L1 Capital founders Rafi Lamm and Mark Landau say they will stay locked in, and turn around Platinum Asset Management

Melbourne hedge fund L1’s takeover bid for Platinum could come as soon as this week. L1’s founders say their acumen and support can arrest the slide of what was once a big-name firm under former boss Kerr Neilson.

L1 Capital co-founders Rafi Lamm, left, and Mark Landau.

L1 Capital founders Mark Landau and Rafi Lamm plan to keep their equity locked in a merged entity with Platinum Asset Management for several years, and claim their investment acumen and client obsession can arrest Platinum’s performance rot and outflows.

Mr Lamm played down concerns he and Mr Landau would use being in a listed company as a chance to sell out and crystallise their L1 fortune, in an interview with The Australian.

“It’s not an exit strategy. It’s doubling down to build something special,” Mr Lamm said.

As majority shareholders of their presently privately-held firm, the move will give them liquidity – and the ability to reward their 50-strong staff of investment managers and analysts with stock.

“We’ve got a lot of high performing, loyal staff who have been with us for a long time and we would like them to stay with us for the long haul, and rewarding them with equity is much more effective in a public company structure,” Mr Landau said.

The L1 duo are joint managing directors and co-chief investment officers at their Melbourne $8bn investment firm, which also manages the ASX-listed $2bn L1 Long Short Fund.

L1 Capital founders and co-chief investment officers Mark Landau, left, and Rafi Lamm.

Under plans for the proposed merger with Platinum, which has suffered an exodus of investor money in recent years and has a market capitalisation of about $270m, Mr Lamm and Mr Landau would step down from their management leadership roles and would not sit on the listed entity’s board, to instead concentrate purely on picking stocks.

The pair had a 10-year escrow for their shares in the Long Short fund when it listed on the ASX in 2018, and would own the majority of the 74 per cent of Platinum shares L1 speaks for should the proposed merger complete.

Existing Platinum shareholders would control the remaining 26 per cent. The deal remains subject to final approvals from both parties, who are understood to be working towards finalising the merger.

Documentation could be released as soon as this week.

“Basically, Raf and I will keep doing 90 per cent of what we do now, and 10 per cent will drop away in terms of our CEO (managing director) role. We’ll be very involved in terms of setting the long term strategy and direction, making relevant introductions, focusing on the big picture, and long-term priorities,” Mr Landau said, asked about their roles post-merger.

“The best thing from our personal perspective and the best thing from a client perspective is that we spend our day focused on stocks. It is something we are very passionate about doing.”

Mr Lamm played down suggestions, as revealed in The Australian’s Margin Call column in May, that he is considering moving to Israel, but conceded it may make sense for him to be based overseas one day given an increasing focus on foreign stocks.

He and Mr Landau said L1 could modernise Platinum’s operations, restore faith in the brand and turn around its performance, while pointing to their track record of investing in international companies as proof they can fill a gap in the market for a listed investment firm with a global mandate.

To this end, the pair have the support of billionaire Platinum founder Kerr Neilson, who has watched his once legendary firm slide amid concerns it lost its edge since he stepped down as chief executive in 2018.

Platinum founder Kerr Neilson has backed the approach from L1 Capital. Picture: Hollie Adams

Mr Lamm described Platinum as a “trailblazer” that under Mr Neilson was “respected and admired” for its global investment track record.

That being so, “no question, it’s lost some of its shine in the last five or 10 years”.

“We think with an energetic investor-led culture, there’s every opportunity to restore the brand. Their whole business was set up a generation ago in terms of systems and back office. In terms of cost structure of processes, we run a very efficient, modern investment management business. So we can use those skills and know-how,” Mr Lamm said.

“They’ve still got a very loyal private investor base that believes in the strategy … The objective is to make sure the investment product is market leading, and the business model around it and efficiencies are market leading, and the flows will be what they are. I think in the longer-term we would like to grow their funds and we can think that’s an achievable goal.”

While they have yet to meet Mr Neilson in person, the L1 founders have spoken to him several times. He sold close to half of his 21 per cent shareholding to L1, having declined to support an offer from Regal Partners tabled and withdrawn in 2024.

“It is a nice validation of us that Kerr gave us the nod to sort of say, ‘I’m handing you my legacy and my baby’. We’re not going to take that lightly, and he likes that we’re cut from the same cloth as him, in that we’re obsessed with clients having good outcomes,” Mr Landau said.

“I think he described it as youthful enthusiasm, a sort of hunger and entrepreneurial dynamic type of environment [at L1] that I think Platinum had particularly in its first decade.”

L1’s Long Short fund has delivered more than 20 per cent per annum since inception, and its global opportunities strategy 28 per cent. Mr Lamm and Mr Landau’s firm, of which they are majority owners, delivered $400m in net profit over the past four years.

Much of that has been paid in dividends to the founders, though Mr Landau claims their life savings are invested in their funds.

Mr Lamm added: “[We’re] absolutely obsessed with putting our money where our mouth is.”

L1 Capital founders and co-chief investment officers Mark Landau and Rafi Lamm.

The duo are close friends who met through the industry while working at Invesco Australia and Cooper Investors before establishing L1 in 2007 just before the global financial crisis.

They say they have always made joint decisions on every stock they pick, and L1’s reputation has been forged by a relentless travel schedule – there is no itinerary declined – and level of detail they say they glean from site visits and management meetings.

The listed Long Short fund has about 29 per cent exposure to international stocks, mostly in North America and Europe. “Since inception, our international stocks have performed just as strongly as domestic stocks and in the last five years since we’ve increased the team resourcing to cover global stocks more fully, the performance of international stocks has been even stronger than domestic,” Mr Landau said.

The Long Short fund’s five investment themes are infrastructure, mining, construction materials, UK companies and energy. More broadly, that means companies that ethical funds will shy away from or companies that aren’t exactly sustainability champions.

That has taken L1 into Qantas and Mineral Resources, and energy giant Santos where L1 last week come out in support of the $30bn takeover mounted by Abu Dhabi’s ADNOC.

“Since we started the competitive landscape has completely changed in terms of value investing globally. It’s anything that sort of doesn’t tick the general momentum market flavour of the month box is massively under-researched, under-followed, and that’s been the opportunity for us,” Mr Lamm said.

“We were the biggest shareholder in Qantas for a couple years which is unusual for a fund of our small size, and that’s because when Qantas had bad headlines, most funds didn’t want to be involved – the reputational risk of investing in something that has some hairs attached to it. And for us, we’re obviously cognisant of all those issues. But, according to our process, the valuation has stacked up very well.”

L1 has also supported Mineral Resources and its controversial founder Chris Ellison who faced accusations of tax evasion and misusing company property. Mr Lamm said that position has been costly given Mineral Resources’ share price is down 62 per cent in a year, but pointed out that L1 has also successfully shorted other iron ore and lithium stocks to mostly mitigate the financial damage.

Mr Landau said the “unloved” companies in L1’s roughly 80-strong Long Short portfolio have an average price to earnings ratio of about 10 times, versus the typical Australian industrials trading at more like 20 times.

“You’d be wrong to assume that we’re buying second tier quality companies or companies that are shrinking. The consensus [earnings per share] growth for our portfolio is mid-teens. These are generally well run companies, with good balance sheets that are travelling well, and just for whatever reason, are temporarily out of favour.”

The firm’s investment theme has extended to establishing a Gold Fund this year, which is up 40 per cent net of fees in its first three months.

“Within the gold space, there’s this huge dispersion, and we think we have some really good research and understanding of the space to pick the eyes out of a pretty diverse group of companies globally,” Mr Lamm said.

“And so we set up a gold fund. We don’t do any personal investing. We were keen to have more gold exposure, so we set that up, partly to be able to express that view for ourselves, but also to offer it to our high net worth clients.”