Kerr Neilson hails fund manager Platinum’s golden comeback

Platinum’s globally focused funds are back on track, says CEO and founder Kerr Neilson.

Kerr Neilson, managing director of Platinum Asset Management.

Platinum’s globally focused funds are back on track, says CEO and founder Kerr Neilson.

“I think the most interesting thing is the turnaround in our performance,” Neilson told The Australian.

“People were wondering if we had lost the plot, forgetting of course that the Platinum International Fund has been the best-performing fund in the past 22 years.”

It’s been a rough ride for the highly regarded international fund manager: its share price having fallen as much as 55 per cent over the past two years amid an unprecedented flow of funds to passive managers, as well as doubts about Platinum’s bets on China.

That’s changing with the vast majority of Platinum’s funds beating their benchmarks in the past year and its share price surging more than 40 per cent in the past three months. The flagship Platinum International fund returned 19 per cent net of fees, exceeding its benchmark by 6 per cent.

Platinum shares surged 11 per cent to a 12-month high of $5.98 on Friday after its full-year results last week showed a surge in performance fees in the past year.

Neilson says he’s also encouraged by signs that China’s economy is still performing strongly even as it starts to address industrial pollution and non-performing loans in its banding system.

“I think it’s the core of why these markets are looking too chirpy,” he adds.

“As China reduces capacity in polluting and loss-making firms, surviving firms are becoming highly profitable as the wholesale prices of basic products like steel, cement, flat glass and PVC are surging. All of a sudden, by cutting capacity, China’s state-owned enterprises are making a lot of money and the banks are becoming highly solvent after being quite a point of concern.”

While a weaker US dollar has been the main force behind a 10 per cent rise in the Australian dollar this year, Neilson says stronger commodity prices have been a contributing factor.

The currency finished last week at US79.32c after hitting a 2½-year high of US80.66c last month.

And after languishing around US75c for the past two years, the Australian dollar is giving investors a better opportunity to diversify their portfolios by increasing their international exposures, particularly in China, where Neilson says most investors are underinvested. “I think it’s a good time to back the recovery of the banking system in China,” he says.

“The banks are going to lose a lot of money, but the magnitude of the losses that they have been providing have been reduced.

“Compared to 12 months ago there has been a huge change in the outlook.”

Neilson says Platinum’s China bets are back on track.

“A lot of our money has been in China’s internet stocks — which have been wild — but in addition to that we are finding consumer stocks, manufacturing companies — they are all going like a train.”

“The relevant issue here is valuations and the growth rates and they are just higher than the other markets.

“But it’s not confined to China. Korea is going like a train — you can still buy Samsung on 8.5 times (EPS) and even if it has a setback eventually, it will still be 12 times, so you are pricing in a very strong setback in VRAMs and memory, which I don’t see coming for the next two years, and they just launched the Galaxy 8 Note, so they’ve got the products.”

He also says carmakers around the world are cheap.

“We bought a few, but people are worried about electrification and much later on, autonomous drives, but the real problem is that the Chinese are driving this as new industry for themselves, so they are legislating and driving, so you get a huge inducement to go electric.”

Platinum is preparing to list two new managed funds on the Australian Securities Exchange.

Structured as “feeder funds” for Platinum’s flagship funds, the Platinum International Fund and the Platinum Asia Fund will provide an easier way to access Platinum’s actively managed portfolio with a single trade.