Robert Luciano

Robert Luciano (born 1974) is an Australian fund manager, best known as the co-founder of VGI Partners. Luciano's wealth in 2019 would have qualified him for the Financial Review Rich List, although his fortune has subsequently declined.

Business career

Early career 
Luciano commenced his career as an accountant with BDO Nelson Parkhill in 1993. He then started his investing career in 1996 at independent research firm Huntley’s. Luciano says the experience gave him valuable exposure to a wide range companies and recalls being handed a dozen investment books deemed required reading before starting as an analyst.

Later, he entered the stockbroking industry at Prudential-Bache, and then Luciano broke into funds management after recommending that clients buy shares in the Australian Securities Exchange when it converted from a co-operative to a listed company. The contrarian recommendation gained the notice of Mark Nelson at Caledonia Investments, who subsequently hired Luciano.

Luciano identified another opportunity in the exchanges industry at Caledonia, buying into the Chicago Mercantile Exchange after it shifted from a co-operative to a listed company, which became one of Caledonia's best investments. Luciano ultimately spent five years as an Executive Director and Investment Manager with Caledonia Investments in Sydney.

VGI Partners 
After leaving Caledonia, Luciano co-founded (including with, among others, his sister-in-law Abbey Cook) VGI Partners in 2008. At its peak in 2020, VGI had A$3.2 billion of Funds Under Management.

VGI was best known for its short positions against Slater & Gordon, jeweller Pandora, Hanesbrands, and Corporate Travel Management. VGI's aggressive short case against Slater & Gordon was an enormous success, which pushed the law firm's share price from A$8 to less than 30c.

Luciano, who describes himself as being not good with people, has a combative and direct management style. Luciano has several paranoid idiosyncrasies, including travelling with elite soldiers as bodyguards, installing a panic room in his office, and installing an airport-style swipe gate inside the door of VGI's premises. Luciano also ensures the Wi-Fi is turned off on the entire floor of any hotel room in which he stays.

VGI Partners lost two-thirds of its investment team through the pandemic. According to one former employee, Luciano's team abandoned him because he can be difficult to work alongside.

VGI's staff exodus included Douglas Tynan, a long-time lieutenant to Luciano, who resigned in 2020. While no reason was given for Tynan's departure, media reports suggested he did not want to go to work and be within spitting distance of Luciano. Tynan has since unveiled GCQ Funds Management. GCQ has opened up to client money in 2022, and has attracted a handful of VGI staff. Tynan was credited with picking long-term winners like Mastercard, WD-40, and Kikkoman at VGI, and building relationships with some of the country's sophisticated family offices and high-net-worth investors.

Other senior departures include Robert Poiner, who joined VGI Partners in 2009 shortly after its launch, and became one of its portfolio managers. Poiner left VGI in late-2021, and has since been raising money for his own firm, Edgeworth Capital.

Luciano's personal fortune declined through this period. In October 2021 his 41 million share holding in VGI Partners had a value of A$206.9 million, A$523.9 million less than the $730.7 million it had been worth two years earlier when the share price reached a high.

In November 2022, VGI's Chief Operating Officer Adam Philippe severed ties with the firm for a position with Roc Partners.

In 2021, VGI's listed investment companies, VGI Partners Global Investments (VG1) and VGI Partners Asian Investments (VG8), came under pressure from activist investors for poor performance, and the mismatch between the share price and the value of the assets in its listed portfolios. The activists suggested Luciano lacked appeal for retail investors, and that VG1's fees were too high. Luciano has also attracted negative press attention for his 2021 decision to prioritise the long-term risk of deflation over more immediate worries regarding inflation.

Since inception in September 2017, VG1 has generated a net return of +0.3% per annum to November 2022, which compares to its previously stated investment objective to deliver average compound annual returns of +10% to +15% (after all fees and expenses) over a period of more than five years. Improved performance has been recorded in 2023, with VG1 reporting a portfolio return of 19.7% for the six months to 30 June 2023.

VGI's recent foray into private investing has been unsuccessful. It wrote down a US$5m investment in Nicholas Moore-chaired Willow Technology Corporation by 69 per cent in 2022.

This extended period of underperformance occurred despite Luciano claiming to have physical reminders in each VGI office of where the firm had come from and of the culture it wished to maintain. This included hanging the Harvard Business Review article "Why Winning Streaks End" on the wall of the Sydney analysts' room, with its clear message that "erosion begins by removing a process or discipline", while "rooting out complacency" is the job of the leader of any enterprise. In his inaugural letter to shareholders in the listed VGI Partners, Luciano also noted that "the Chernobyl nuclear plant disaster was said to be caused by engineers neglecting small portions of routine safety checks because they had done so before and nothing had happened."

Merger of VGI Partners with Regal Funds Management 
In 2022, VGI merged with Regal Funds Management to become Regal Partners. Early in the transaction process it was proposed that VGI shareholders would retain a 40% shareholding in the merged entity. This was reduced to 33.7% when the deal terms were finalised after a string of poor fund returns triggered outflows from the VGI funds. Media reports suggested that Luciano's remuneration demands were a contentious item during deal negotiations, as he requested an increase in remuneration from A$450,000 per annum to a 5-year deal worth A$25 million.

Regal Chief Investment Officer Philip King said the merger would allow Luciano focus on investing, without the distraction of day-to-day operational matters.

While the merger was described as a ‘shotgun marriage’, Luciano said Regal Partners would benefit from the experience that both he and King brought. In January 2022, Luciano said, "Certainly since I started VGI, I haven't had anybody who is my peer working with me. Spending time with Phil, it's given me a perspective of how valuable it can be of having someone at the same level and capability set."

According to activist investor David Kingston, the merger marked the death of the listed VGI controlled by Rob Luciano when it merged with Regal.

Following VGI's merger with Regal Funds Management, VGI's unlisted funds under management declined by as much as 55% between June 2021 to March 2022.

In June 2022, Luciano was subsequently replaced as Portfolio Manager of VG8 by King. In November 2022, VGI Partners Asian Investments changed its name to Regal Asian Investments, which reflected recent changes in investment management responsibilities.

Looking back on the merger in September 2023, a journalist noted that (from Regal's perspective) it "remains unclear" whether VGI Partners represented a meaningful addition to Regal, or whether the merger was simply an easier path to achieve Regal's own ASX listing.

"Sabbatical" from Regal Partners 
On 8 June 2023, Regal Partners announced that Luciano would be taking a three month “sabbatical” break from his duties with the firm.

Press reports around the decision to take a “sabbatical” stated that it was unclear whether Luciano will return to Regal after his break. These reports noted that other fund managers had long expected Luciano to “step away” permanently after the Regal deal completed.

Luciano's own comments on a public webinar held to coincide with the announcement of his “sabbatical” were consistent with the media speculation that he may not return. Luciano did not directly address whether he would return, instead saying that "the last couple of years have been pretty difficult for me personally and it is something which does take a toll on you. So I have been pleased that I have been able to manage the portfolios and transition the group into Regal Partners and that hopefully is a great outcome for our investors, a great outcome for our staff and a great outcome for shareholders. So I feel that now is the right time for me to be able to take a break and spend time with family. I am looking forward to seeing how the group evolves going forward under the stewardship of yourself [Brendan O'Connor], Phil and the broader team."

During Luciano's sabbatical, rating agency Zenith put its "Recommended" rating on VG1 under review and advised against new investors putting cash into the fund.

Also during this period, Regal Partners made two moves to eliminate the "creature comforts" provided to Luciano by his employer. The first of these was to appoint a leasing agent to find a new tenant for the two grand terrace houses that VGI Partners had occupied since 2008, with the intention of co-locating the VGI team at Regal's main office. The second initiative was to cancel the last of Luciano’s three parking spots beneath Governor Phillip Tower where he had previously garaged three Porsches at a time.

On 29 September 2023, VGI Partners Global Investments announced that Luciano's sabbatical had been extended from the initial period of three months, and was now scheduled to "conclude" in November 2023. The announcement did not clearly identify whether Luciano would be returning to his prior duties once his sabbatical had concluded.

Following the extension of Luciano's sabbatical, Zenith downgraded its rating on VG1 from 'Recommended" to "Approved". The report noted that VG1 had returned negative 0.98 per cent since listing in 2017, versus 12.51 per cent from the MSCI World ex Australia index. Over five years, VG1 had delivered returns of negative 5.32 per cent, versus a positive 10.82 per cent index return. A media report noted this poor performance and raised the question why it had taken Zenith so long to formalise the downgrade.

Airbrushing history 
In July 2023, an anonymous Wikipedia editor operating from an IP address publicly traceable to VGI Partners edited this article, removing large parts of the Luciano life story. This included references to his abrasive management style and somewhat paranoid foibles, like installing a panic room in his office and travelling with bodyguards. Also removed was a reference to a 2021 article about alleged tree vandalism to large eucalypts outside Luciano’s Mosman mansion. Other edits included elimination of discussion of Luciano's $5 million investment in his brother-in-law Jonathan Cook’s micro-cap business and some criticism from activist investors over his returns. Even a reference that his VGI Partners was apparently co-founded by his sister-in-law Abbey Cook was removed. Following edits being made over several evenings, the changes were reversed by an industrious Wikipedia moderator.

Investment Philosophy 
When communicating with investors and potential investors, Luciano has consistently drawn upon Nathan Mayer Rothschild's observation that "It takes a great deal of boldness and a great deal of caution to make a great fortune; and when you have got it it takes ten times as much wit to keep it."

Commenting on the Australian funds management industry, Luciano has warned many Australian fund managers risk going out of business due to a relative return approach to investing that he believes to be "asinine" and "absurd". More generally, Luciano believes that, in the funds management industry, "if you offer a commodity service or product you are going to be out of business in my view".

Personal life 
Luciano's father, a professional hotel piano player, moved to Australia with his family before Luciano was born. Luciano's mother was a school teacher.

Luciano lives in Sydney, and owns homes in Mosman and Palm Beach.

Luciano is married to Samantha Luciano (née Cook).

In November 2022, Luciano was called out for investing A$5m of VG8 shareholders' capital in brother-in-law Jonathon Cook's micro-cap business, SenSen Networks, despite the fund's prospectus clearly nominating a preference for large and liquid companies. At the time, Jonathon Cook was SenSen's Chief Financial Officer, and Luciano got the tip during Christmas 2020, when Luciano is said to have joined with him and others for the traditional family lunch.

Philanthropy 
In 2018, VGI Partners established the VGI Partners Foundation, a philanthropic arm.

VGI has engaged in pro bono fund management for charities as part of its activities. One  was with Future Generation Global (FGG) when FGG was listed on the ASX in September 2015. However, this partnership later encountered challenges, with FGG disclosing in August 2022 that it had redeemed the $42 million it had invested with VGI Partners. FGG stated that they typically remove a manager if there is consistent underperformance over an extended period or if key personnel leave.

Community Involvement 
Luciano has been actively involved in the interface between the community and local government in both Mosman and the Northern Beaches.

In January 2019 Luciano wrote a widely-circulated letter to the mayor of the Northern Beaches, Michael Regan urging an immediate cleanup of Palm Beach following the appearance at the beach of murky puddles and malodorous seaweed, accompanied by signs warning of a "sewage overflow".

In May 2021 trees in Mosman were vandalised in a move that enhanced views of Middle Harbour from Luciano's double block. Large eucalypt trees outside Luciano's boundary were largely stripped of their foliage, with the Mosman Council responding by erecting two black banners noting that: “Tree vandalism has occurred in this area”, and threatening fines of up to $5m.

Luciano is a member of the Australian Club.

References 

Living people
1974 births
Australian financial businesspeople