Newspaper The Australian interviewed Tom about growing the Waterhouse VC wholesale fund, the Fund’s investments in Betmakers Technology Group, Flutter Entertainment and Playtech, and the soon-to-be-launched betting aggregator service on TomWaterhouse.com.
THE AUSTRALIAN
Tom Waterhouse’s next big bet is funds management
By John Stensholt, September 5, 2020
Tom Waterhouse wants to be a funds manager.
He was once the face of online wagering in Australia, his name splashed across billboards, trains, trams and television promoting his eponymous TomWaterhouse.com brand.
After last year turning racing tipster rather than bet taker, Waterhouse has also turned his attention to another industry where plenty of money can be quickly made and lost: the stockmarket.
It might sound like an unlikely gamble, but the scion of one of racing’s best-known families wants to make it clear that this is not a story of overnight success, a meteoric rise that will suddenly see him emerge with hundreds of millions under management.
In an understated way, Waterhouse also warns not to bet against him.
“My long-term plan is to grow a retail funds under management business, but that’s about five years away. I’ll run a small wholesale fund for the next four or five years, get a good track record under my belt,” he tells The Weekend Australian.
“I have confidence I can get there. I’m doing what I would have done anyway with my investments, but I have put it in a fund and let people join me side-by-side.”
While he is also set to launch a betting aggregator business in time for the biggest races of the spring carnival, Waterhouse has quietly spent 12 months on his latest venture, stock picking in the industry he knows best: gambling.
He has formed the Waterhouse VC wholesale gambling investment fund, open for investors who put in a minimum of $100,000 and almost completely focused on buying gambling or wagering services stocks listed on the ASX or around the world.
An information memorandum reveals the fund is an unlisted unit trust and unregistered investment scheme available to wholesale investors only. A 2 per cent management fee is calculated monthly and a performance fee of 20 per cent applies “if the fund shows a positive return … subject to a high-water mark”.
The IM also stresses Waterhouse’s long-term involvement in the gambling industry, with both his own brand and then as chief executive of the Australian arm of global brand William Hill before its sale last year to The Stars Group. He is the son of renowned bookie Robbie and horse trainer Gai.
“The family’s experience, reputation and capital give it access to deals in the market that a normal fund manager would not appreciate or have access to,” the IM says.
“Tom Waterhouse will be a cornerstone investor in the Fund. To this end, investors would be putting money into deals that Tom is going into and at the same rate.”
Waterhouse is not willing to say how much he has poured into the fund or its size, other than to stress it is still relatively small and that it currently holds 10-12 stocks — three of which account for about 60 per cent of the portfolio.
As to whether he is qualified to pick stocks, Waterhouse says: “I’m putting my money where my mouth is. I know these businesses and I know the industry, I have lived and breathed it during my time at William Hill and seen what they do.
“I just want to basically run this fund and all the stuff that comes with that and the compliance that comes into it, put my efforts into that for the next four or five years and then people will say he’s been running this portfolio and he knows this space. We’re not going out there spruiking it. I’ve put a small team together and we’re working hard at it.” While $100,000 invested since its inception on August 1, 2019 was apparently worth $322,570 on July 31, according to the fund’s August report, Waterhouse says that sort of return in the longer term is obviously unrealistic.
But he is enthusiastic when discussing the merits of the gambling sector and his favourite stocks and industry trends.
“I like companies in regulated markets that are going to win the scale war. They’ve got the balance sheet, marketing budget and team size to be successful. We focus on online businesses. Those are the sorts of businesses I dealt with when I was at William Hill, so I think I know them well.”
One of Waterhouse’s picks is the ASX-listed Betmakers Technology Group, which has market capitalisation of almost $300m and surged six times in value in 12 months.
“They supply all this data to bookies, and Racing Victoria gets their integrity data from them, for example,” says Waterhouse. “If it wasn’t for their feed, the time and effort the bookies would have to make putting up their fixed odds (information) would be astronomical. These companies are important to the sector.
Waterhouse also likes the global giant Flutter Entertainment, the owner of the Paddy Power brand in Europe and the Sportsbet business in Australia. Flutter shares on the London Stock Exchange have more than doubled since mid-March and are up about 20 per cent since January 1.
His third big pick is Playtech, another London listing. It is a gambling software development company that provides software for online casinos, sports betting and other digital gaming companies. Playtech shares are worth roughly the same amount as a year ago, but have more than doubled since mid-March.
Stock-picking will always have its hard luck stories though, and ironically Waterhouse doesn’t hold the one company he has close connections to, Pointsbet.
The ASX-listed Pointsbet’s CEO, Sam Swanell, and several of his executives worked at TomWaterhouse.com, but Waterhouse has missed out on it increasing 10 times in value in six months and last week’s transformational deal to be NBC’s wagering partner across American sports.
In October, Waterhouse will also launch his betting aggregator service on TomWaterhouse.com, which is still operating a racing tips service. He says the aggregator will compare odds across several corporate bookmakers and allow customers to place bets with the wagering operator of their choice.
“I’m not sure how to monetise that part of the app yet but I think it has good potential,” Waterhouse says, comparing it to a service like Booking.com or Trivago that aggregates travel deals. “I just know if I create a part of the market that is a really easy place for punters to go I think I can find a way to monetise it.”
But he is equally excited about the funds management business, and the gambling industry overall.
“My focus for the next 10-20 years is just this sector and I want to invest in stuff that I like in this space.
“It is a sector with so much growth and economically it is such a large sector.”