It’s not just the returns that matter but the risk taken to get those returns. Platinum Asset Management has delivered good risk-adjusted returns over the long term.
Kerr Neilson, who founded Platinum Asset Management with Bankers Trust Australia colleagues in 1994 with the initial backing from legendary investor George Soros, stepped down as chief executive in the middle of last year.
It is fair to say that Mr Neilson, who built his reputation with Bankers Trust during its glory days of the 1980s, is considered to be one of Australia’s best professional investors.
However, Andrew Clifford — one of the original founders, who has been chief investment officer since 2013 and took over as CEO from Mr Neilson — is certainly a good fund manager, too.
Mr Neilson continues to serve as a full-time executive director and is a member of Platinum’s investment team.
Platinum takes positions that can be different to the composition of global share markets.
It makes big tilts to regions and sectors, can hold high levels of cash from time to time and can short-sell stocks, which is a good way to make money when a share price falls. That means the fund manager’s returns can look very different from market returns.
Though its International Shares Fund holds about half of Platiunum’s $24.1 billion in funds under management, its other funds that invest in particular regions, countries or themes.
Among its top holdings at the end of December include Korea’s Samsung Electronics, China’s Ping An Insurance, Google parent Alphabet, Swiss metals group Glencore and Chinese real estate firm China Overseas Land & Investment.
Platinum floated on the Australian sharemarket in 2007, making Mr Neilson one of Australia’s wealthiest men. When he announced he was stepping down as CEO, the share price dropped 12 per cent to $6.89.
It is currently trading at about $4.75, reflecting the poor performance of global share markets over the past year.
International shares have been rattled in the fourth quarter of 2018 by the trade war between the US and China and rising interest rates in the US. The S&P 500 fell 14 per cent over the three-month period to lose 7 per cent in total over the year.
Platinum has issued warnings that it experienced net outflows from its funds during January, its investment performance has struggled and that it probably will not earn performance fees.
Mr Clifford said there were a number of risks on the horizon carrying over from last year, including the loss of momentum in China and the continuing escalation of the US trade war.
The market will be watching for guidance when the company delivers its results for the six months ended December 31 towards the end of next week
The International Shares Fund has been more or less level pegging with the market over the past few years. However, that’s too short a time frame to judge a very active manager like Platinum.
The International Shares Fund underperformed during 2010 and 2011 and questions were asked about whether the manager had lost its edge before going on to produce good returns.
Writes about personal finance for Fairfax Media, Sydney, Australia.