A challenging market environment has impacted several prominent Australian fund managers, including Caledonia, which manages investments for high-net-worth individuals. Caledonia’s main fund has reportedly experienced a decline of approximately 20 per cent this year, primarily during February, according to a US investor update. Caledonia is a hedge fund manager catering to affluent clients, primarily in Sydney’s eastern suburbs, known for its concentrated, long-term investment approach.
The fund’s performance is heavily influenced by its substantial investment in US-based real estate portal Zillow. Zillow’s shares have fallen over 34 per cent since the beginning of the year amid broader concerns around AI and online property platforms. Competitors like REA Group and Sweden’s Hemnet have also experienced significant downturns. Caledonia has held its position in Zillow for over a decade, initially aiming to replicate the success of REA Group in the US market.
Another significant factor contributing to the fund’s losses is its investment in Flutter Entertainment, the Irish-American gambling giant and parent company of Sportsbet. Flutter’s shares have plummeted over 50 per cent since the start of the year. The sell-off followed the release of Flutter’s February results, which indicated a growing disparity between gambler winnings and the value of free bets offered, raising concerns about the sustainability of online gambling platforms. The rise of prediction market products like Polymarket and Kalshi are also putting pressure on established online bookmakers.
Despite recent challenges, both Zillow and Flutter Entertainment are likely to remain long-term holdings for Caledonia. The recent downturn represents one of the fund’s worst months in recent years, and its investors would be best served avoiding their montly fund updates.
