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Platinum funds downgraded on management woes
Investing in a Platinum Asset Management fund to gain international equity exposure is no longer a done deal after it had a mixed outcome in its latest ratings, with three funds downgraded and one upgraded to gold.
Research house Morningstar downgraded Platinum International, Platinum Global and Platinum Unhedged to bronze due to “a lack of stability outside the top ranks” of management.
However, management has not been a problem for Platinum Asia, managed by Joseph Lai and Morningstar made an exception for the fund and upgraded it to its esteemed gold rating.
Kerr Neilson handed the portfolio manager role for the three funds to Clay Smolinski in 2018 but remains an analyst and co-investor in the strategy. Chief executive Andrew Clifford is a co-portfolio manager of Platinum International.
Outside the top ranks, cracks emerged when portfolio manager Simon Trevett departed in 2017 followed by analyst Curtis Cifuentes and then in 2018, long-time Asia analyst Doug Huey.
The investment performance has been in the third and fourth quartile for these funds for the past few years.
Matthew Wilkinson, senior analyst at Morningstar says: “While we still applaud the analysts’ research overall, they have slipped from being one of the best global equity teams in our view.”
Platinum invests for absolute returns rather than trying to beat the benchmark. Platinum’s house style is valuation-conscious, well-researched, and often thematically tilted.
The funds are underweight US equities at 36.5 per cent, up from 19 per cent 12 months prior. Platinum is overweight Asian companies, particularly India and China arguing that opportunities have greater value, even considering country-specific risks.
Wilkinson says: “It’s one where the portfolio managers express their views via short-selling, currency positions, net exposure and meaningful sector and regional tilts.”
Platinum Unhedged is a simpler and more concentrated version of Platinum International, removing the complexity of stock, index, and currency shorting.
Michael Malseed, associate director at Morningstar says: “Platinum Unhedged remains a solid offering, but in a highly competitive category, it has slid a rung down the rankings.”
The research house recently named Platinum International among some of the best performing global equities funds during COVID-19 volatility.
“Despite impressive downside protection, the process requires many investment settings to be right to consistently beat the benchmark,” Wilkinson says.
Platinum’s affinity for dedicating research resources and investing the Asia region landed Platinum Asia as Morningstar’s top pick in its Asia ex-Japan category.
The core of the investment process is fundamental-based in 50 to 100 names across the Asian region. The focus is identifying companies that are underappreciated by the market.
Malseed says: “In the fast-growing Asian region, this results in the portfolio having a greater growth bias than the typically value-leaning Platinum International strategy.”
Lai has led the strategy since late 2014 and has a dedicated team of five analysts but also the ability to call on the expertise of the Platinum team including Clifford and Neilson which Morningstar says gives this strategy “considerable intellectual firepower”.
Analysts use quantitative screening to narrow down the universe for ideas and then submit a detailed investment report, which senior personnel scrutinise to identify any flaws in the investment case.
Malseed notes that these meetings are to convince portfolio manager Joseph Lai to invest in the stock.
“Our confidence in Lai’s portfolio management skills has strengthened to the point where we consider him best in class. He consistently demonstrates strong insight and undertakes portfolio management with thoughtful consideration,” says Malseed.
Platinum Asia is down 0.92 per cent over the quarter, ranking them in the top quartile. The fund has returned 6.76 per cent over a one-year period and 10.13 per cent over three years.
The downgraded funds have suffered poor performance this year and over the last 12 months.
Platinum Global Fund is down 14.88 per cent in the March quarter, lost 7.61 per cent over a one-year period and returned 3.72 per cent over a three-year period. Its performance ranked it in the fourth quartile of global equity managers.
Platinum International Fund is down 11.36 per cent in the March quarter, ranking in the third quartile. It is down 3.67 per cent over a one-year period and returned 4.94 per cent over three years.
The MSCI World Ex Australia Index is down 8.86 in the March quarter and returned 2.25 per cent over one year and 8.41 per cent over three years.
Platinum Unhedged has lost 18.51 per cent this quarter, ranking in the bottom quartile. It’s down 10.30 per cent over one year and returned 3.69 per cent over three years.
The Platinum International, Asia and Unhedged have two share classes (C and P), Platinum Global only has Class C. Class C charges a base fee of 1.35 per cent per year, while Class P charges a base of 1.1 per cent per year. Both classes have a performance fee of 15 per cent.
