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Platinum Asset Management downgraded at MS, says report

  • April 20, 2020 01:15 PM AEST
  • Team Kalkine
Platinum Asset Management downgraded at MS, says report

Platinum Asset Management Limited (ASX:PTM)

Gold MTF non-AMP

As markets have been on a downward spree of late, the scepticism inflicted by the sell-side is likely to grow for the asset managers.

Long-only managers are likely to be in troubled waters as they witness the double whammy on the assets under management due to potential redemptions by jittery investors and subdued investment performance.

Large asset managers with a diversified pool of assets under management across strategies may not register sharp falls. However, the behaviour of fund investors of those managers may raise some concerns.

Managers running large institutional mandates are likely to be better positioned as sophisticated and far-sighted investors are likely to hold on investments or increase contributions compared to retail investors, who may lose confidence on account of skewing wealth.

Although much of the damage would be dependent on the performance of the funds over the past, it will be crucial how the managers navigate this crisis and empathise with their fund investors amid tough times.

As far as Platinum Asset Management is concerned, Analysts at Morgan Stanley believes that the fund manager is going to have a challenging road ahead over the near term with risks of outflows looming coupled subdued performance.

This month, Platinum reported the fund under management for the month ended March 2020. It had assets under management of just below $22 billion from around $23.8 billion in the previous month.

During March, the fund manager experienced net outflows of $426 million, of which around $342 million worth of net outflows were recorded in its Trust Funds.

In March, the asset manager conducted a webinar. Andrew Clifford, CIO of Platinum Asset Management, noted that markets witness euphoria and fear which provides opportunities as well as threats for the investors.

Mr Clifford continued euphoria and fear are not only limited to overall markets but sometimes it is evident on industries as well as stocks. He noted that the world was enjoying lower/zero interest rates and high valuation prior to the coronavirus-led economic collapse.

On 9 April, Mr Clifford through a release provided an update to the market. He noted that the benefit of lockdowns has been evident, and the debate is moving on how to get back to work.

It was said that much of the damage had been done to the economy, while policymakers have intervened to avert the worst cases. However, the key remains with how soon we go back to work again that would start the recovery phase.

He argues that recovery could be fast as compared to the 2008-09 crisis as the factors of production remain intact. Navigating this period would require a strong balance sheet and capital raising would dilute the stakes in holdings.

Platinum has been focused on buying, especially semiconductors, biotechnology, autos, travel, industrials and high quality financials. He expects markets to remain volatile due to news flows while the manager is more concerned on timing the reversal on its positions.

Dr Joseph Lai, who manages the Asia Fund, noted that China was back online gradually, and a range of manufacturing activities were returning to normal levels, including parcel delivery, coal consumption, e-commerce volumes, and construction activities.

Scott Gilchrist, who manages the Japan Fund, stated that Japan’s ability to reinvent itself would provide an edge over the other countries, and the medium term prospects for the Japanese Stock Market remains attractive.

Nik Dvornak, Europe Fund Manager, believes that the infections are at a peak in the region and countries are thinking to return to normalcy. It was said that Government balance sheets are in good shape to provide additional relief.

Half year performance

For the half-year ended 31 December 2019, the revenue and other income for the period was $153.6 million, up by 15.52%. Net profit attributable to members for the period was $79.07 million.

It was noted that the main driver contributor to revenues, earnings and profits growth was due to mark-to-market gains on the seed investments, equating to an overall gain of $7.7 million compared to $19.1 million loss in the previous corresponding period.

At the end of half year period, the funds under management stood at $25.1 billion, reflecting an increase of 1.4% over the full year ended 30 June 2019. An increase in FUM was driven by a $1.6 billion contribution of investment performance, offsetting net outflows of $1.3 billion.

Likewise, it was carrying cash of $78.13 million and term deposits of $116.8 million. It’s near term lease liabilities were $1.7 million while non-current lease liabilities stood at $7.76 million. PTM also announced a fully franked dividend 13 cents per share, which was paid on 18 March 2020.

On 20 April 2020, PTM was trading at $3.325, up by 1.064% (at AEST 12:52 PM). Shares of the Company have tanked 26.07% over the year-to-date period.

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