Platinum Asset Management chief Andrew Clifford’s market caution

Platinum Asset Management’s outflows continued apace last month, with a further $246m pulled from the value manager’s funds.

Andrew Clifford, chief executive officer at Platinum Asset Management. Picture: David Swift

Platinum Asset Management’s outflows continued apace last month, with a further $246m pulled from the value manager’s funds, taking its calendar year-to-date outflows to just shy of $2bn.

Platinum’s overall funds under management fell to $21.6bn by October 31, down from $22.83bn the month prior.

The outflows come as the value manager recorded negative returns across all of its funds for the month, with its flagship international fund posting a -5 per cent return on a one-, three- and six-month basis.

The same fund recorded a 16 per cent 12-month return, and it delivered a 5 per cent return over a two-year period.

This compares with the MSCI AC World Net Index in Australian dollar terms, which returned 1 per cent over one and three months, and 10 per cent on a six-month basis. Over a one-year period, the MSCI AC World Net Index in $A returned 28 per cent.

According to Platinum’s annual report, released in September, its funds under management jumped 10 per cent in fiscal 2021, despite $2.3bn in net outflows over the same period.

These net outflows were more than offset by its investment performance as momentum shifted to value stocks, adding $5.5bn to its funds.

“While we would usually see strong investment performance as a prelude to better funds flow in the future, there are a number of other variables to consider,” CEO Andrew Clifford said in a letter to shareholders accompanying the report.

“Firstly, there has been a proliferation of new global managers in the Australian market in recent years, of which many have so-called growth investment styles.

“While we suspect this investment style will be seriously challenged at some point … the behaviour of investors to follow past returns will likely see these managers take a significant share of fund flows for the moment.”

A longer-term issue was the trend towards the use of exchange-traded funds (ETFs), Mr Clifford noted.

“Hand in hand with this trend has been the acceleration of the DIY investor during the pandemic, as highlighted by the success of the free trading program Robinhood in the US, and similar platforms elsewhere,” he said.

“While ETFs are traditionally associated with passive or index investing, increasingly, ETF providers are preying on investors’ fear of missing out, by packaging up neat parcels of stocks that tap into favourite investment themes, such as cloud computing or clean energy.”

While a bear market may create a setback for the DIY investor and ETFs, Platinum sees this trend continuing over the longer term and is exploring the possibility of developing products to better target this market, he added. Mr Clifford also cautioned on exuberance in sharemarkets, warning of the risks investors may be ignoring when piling in to market darlings. “One risk is the potential for higher interest rates if inflation remains more persistent than otherwise expected.”

The investment manager believes the current bull market, like all others, will end at some point, with “painful consequences” for those invested in the hotspots until the end.

The company AGM is due on November 17, where shareholders will vote on a number of items, including the remuneration report, a new equity incentive plan and a proposed grant of deferred rights to Mr Clifford.