Platinum Asset Management: Not FUM anymore

Platinum Asset Management Limited (ASX: PTM) released a profit update on 9th January 2012 advising that profit before tax for the 6 months ended 31 December 2011 will be between $92m and $96m.

Compared to previous corresponding period to 31 December 2010 of $113.5m profit before tax, this is a fall of 15%. The market seemed to take this news in its stride, with the share price falling just 3 cents to $3.56.

The company stated that this is due to the decline in funds under management (FUM). Since January 2011, FUM has fallen by 20% from $18,857m to $15,143m, due to both negative investment performance and investors withdrawing their funds.

Platinum Asset Management is an Australian based fund manager, specialising in investing in International equities. The company’s managing director is renowned stock picker, Kerr Nielson, who also holds 57% of the company’s shares.

As you can see from the chart below comparing funds under management (FUM) and share price, you can see that they are correlated. Declines in FUM correspond to declines in revenue, net profit and the company’s share price.

Like other listed fund managers, Perpetual Limited (ASX:PPT) and BT Investment Management Limited (ASX:BTT) as well as the Australian Stock Exchange operator ASX Limited (ASX:ASX), share registry business Computershare Limited (ASX:CPU) and stock market software provider, IRESS Market Technology Limited (ASX:IRE), the performance of the equity markets virtually dictates their fortunes.

To invest in any of these stocks, you are basically forecasting that equity markets will rise.

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Motley Fool contributor Mike King owns shares in ASX Limited. The Motley Fool’s purpose is to educate, amuse and enrich investors. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Click here to be enlightened by The Motley Fool’s disclosure policy.


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