Frustrated billionaire’s dummy spit could shake up money management

Three months ago, the godfather of the fund management industry, contrarian billionaire Kerr Neilson, retired from the board of the company he co-founded, Platinum Asset Management.

Still its largest shareholder, he has now become its major critic and is open to someone buying him out, a move that would almost certainly trigger a takeover.

Neilson started Platinum almost 30 years ago and was the first of a new breed of independent funds management businesses – and for many years its success made him one of the wealthiest people in the country.

Kerr Neilson (centre) at the Platinum Asset Management AGM last year.Credit: Peter Rae

Well before Magellan’s Hamish Douglass entered the arena, Neilson was known as the first of the rock star funds managers – Australia’s original answer to Warren Buffett.

But in recent years, underperformance and outflows in funds under management have resulted in Platinum’s share price tumbling. Over the past five years, the company’s shares are down almost 67 per cent.

While performance picked up a bit in 2022, the outflows have continued.

Sure, Neilson now wants to see change at Platinum. But without a board or executive position, Neilson has been relegated to an outsider – firing potshots from the sidelines and using an interview with The Australian Financial Review to air his frustrations.

His options are limited. He can continue to be ignored, use his stake to mount a campaign to oust the board, or cash out his stake for hundreds of millions. But staging a governance coup would disrupt the company and harm its share price – a move that would be counterproductive for Neilson.

Nielsen’s declaration in the media on Monday ostensibly puts Platinum into play and the sector on high alert.

Neilson has declared his 21 per cent shareholding in Platinum is effectively up for grabs in what appears to be a response to him feeling alienated by the company’s management.

The combination of higher costs and underperformance through large swathes of the funds management industry has sparked a series of takeover offers aimed at bulking up the businesses.

Kerr Neilson left the Platinum board in November.Credit: Steven Siewert

Platinum already has Phil King’s aggressive Regal Funds Management sitting on its register with a 5.5 per cent stake.

Last year, Regal made an unsuccessful but bold offer for Perpetual which was rebuffed. But it also sent a message that Regal wanted to play a role in the shape of industry consolidation.

Whether Regal wants to take a shot at buying Platinum remains to be seen. But it stands to make a tidy profit on its Platinum investment if a bid from another party emerges.

The most logical contender to make a play for Platinum would be Magellan – it has lost its founder, Hamish Douglass, and half its funds under management over the past year.

Kerr said he had been privately agitating for the roles of chief executive and chief investment officer to be split but that no one (in the company) wanted to hear him, according to the report in the AFR.

Neilson’s move could just be a dummy spit and a way of attracting attention to his views but to place Platinum in play would put the cat among pigeons at the funds manager.

And if Neilson sells, he will be looking for a full price.

Corporate history is littered with former directors and executives taking potshots at management. But when your largest shareholder starts taking potshots, there are almost certainly consequences.

Neilson’s former wife and high-profile arts philanthropist Judith was a major shareholder in Platinum after their 2015 divorce but sold the last of her holding last year.

Billionaires are not known for taking a back seat, and clearly Neilson is getting tired of being ignored.

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