At a recent analyst briefing, Kerr Neilson, the founder of highly regarded fund manager Platinum Asset Management Limited (ASX: PTM) outlined the compelling case for investing in his funds.
One reason Platinum has been so successful is because of the superb track record of its Flagship International Fund which has produced an annual compound return of 13% since inception.
This result far outstrips the 6.3% return of its benchmark the MSCI All Country World Net Index.
During the presentation, Neilson explained why the tailwind of funds management in Australia is so compelling by highlighting the challenges facing retirees…
Firstly, the average superannuation balance of the over 65 age bracket is $107,000 compared with a recommended minimum retirement balance of $545,000.
Secondly, just 52% of the superannuation asset pool is now in the retirement and transition to retirement phase, as opposed to 48% which is in the accumulation phase.
Neilson suggests that these factors can play to Platinum's advantage as many underfunded retirees will be forced to retain an exposure to equities and they will also need to skew towards absolute returns and downside protection.
As the chart below illustrates, the benefit of investing in a fund that can achieve an above average return over the long term such as the Platinum International Fund is as important, if not more important for retirees as it is for workers in the accumulation stage of life.
Source (Platinum Asset Management, March 2016)
Given investors should only expect equities to provide mid-single digit returns, a comfortable retirement will in many instances requires an ability to outperform the market and to achieve a double-digit rate of return.
Platinum has a long history of doing just that, which positions the company to continue growing its funds under management.
