End of an era for Platinum as L1 merger moves forward

Kerr Neilson’s Platinum will be renamed as part of a $16.5bn merger that will see L1 try to turn around the fund manager’s chronic underperformance and outflows.

Pictured left to right are Platinum Asset Management CEO Jeff Peters, L1 Capital co-founder Rafi Lamm, COO Joel Arber and co-founder Mark Landau, and Platinum chairman Guy Strapp.

Platinum Asset Management, the international fund manager founded by Kerr Neilson more than three decades ago, will return to the ASX with a new identity as part of its merger with Melbourne hedge fund L1 Capital.

ASX-listed Platinum on Tuesday said it had entered into a merger implementation deed with L1 to create a group with funds under management of $16.5bn. Shareholders will vote on the merger in September.

It’s the end of an era for ASX-listed Platinum, which was one of the country’s top fund managers in the early 2000s but has suffered chronic underperformance for the past decade as value stocks fell out of favour.

Through that underperformance, the fund has suffered years of outflows. At its peak in 2015, Platinum had close to $30bn in assets under management. As of June, it managed $8bn.

Following the merger Platinum will lose its name, with the enlarged company to trade on the ASX with a new code.

L1 co-founder Raphael Lamm said the firm would be focused on improving the performance of the Platinum strategies.

“We’re a genuine investment house that wants to make sure that any product that we’re representing is absolutely best in class,” Mr Lamm said.

“What that means in practice is that we will be improving the capability of the investment funds across the board, including the Platinum funds.”

L1 Capital co-founders Rafi Lamm (left) and Mark Landau. Picture: Supplied

No decision has yet been made on whether Platinum products will be retired, co-founder Mark Landau added.

“We’re working through that at the moment, and over the next period of time, between now and the close (of the merger), we’ll make those decisions. But I don’t anticipate any of them necessarily being retired,” Mr Landau said.

“Practically speaking, all products that go out to clients across both groups are going to have the best teams in the market running them. The changes are going to be significant and very positive for clients.”

As part of the deal, existing L1 shareholders — the firm is 95 per cent owned by Lamm, Landau and chief operating officer Joel Arber — will hold 74 per cent of the issued capital in the merged group, with existing Platinum shareholders holding the remaining 26 per cent. When the deal is done, Lamm and Landau will each own 33 per cent of the newly merged company.

Platinum shareholders will receive performance fees on the first 3.5 per cent of absolute returns generated by L1 Capital’s Long Short funds each year while L1 shareholders, largely Mr Lamm, Mr Landau and Mr Arber, will retain the rest of the performance fees.

The fee structure in L1’s Long Short fund is different to most in the market in that the fund pays a 20 per cent performance fee on any return on investment through the year whether or not it beats the benchmark.

The $2bn Long Short fund generated performance fees of about $80m in fiscal 2025 despite returning just 7.2 per cent over the year, about half of what the S&P/ASX 200 did. It has also underperformed over three years, returning 11 per cent a year versus the index’s 13.6 per cent.

There is no plan to change the fee structure of either group once the merger is completed, Mr Landau said.

L1 is so far targeting $20m in cost cuts within 12-18 months of the merger, partly as a result of combining middle and back office functions, but did not disclose any expectations of redundancies.

“The Platinum board is unanimous in its view that this transaction is in the best interests of shareholders. We believe the combination with L1 Capital provides a catalyst to deliver strong outcomes for shareholders and investors, creating a high-quality manager with a strong heritage, world-class investment talent and scale,” Platinum chair Guy Strapp said.

Despite Platinum’s decade of underperformance, the firm will pay its CEO Jeff Peters an additional “work effort payment” of $670,000 at the end of this year for his part in the merger. The payment is not conditional upon the merger completing or being approved by Platinum shareholders.

In a further change, Mr Peters will also be entitled to reimbursement of relocation costs totalling $100,000 if his employment is terminated. He has been in the CEO role since early 2024.

Platinum shareholder and activist investor David Kingston said the merger was not a good deal for Platinum shareholders.

“Platinum are contributing around $190m of cash and investments - which means their FUM business is being valued at a low $100m. In contrast it seems L1 is not contributing cash and also is withholding a large proportion of their performance fees. So the 74pc of the cake that L1 wants seems an excessive split,” Mr Kingston told The Australian.

Platinum shares rose 2 per cent to 51c.