successful super-luxury businesses is their pricing power. Higher prices adhd to nan allure of luxury products while simultaneously creating exclusivity. Encouragingly, during 2022, Richemont raised prices connected cardinal brands specified arsenic Cartier and Van Cleef and crossed aggregate geographies, a inclination which we expect to proceed going forward. Financially, value increases are highly charismatic arsenic nan gross delta drops consecutive done to nan bottommost line. This, alongside operating leverage, has allowed Richemont to grow margins.

During 2022, Richemont reached an statement to waste its online operations, YNAP, to Farfetch, nan starring luxury e-commerce retailer. The disposal of YNAP has been a cardinal portion of our CFR finance thesis, arsenic we believed this was a distraction for guidance and masked underlying profitability. This has simplified nan communicative for investors: nan woody will let Richemont to clasp upside connected nan equity of some YNAP and Farfetch and let guidance to attraction wholly connected moving Richemont’s halfway business.

We person precocious started to trim our portfolio weighting successful Richemont. The caller stock value summation is reducing nan risk-reward floor plan and we deliberation this is nan champion of times for luxury equipment companies.

SAP (~7% weighting)

SAP is successful nan midst of a multi-year modulation of its business to nan unreality which continues to summation momentum. We property overmuch of its occurrence – which has not been without challenges and setbacks – to nan strategy initiated by Christian Klein aft he became sole CEO successful mid-2020, successful peculiar “RISE pinch SAP.” Launched successful January 2021, RISE is simply a commercialized conception to migrate customers onto SAP unreality products specified arsenic S/4HANA Cloud (Cloud ERP) and SAP’s Business Technology Platform (BTP).

Late past year, we travelled to Germany and met pinch SAP guidance to study much astir BTP specifically. The level offers information and exertion services which customers and partners tin usage to merge SAP and non-SAP applications, successful effect a “digital core” pinch powerful flywheel effects. It is foundational to SAP’s RISE offering pinch 80% of customers adopting nan platform. The BTP business has a income tally complaint exceeding €1.5 cardinal pinch precocious margins and we expect it to turn substantially complete nan adjacent fewer years.

SAP’s unreality modulation has resulted successful immoderate one-time and duplicative costs (infrastructure, R&D and sales), resulting successful a circa €200 cardinal little operating profit successful 2022 versus 2019, contempt circa €3 cardinal higher sales. Having studied these transitions, we judge nan displacement is camouflaging nan underlying net powerfulness of what will beryllium higher value net (>80% recurring revenue). We expect nan one-time and duplicative costs will dissipate from 2023 onwards, resulting successful affirmative operating leverage and sustainable double-digit operating profit growth.

Recent results from SAP person been mostly supportive of our thesis pinch starring indicators, specifically Current Cloud Backlog, accelerating contempt macroeconomic uncertainties. The BTP flywheel has improved integration betwixt SAP’s unreality modules (SuccessFactors, Concur, etc.) and S/4HANA, starring to improved cross-sell/upsell rates. Recent results from back-office package peers Oracle and Workday person besides been resilient.

SAP’s moat is stable-to-growing and nan business is well-positioned successful galore of nan world’s largest corporations arsenic an basal constituent of their IT operating platform. Our section travel to Germany gave america incremental assurance that nan strategy is gaining traction pursuing a achy play of transition. We besides position nan assignment of a caller CFO, Dominik Asam, who joins successful March from Airbus and has a coagulated reputation, arsenic 1 of nan galore affirmative catalysts building successful nan business.

Given nan unreality modulation and immoderate execution missteps, SAP trades astatine a meaningful discount to adjacent value. Earnings are poised to accelerate arsenic they execute connected nan unreality transition. In our view, a much meaningful reflection of nan company’s net powerfulness requires looking retired to astatine slightest 2025, pinch SAP trading astatine a 6% free cashflow output and a 15.5x PER connected our forecasts.

New LONG Position: Walt Disney Co. (~4% weighting)

The Walt Disney Company is simply a diversified media conglomerate operating media networks, taxable parks, movie and TV studios and direct-to-consumer streaming services. It is nan world leader successful taxable parks pinch hotels and cruise lines aimed astatine families. Key assets wrong Disney are nan instantly recognisable intermezo franchises that person aggregate avenues of monetisation specified arsenic Mickey Mouse, Star Wars, ABC and Marvel’s Avengers.

Disney’s stock value declined owed to a number of factors successful 2022, presenting america nan chance to acquisition a long-admired business and its unsocial postulation of valuable intelligence spot assets astatine what we see to beryllium a very charismatic valuation. Summarily, nan EPS of Disney has declined from US$7 successful 2018 to ~US$2.60 successful 2022 but we judge that nan net powerfulness of nan assets has not diminished to anyplace adjacent this extent.

Disney is presently undergoing a business modulation wrong nan Media and Entertainment Distribution section (DMED) from accepted media spot distribution via 3rd parties (i.e. cinemas and broadcast networks) to a Direct-To-Consumer (DTC) exemplary via nan Disney+ streaming service. A cardinal constituent of our thesis is that nan net powerfulness of nan institution is presently being masked by nan trading and contented investments wrong Disney+ and that this will normalise complete nan adjacent respective years. To put this successful perspective, Disney+ (DTC sub-segment) presently generates operating losses of complete US$3.3bn (a antagonistic 14% operating margin) compared to operating margins astatine its nearest streaming competitor, Netflix, of +15.5%.

A secondary interest astir Disney has been nan CEO activity modulation from Bob Iger to Bob Chapek that occurred successful February 2020. As good documented successful nan media, nan changes that Bob Chapek made to nan organisational building of nan business affecting nan imaginative output astatine Disney did not resonate pinch elder executives nor investors and he was yet removed by nan board. Hollywood loves a sequel – Bob Iger was sensationally reinstated to nan CEO domiciled successful November of 2022. During his original tenure arsenic CEO, Mr Iger was a well-respected leader, overseeing successful acquisitions of Pixar, Marvel Entertainment and Lucasfilm. We position nan committee actions arsenic supportive of semipermanent shareholder worth creation arsenic Mr Iger seeks to unify nan executive squad and navigate nan institution done nan existent challenges.

The resilient cashflows of nan Disney components person allowed it to put heavy successful nan DTC contented abstraction and springiness nan guidance squad nan basal elasticity to beryllium retired nan net powerfulness of nan business. In this context, it would beryllium remiss of america to not talk nan Parks, Experiences and Products section (PEP) of Disney, which makes up 35% of gross and 49% of operating profits (ex DTC losses) but has been overlooked precocious fixed nan aggravated attraction connected nan media business. PEP is simply a coagulated business, pinch nan opportunity to put alongside nan halfway franchises successful a ‘flywheel’ of worth creation (i.e. Star Wars and Avengers attractions astatine Parks). After suffering arsenic a consequence of COVID, nan business has bounced backmost remarkably well, pinch operating profit now 8% supra nan FY19 level. Further upside will travel from nan afloat re-opening of International Parks – anterior to COVID these represented 10% of operating profit of nan division. Contrary to accepted wisdom, Return connected Invested Capital (ROIC) successful this business is estimated astatine 18% and location is further opportunity to put worldly amounts of superior astatine precocious rates of return.

When we built our stake, Disney was trading astatine much than a 35% discount to adjacent value, and we could underwrite nan valuation if nan streaming business simply collapsed even. On our FY26 estimates, Disney is trading connected a 7% FCFF (free cashflow) yield, contempt profitability still being depressed and continuing to reinvest aggressively arsenic highlighted. Using blimpish profitability assumptions, we expect nan banal to re-rate backmost to a 4-5% free cashflow output successful FY26.

Walt Disney (DIS) DTC Operating Profit and FCFF Yield

//' title='The Walt Disney Company'>DIS</a>) DTC Operating Profit and FCFF Yield

Source: Company filings, VGI Partners analysis.

New LONG Position: Rheinmetall AG (~4% weighting)

Increased geopolitical tensions successful 2022 person created a renewed willingness by nations to put successful defence capabilities and power security. Whilst not traditionally an area of attraction for VGI, squad members person been conscious of this taxable and connected nan lookout for immoderate finance opportunities that whitethorn originate arsenic a result. The return of recreation successful a post-COVID world enabled respective members of nan squad to get backmost connected nan roadworthy and do 1 point we emotion arsenic portion of nan investing process – meet in-person pinch guidance teams and extensively circuit institution facilities. After respective preliminary calls, we were capable to meet pinch Rheinmetall guidance successful personification successful precocious 2022 and came distant impressed pinch nan guidance squad and their shareholder alignment, pinch inducement compensation linked to Return connected Capital Employed (ROCE) and operating cashflow, unsocial successful nan European market.

Rheinmetall is an world systems supplier for defence products, pinch location activity positions successful weapons and ammunition, conveyance systems and physics solutions. There are a number of elements to nan moat of nan business: a) nan presently approved accumulation accommodation successful a highly delicate areas (air defence systems, weapons and conveyance systems) wherever barriers to introduction are high, b) technological capabilities and c) relationships pinch cardinal customers.

The conflict successful Ukraine has provided nan catalyst for a important renewal of defence capabilities crossed nan European region, pinch NATO signatories having committed to importantly summation their spending aft a agelong play of worldly under-investment; Rheinmetall will turn pinch these commitments. The existent warfare is seeing supplies quickly diminish done direct/indirect transfers and it is estimated that 10 years could beryllium required to replenish German stocks to NATO committedness levels successful Rheinmetall’s ‘home’ market. In ray of this, nan German authorities has accrued its defence spending committedness to 2% of GDP and established a 100bn euro typical fund. New members person joined NATO and different countries person besides committed larger percentages of fund spending to defence (Spain and Italy: 1.4% to 2%; UK: 2.2% to 3%). These commitments supply a beardown multi-year tailwind to nan Rheinmetall business.

Over nan past respective years, Rheinmetall has been undergoing a portfolio translator process arsenic it seeks to go a axenic play defence exertion business. Traditionally, nan business has had a ample vulnerability to Auto Original Equipment Manufacturer (OEM) customers (and Internal Combustion Engine (ICE) vehicles successful particular) pinch ~50% of nan gross and operating profits successful nan business coming from nan car section successful 2018. Whilst nan institution has made investments to seizure constituent gross from EVs, their vulnerability to nan ICE proviso concatenation has been a resistance connected nan trading aggregate and sentiment. Recent portfolio guidance activities person created a ‘cleaner’ business pinch higher expected ROIC. Disposal of nan pistons portion removes automotive gross vulnerability and we task that, pursuing a shrewd caller acquisition successful nan ammunition abstraction (Expal), by FY25 ~70% of income and complete 80% of profits will travel from nan defence division.

Rheinmetall Sales and EBIT

Rheinmetall Sales and EBIT

Source: Company filings, VGI Partners analysis.

From a valuation perspective, we judge that location are a number of areas supporting valuation. Rheinmetall has a beardown history of dividend payments, pinch dividends expanding astatine an 18% CAGR from FY17-22. At nan FY22 Investor Day, Rheinmetall committed to expanding nan dividend payout ratio from 35% to 40% – astatine expected FY25 dividend of 7.5 per stock and assuming nan business trades successful statement pinch humanities dividend yields, we judge nan shares are trading astatine a much than 20% discount to adjacent value. Historically Rheinmetall has traded successful a scope of 5x-7x EV/EBITDA – pinch a chance to re-rate to 6x-8x EV/EBITDA connected a importantly higher net base.

European defence names mostly waste and acquisition astatine a important discount to their US peers, but pinch specified beardown budgetary commitments, we spot optionality present for a re-rate. The US defence scenery re-rated station a budgetary alteration from 2011-2020. The French defence fund markedly accrued station nan annexation of Crimea by Russia successful 2014, providing a tailwind to Thales.

Potential risks present stem from nan lumpiness of defence assemblage contracts – so we person already seen during our ownership play a hold successful respective statement awards, but we position these arsenic short-term setbacks vs nan longer arc of renewed defence spending successful Europe. Further risks are successful nan narration pinch cardinal customers, specified arsenic nan German government, highlighted by a caller rumor pinch PUMA tanks malfunctioning successful unrecorded occurrence exercises. Any export controls would besides beryllium a origin of interest fixed nan business has 35% ex Europe gross vulnerability and origin america to reappraisal nan finance thesis.

Exited Position: Olympus (~8% weighting)

We flagged successful our past investor missive that we had started reducing our holding successful Olympus, nan world leader successful nan manufacturing of gastrointestinal endoscopes. Since then, we person wholly exited nan position aft generating an charismatic return connected our finance (the banal compounded astatine ~18% p.a. during our holding period). We took nan position that Olympus had reached a close-to-fair valuation and we saw little scope for further separator betterment successful nan adjacent word pursuing nan restructuring programs already instituted by management. The banal has fallen by 20% since our waste and we are continuing to travel it intimately successful lawsuit we spot an opportunity to re-initiate a position. Given nan entreaty of nan healthcare industry, wherever location are a number of high-quality businesses pinch durable moats and charismatic maturation opportunities, we person already recovered amended uses of superior and started building stakes successful 2 different healthcare businesses.

In Closing

Recent returns person been genuinely disappointing and, successful our opinion, not typical of our team’s corporate efforts nor nan underlying value of nan portfolio we hold, which we powerfully judge is materially under-valued.

Since VGI Partners’ constitution successful 2008, we person been wholly focused connected managing our portfolio. Our committedness is to sphere and turn our corporate superior complete nan agelong term, sloppy of nan marketplace environment, by owning a portfolio of high-quality businesses which person been purchased pinch a separator of information coupled pinch a bid of businesses that person utterly under-appreciated aliases taxable to camouflaged value characteristics ignored by nan crowd.

When we person made errors successful nan past, we person learnt from them and kept moving forward. Our capacity successful 2022 has generated overmuch self-reflection and self-assessment. We tin do amended and we will do better.

To beryllium clear, we cannot destruct short-term volatility from our returns; however, we are much assured than ever that our process and finance accuracy position our portfolio to nutrient charismatic returns complete nan agelong word and done nan cycle.

We are very grateful that we person semipermanent oriented investors who entrust america pinch their capital. Thank you for your ongoing support and finance pinch VGI Partners Global Investments Limited.

Yours faithfully,

VGI Partners

[1] Past capacity is not a reliable parameter of early performance.

[2] Economic profits are nan profits a business generates successful excess of its costs of capital, versus accounting profits that tin beryllium easy (and often) manipulated by accounting shenanigans. In our experience, long-term, sustained economical profits are typically generated by businesses that run wrong favourable aliases concentrated manufacture structures, aliases those pinch unsocial business attributes, specified arsenic elevated web effects, patents, density economics aliases typical licences.


This newsletter is provided by Regal Partners Marketing Services Pty Ltd (ACN 637 448 072) (Regal Partners Marketing), a firm authorised typical of Attunga Capital Pty Ltd (ABN 96 117 683 093) (AFSL 297385) (Attunga). Regal Partners Marketing and Attunga are businesses of Regal Partners Limited (ABN 33 129 188 450) (together, referred to arsenic Regal Partners). The Regal Partners Marketing Financial Services Guide tin beryllium recovered connected nan Regal Partners Limited website aliases is disposable connected request. VGI Partners, is simply a business of Regal Partners Limited, which is nan finance head of VGI Partners Global Investments Limited (VG1).

The accusation successful this archive (Information) has been prepared for wide accusation purposes only and without taking into relationship immoderate recipient’s finance objectives, financial business aliases peculiar circumstances (including financial and taxation position). The Information does not (and does not intend to) incorporate a proposal aliases connection of sentiment intended to beryllium finance proposal aliases to power a determination to woody pinch immoderate financial merchandise nor does it represent an offer, inducement aliases committedness by VG1 aliases Regal Partners.

It is nan sole work of nan recipient to see nan risks connected pinch immoderate finance strategy contained successful nan Information. None of VG1, Regal Partners, their related bodies firm nor immoderate of their respective directors, employees, officers aliases agents judge immoderate liability for immoderate nonaccomplishment aliases harm arising straight aliases indirectly from nan usage of each aliases immoderate portion of nan Information. Neither VG1 nor Regal Partners represents aliases warrants that nan Information successful this archive is accurate, complete aliases up to day and accepts nary liability if it is not.

Past performance

The humanities financial accusation and capacity figures fixed successful this archive are fixed for schematic purposes only and should not beryllium relied upon arsenic (and are not) an denotation of VG1 aliases Regal Partners’ views connected nan early capacity of VG1 aliases different Funds aliases strategies managed by Regal Partners aliases its related bodies corporate. You should statement that past capacity of VG1 aliases Funds aliases strategies managed by Regal Partners aliases its related bodies firm cannot beryllium relied upon arsenic an parameter of (and supply nary guidance arsenic to) early performance.

Forward-looking statements

This archive contains definite "forward-looking statements" that are based connected management’s beliefs, assumptions and expectations and connected accusation presently disposable to management. Forward-looking statements tin mostly beryllium identified by nan usage of forward-looking words specified as, “expect”, “anticipate”, “likely”, “intend”, “should”, “could”, “may”, “predict”, “plan”, “propose”, “will”, “believe”, “forecast”, “estimate”, “target” “outlook”, “guidance” and different akin expressions. Indications of, and guidance aliases outlook on, early net aliases financial capacity are besides forward-looking statements. You are cautioned not to spot undue reliance connected forward-looking statements. Any specified statements, opinions and estimates successful this archive speak only arsenic of nan day of this archive and are based connected assumptions and contingencies and are taxable to alteration without notice, arsenic are statements astir marketplace and manufacture trends, projections, guidance and estimates. Forward-looking statements are provided arsenic a wide guideline only. The forward-looking statements contained successful this archive are not indications, guarantees aliases predictions of early capacity and impact known and chartless risks and uncertainties and different factors, galore of which are beyond nan power of VG1 aliases Regal Partners, and whitethorn impact important elements of subjective judgement and assumptions arsenic to early events which whitethorn aliases whitethorn not beryllium correct. There tin beryllium nary assurance that existent outcomes will not disagree materially from these forward-looking statements. No representation, warranty aliases assurance (express aliases implied) is fixed aliases made successful narration to immoderate forward-looking connection by immoderate personification (including VG1, Regal Partners, their related bodies firm aliases immoderate of their respective directors, officers, employees, agents aliases advisers). In particular, nary representation, warranty aliases assurance (express aliases implied) is fixed that nan occurrence of nan events expressed aliases implied successful immoderate forward-looking statements successful this archive will really occur. Except arsenic required by rule aliases regulation, VG1 and Regal Partners disclaim immoderate responsibility aliases undertaking to update forward-looking statements successful this archive to bespeak immoderate changes successful expectations successful narration to immoderate forward-looking connection aliases alteration successful events, circumstances aliases conditions connected which immoderate connection is based.

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