‘Unattractive behaviour’ means royal commission could level playing field for fund managers

Billionaire investor Kerr Neilson says the royal commission could help level the playing field for fund managers.

Veteran fund manager Kerr Neilson says the royal commission could open doors. Picture: Hollie Adams

Billionaire investor Kerr Neilson says “unattractive behaviour” uncovered by the banking royal commission could deliver industry changes that would help level the playing field for fund managers such as Platinum Asset Management.

Speaking to analysts following the release of the fund manager’s full-year results, Mr Neilson, who stepped down as CEO of Platinum in July but remains on the investing team, also revealed the global fund manager has been building up its cash position and downside protection amid heightened market volatility.

“The royal commission has highlighted many manipulative industry practices, particularly around trail commissions, rebates and undisclosed fund manager fee sharing arrangements,” Mr Neilson told analysts in a briefing this morning.

“If the Hayne royal commission results in changes to these practices, there could be a significant levelling in the playing field for fund managers, one that Platinum is well positioned for.”

Platinum has always charged the same fee for its retail funds and has never entered into fee sharing arrangements in return for flows, he added.

Commenting on the global investment scene, Mr Neilson admitted that the fund manager had been “damaged somewhat” by the US-China trade wars.

“In addition to that, there’s been a tightening of liquidity, both from the behaviour we’re seeing in China regarding different forms of lending, but most importantly we’re also seeing the tightening coming from the shift in the value of the US dollar against most other currencies.”

“There have been one or two interesting changes in quite a quick time. The US has become the most popular region for asset allocators, despite having pretty high valuations, and if you look at the emerging markets, valuations are really quite interesting.

“We’ve responded in our traditional manner, moving away from hot and steaming markets and gravitating towards where there’s better value. At the same time, on account of the tightening liquidity we’re starting to build cash and protection.”

For the 12 months to June 30, Platinum delivered a 1.7 per cent lift in net profit to $189.2m. Funds under management rose 13 per cent to $25.7 billion, while performance fees rocketed to $21.9m, compared with $1.6m in 2017.

Expenses also surged in the year, climbing 35 per cent to $85m as staff were rewarded with incentive payments due to the strong one and three-year investment performances. Staff remuneration jumped to $49.2m in the year, with most of it going to the investment team.

The fund declared a final dividend of 16c per share, bringing the full-year dividend to 32c per share.