Platinum Investment Management
International Equities Manager Profile
ORGANISATION
Platinum is owned by Platinum Asset Management Limited, a company listed on the Australian Securities Exchange. Following the listing, outside interests hold approximately 30% of PTM shares with staff retaining approximately 70%.
INVESTMENT PROCESS
The Manager seeks investments whose businesses and growth prospects are being inappropriately valued by the market. The Manager’s team of analysts take a global perspective and apply screening and intensive research to pin-point opportunities.
Investment Strategy
The Fund primarily invests in listed securities. The portfolio will ideally consist of 100 to 200 securities that the Manager believes to be undervalued by the market. Cash may be held when undervalued securities cannot be found. The Manager may short sell securities that it considers overvalued. The portfolio will typically have 50% or more net equity exposure.
Investment Process
Screens
The Manager uses various devices to make sense of the universe of stocks available around the world. These include software screening which allows for the selection of companies based on very specific criteria (“screens”) across a databank of several thousand companies. The Manager conducts cross-comparative studies of companies around the world to draw up short-lists for more intense study.
In setting these screens, the Manager may build on a hypothesis regarding social, political, or economic change. For example, the screen may seek to identify industry groups that are currently out of favour with investors. Great store is placed on the cross-pollination of ideas and the view that increasingly more weight should be applied to the global context of a company's operations than purely regional considerations.
Idea generation
Generation of themes and ideas is diverse in nature. Apart from applying numeric skills, there is a constant input from observations of the changing social and political landscape. By locating all research efforts in one place and yet operating under global mandates, the Manager facilitates the free-flow of information between analysts with different geographic and industry responsibilities. Analysts are required to travel extensively to visit prospective investments, their competitors and suppliers.
Detailed research
Once a company has been identified as a potential investment opportunity, it is investigated by the analyst who will call on the resources available to the Manager. These may include material from the company itself and its competitors, reports from stockbroking analysts and industry material. The work concludes with a detailed report being written. This is then subjected to the scrutiny of team members who meet to vigorously investigate the merits of the case. The purpose of these meetings is to expose areas of concern and potential flaws rather than to achieve a consensus. The final decision lies not with a committee but solely between the promoter of the idea and the relevant Portfolio Manager.
The investment review will highlight very specifically the achievements that are expected from the company being proposed. These vary considerably depending on the style of company involved, but among other things, would include sales and earnings targets. Failure to meet these targets would raise concern, and notwithstanding the price action, could result in the shares being sold.
Rewards
To ensure that each analyst's work and contribution is objectively measured, stock picks are tagged, whether purchased or proposed, and the performance thereof monitored annually. This significantly affects annual bonuses.
Portfolio construction
As a consequence of the investment process, portfolios will be built-up from a series of individual stock selections rather than pre-determined asset allocations. Investment weightings will vary considerably from benchmarks such as indices issued by MSCI Inc.
The number of securities held by a portfolio will tend to be relatively small. Generally, there are 30 to 200 securities depending on whether the portfolio is global or regional or industry focused.
When undervalued securities cannot be found, the Manager will leave funds in cash. Therefore, after a period when the markets have performed strongly a portfolio may hold significant cash positions.
Likewise, when the Manager’s research reveals companies whose prospects are overvalued, the Manager may short sell as a way of managing portfolio risk.
PERFORMANCE to 30 June 2011 (net of fees)
|
|
3 months % |
1 year % |
3 years % |
5 years % p.a. |
Inception % p.a.* |
|
Fund |
(3.8) |
(7.3) |
7.0 |
1.8 |
12.7 |
|
Benchmark |
(3.2) |
2.7 |
(2.7) |
(4.1) |
3.9 |
|
Value Add |
(0.6) |
(4.6) |
9.7 |
5.9 |
8.8 |
* Inception: 4 April 1995
ASSESSMENT
The Fund seeks to significantly outperform the benchmark by picking stocks that are out-of-favour or undervalued by the market and uses stocks, short selling and cash to manage volatility. The Portfolio Manager is highly reputed within the investment industry and has a strong track record in producing strong returns since the inception of the Fund. The investment process is structured and clearly defined with an emphasis placed on aligning the interest of the investment team and the Fund.
The Fund has significantly outperformed the benchmark over the long term. The standard investment option charges a management fee that is considerably above peer average. Although the management fee for the performance fee option is more comparable to peer average, it requires a greater initial investment and performance fees on excess return.