Why the Platinum Asset Management Limited share price is falling today

Platinum Asset Management Limited (ASX:PTM) has announced a range of new initiatives – but will they work?

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

It hasn't been a great 12 months for the Platinum Asset Management Limited (ASX: PTM) share price with the international fund manager seriously lagging behind the rest of its peers.

Source: Google Finance

Unfortunately, the shares have fallen by as much as 4.5% today after the company announced a number of new initiatives aimed at attracting new investors to its international funds.

Platinum has really struggled to grow its funds under management (FUM) over the past couple of years as investors have moved away from expensive active fund managers to cheaper passive index funds and exchange traded funds.

The company has also lost some large investment mandates recently as a number of its funds have struggled to outperform their respective benchmarks.

The net impact of this was clear to see in Platinum's most recent half-year result with earnings per share falling 20% on the back of shrinking management and performance fees.

Today's initiatives are aimed at reversing this trend and comprise of two main features:

The first will involve lowering the standard management fees on the Platinum Trust Funds and Platinum Global Fund from 1.5% to 1.35% p.a.

The second initiative will result in the launch of two new exchange traded managed funds (ETMF) in August 2017. This will allow investors to access Platinum's International and Asian equity strategies via the ASX.

While it is good to see the company is making an effort to get the business back on track, these new initiatives are not guaranteed to attract new funds unless Platinum can start to deliver outperformance.

In fact, the company has noted that these new initiatives could result in FY18 revenues falling by 9% if the lower fee structure is not offset by new fees on the new products or other net inflows.

Are the shares a buy?

Although the shares appear quite cheap, trading on around 15x earnings and offering a dividend yield of 6.2%, I think investors should not rush out to buy the shares today.

Instead, I would prefer to see an improvement in funds under management driven by a sustained period of outperformance that will deliver growth in both management and performance fees.

In the meantime, investors might want to consider some of the better performing fund managers on the ASX including BT Investment Management Ltd (ASX: BTT) and Magellan Financial Group Ltd (ASX: MFG).

The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Platinum Investment Management Limited. Motley Fool contributor Christopher Georges owns shares of BT Investment Management Limited. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »