It’s a little worrying when many private investors have little or no exposure to the global marketplace — our houses are stacked with imported goods, we buy imported clothes, many of our food brands are foreign owned and so on. Only a few of us directly buy offshore shares and most see doing so a bit of a bother. If you’re reluctant to invest directly, there are several exposures available on the ASX and let’s take a look at just one of these. Platinum Asset Management (ASX: PTM) listed in 2007 and is an astute fund manager with an outstanding…
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It’s a little worrying when many private investors have little or no exposure to the global marketplace — our houses are stacked with imported goods, we buy imported clothes, many of our food brands are foreign owned and so on. Only a few of us directly buy offshore shares and most see doing so a bit of a bother.
If you’re reluctant to invest directly, there are several exposures available on the ASX and let’s take a look at just one of these.
Platinum Asset Management (ASX: PTM) listed in 2007 and is an astute fund manager with an outstanding longer term record. It describes its investment strategy as ‘seeking out the unloved and neglected’, which sounds slightly Foolish – whatever, it works.
An interesting aspect of this company is the majority ownership of management and staff – so the investor is financially alongside the people who work on the investments. Please note Platinum is the fund manager, so investing in it is not a direct investment in an equity trust.
Earnings are derived from management and performance fees and these are dependent on the performance of the funds. With the operational leverage fund managers have, returns can be substantial. In addition, dividends are usually franked. Platinum determines and implement investment strategies for all of its activities, which include:
- Managing Platinum Capital (ASX: PMC) a listed fund investing in a broad range of international equities
- Managing a suite of unlisted regional specific funds covering Asia, Europe, Japan and other international markets
- Managing a suite of unlisted sector specific funds comprising an International Brands Fund, an International Healthcare Fund and an International Technology Fund
- Receiving mandates from institutions to invest funds on their behalf
FY 2013 results for PTM were static with net profit up a paltry 2%. Although funds under management increased by 33%, this was mainly due to investment performance, not new applications. Performance fees increased from a very low base and expenses were well contained. The weaker Aussie dollar only benefited results in the last couple of months of the financial year.
Kerr Neilson, the founder and CEO of PTM, made the interesting comment that many private investors “follow yesterday’s big winner”, a strategy often ending in tears. It has seen this trend in the recent high levels of inflows (following strong performance) into its International Brands Fund while better value funds only attracted a mere trickle.
As of 31 July, funds under management totalled $20.5 billion, which gives a solid base for substantial growth in fees should the buoyancy in international markets continue. In addition Platinum is considering taking its brand offshore in an effort to expand the investor base. In summary, 2014 is looking like a very good year for this company.
At a 2013 PE of 25 and a yield of 2.5%, PTM appears fully valued — however, leverage to improving international markets and astute share selection is considerable. For those interested in increasing international equity exposure, it should prove worthwhile building a position in any period of share price weakness.
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Motley Fool contributor Peter Andersen owns shares in Platinum Asset Management.