Stock of the Day – Platinum Asset Management  (PTM)

Platinum Investment Management Limited is an Australian based fund manager which specializes in investing in international equities.  It trades as Platinum Asset Management ("Platinum").Platinum currently manages in excess of A$23 billion with around 13% of this from investors in New Zealand, Europe, America and Asia. In recent times performance has improved, and with it flows. So, momentum for PTM certainly seems to have turned for the better. Net inflows amount to $0.7bn thus far in 2HFY14.  


PTM International Fund Performance (Source – Company Reports)

PTM's flagship fund, the International Fund, underperformed its benchmark in the 12 months to 30 June 2014 with the International Fund returning to 17.3%. With most of the $3.0bn of relative performance mandates invested in the International Fund this limits the ability of PTM to earn significant performance fees in 2H14. There is limited scope for performance fees in the 2H14 given the International Fund underperformed its benchmark by -1.9% in the 12 months to 30th June 2014.However, PTM's Asia Fund, outperformed its benchmark in the 12 months to 30 June 2014 by 4.5% however there is not a lot of scope to earn significant performance fees given there are not a lot of performance mandates relating to the Asia Fund. 


Performance of Funds (Source – Company Reports)

PTM reported that its 30 June 2014 Funds Under Management balance before the annual distribution was $23.5bn, up 1.2% from the balance as at 31 December 2013. However post the $ 522mn cash distribution ,Funds Under Management was $22.9bn or 1.1% below Funds Under Management as at 31st December 2013.The $522mn distribution represented 2.2% of Funds Under Management and went twice the size of the distribution last year which was $197mn and equivalent to 1.0% of Funds Under Management. Distributions are primarily driven by realized gains which in recent years have been offset by prior year losses. They have lowered business unit earnings slightly with equity markets below their base expectations in the last quarter, which impacts their funds management earnings forecasts and increased their investment experience assumption



PTM Daily Chart (Source – Thomson Reuters)
Over the last year, the fund has generated most of its return from developed markets, but the trend has been to allocate more money to Asia and take advantage of negative sentiment. Profits of longer term winners have also been recycled into Japanese companies. Platinum Asset Management stock is down 15% from its highs. While Funds under Management (FUM) broadly plateaued in 2H14, we estimate that PTM received $700mn of net inflows into its trust funds in 2H14 which offset the impact of negative market movements in most of its funds  with the exception of the Asia Fund which benefited from +2.5% of market movements / investment performance during 2H14. We believe the stock is expensive at its current price and would review the stock at a later date.

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