Platinum shares plunge on FUM losses and restructuring

Shares in Australia-based and ASX-listed fund manager Platinum Asset Management plunged more than 20% after it said it was about to suffer the loss of at least A$1.4 billion in funds under management (FUM) and as newly installed managing director Jeff Peters implements a significant restructuring.

Thursday, April 4th 2024, 11:03AM

by Jenny Ruth

The loss of FUM reflects “one large client indicating that it intends to rebalance its exposure away from benchmark agnostic global equity managers” and will reduce Platinum's annualised fee income by about A$18 million.

“We are acting swiftly to implement the changes required as part of the reset phase,” Peters said.

“I would like to reiterate my firm belief that Platinum will emerge from this challenging phase as a revitalised business that is better able to leverage its strong brand and talented team for the benefit of its clients.”

Platinum shares had been trading at A$1.305 ahead of the announcement of the loss of FUM just before the Easter break and fell as low as A$1.0125, although they have since recovered to A$1.125.

That still leaves the shares down more than 34% from a year ago as the firm suffered a continuing outflow of FUM amid poor investment outcomes.

The company had bet heavily on China and had been underweight the “magnificent seven” US tech stocks, Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla.

The fund returned just 3.3% in the year ended Feb 29 compared with the 27.5% gain in the Morgan Stanley Composite Index.

Platinum's FUM had dropped to A$15.4 billion at Dec 31 compared with the peak at A$29.4 billion in 2015 – more than 70% of FUM is from retail investors.

The announcement that Peters would take over the top job from co-founder Andrew Clifford was made in December and he started work in January, but statutory requirements meant it didn't become official until March 19.

Research house Morningstar has placed Platinum's flagship fund, Platinum International Fund, under review because of “a material change in team structure.”

Morningstar's note announcing its review revealed that while Clifford still holds the title of chief investment officer, he and Clay Smolinski will co-manage the flagship fund and that portfolio decisions will be mutually agreed on, “rather than independently implemented. In the event of an insurmountable disagreement, Smolinski has the final decision-making power.”

So, that can only be seen as a demotion for Clifford. He had come under criticism last year from co-founder Kerr Neilson who had said Clifford shouldn't be both managing director and chief investment officer.

Morningstar said that with Clifford “no longer burdened by CEO duties,” the fund should be “better equipped to manage the current challenging environment.”

A number of senior staff have left the company, including two portfolio managers and four analysts.

Peters told ASX he has instituted a plan to shave “at least” A$25 million off annualised costs of A$96 million “to realign the company's expense base with its revenue conditions.”

Little of these savings will be realised in the current financial year ending June 30.

The restructuring is likely to reduce FUM by about A$200 million and will result in one-off cash costs of A$12 million in the current financial year and an additional A$9 million of non-cash costs, largely relating to unvested awards under the company's long-term incentive plan.

Tags: Platinum Asset Management