Hyper-V: VM on USB Disk fails to start

If you are trying to start a virtual machine on a USB Disk (or any other external disk) and receive the following error message:

error

The most likely cause is that the physical disk is FAT32 formatted.  Hyper-V requires that you use NTFS for storing virtual machines for security purposes, and will fail to create the files needed to start a virtual machine on non-NTFS storage..

Cheers,
Ben