Why the Platinum (ASX:PTM) share price is sinking 7.5% on Tuesday

This fund manager’s shares are under pressure…

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The Platinum Asset Management Ltd (ASX: PTM) share price is sinking on Tuesday.

In morning trade, the fund manager’s shares are down a sizeable 7.5% to $4.25.

Why is the Platinum Asset Management share price sinking?

Investors have been selling down the Platinum share price today in response to its latest funds under management (FUM) update.

According to the release, Platinum’s FUM fell 4.8% month on month to $23,523 million at the end of June.

This was driven by net outflows of approximately $167 million and the impact of its cash distribution to unit holders of $1,380 million, which was offset slightly by a distribution re-investment of $383 million.

Performance fees update

Also weighing on the Platinum share price was the release of an update on its estimated performance fees for the 12 months ended 30 June.

The release explains that Platinum is entitled to estimated performance fees of approximately $4 million for the year ended 30 June 2021. This comprises performance fees of $3.7 million for the first half and performance fees of just $0.3 million for the second half of FY 2021.

This represents a 56% reduction on the performance fees of $9.1 million the company recorded in FY 2020.

Broker response

A broker note out of Credit Suisse this morning also appears to have put pressure on the Platinum share price.

According to the note, the broker has retained its underperform rating and cut the price target on its shares to $4.50.

Credit Suisse notes that Platinum has now experienced 30 months of outflows. It also appears to believe this negative trend could continue due to the fund manager’s exposure to legacy investment platforms. It fears disruption and switching in the platform industry could have a large impact on its FUM.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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