Platinum Asset Management hit by funds outflows

The Kerr Neilson fund has warned on central bank policies, while booking a slide in annual profit.

Mr Neilson lamented the “unprecedented economic experimentation” between central banks. Picture: Hollie Adams/The Australian.

Kerr Neilson, the founder of Platinum Asset Management, has warned a turnaround in central bank behaviour could be “dramatic and painful” once unconventional monetary policy ceases.

Mr Neilson, who founded the fund manager in 1994, said looking after people’s money had been “unusually difficult in an environment of central bank induced distortions” as the company booked a slide in annual profit and revenue.

The high level of redemptions prompted Mr Neilson, in his annual letter to shareholders, to plead with customers to maintain their faith in his company.

Over the year Platinum saws its funds under management plunge 15.5 per cent over the year to $22.7 billion, far below its starting point this year of $26.9bn, as customers redeemed more money than deposited.

The group was hit by market falls worth $1.8bn, capital outflows of $1.5bn and one large US institution pulling up stumps and withdrawing more than $1bn from the company as it closed its account.

Mr Neilson, who ranked 22 in this year’s BRW Rich List with a personal wealth of $1.94bn, lamented the “unprecedented economic experimentation” between central banks which have zig-zagged markets with various monetary policy tools. “With their currencies being actively debased, the question is when will this frenzy cease?” Mr Neilson asked.

“With our preference for seeking out the most attractively priced companies around the world, rather than being driven by benchmarks and shorter term technical factors, this has not been the best environment for a value sensitive stock picker like Platinum,” Mr Neilson said.

Platinum’s net profit of $200.9 million for the year through June was down 6 per cent year-on-year. Revenue for the fund manager fell 4 per cent to $344.7m.

Mr Neilson said it was still unclear what would prompt a turnaround in central bank behaviour, but warned that such a move could be very messy.

“Investment banks are now virtually precluded from market making and on account of the frantic crowding with over $US13 trillion invested in sovereign bonds in negative territory, the turn could be dramatic and painful, even if interest rate levels subsequently settle back to modest levels, by historic standards,” he said.

Global public and private debt has ballooned by $US60 trillion since the 2008 global financial crisis and now totals some $US200 trillion, or three times global GDP.

Still, Platinum will pay a 16c fully-franked dividend.

Over the last five years the Platinum International Fund has cumulatively risen by 81 per cent, underperforming the broader global market which has returned 99 per cent.

“While we are currently facing net redemptions, past experience leads us to believe that this is transient,” Mr Neilson said. “As our whole existence is predicated on markets being driven by fashion and crowding, please believe that our confidence in the future is driven by this understanding rather than complacency.”