PTM - Platinum Asset Management

[Fish Broker]

Just for your interest - I called the NZ 0800 line today - applied for 2,000 shares and got 760 shares - so hardly worth it, but then again the guy I spoke to said I was "lucky" and that many applicants got nothing at all.

I had figured since it was always going to be oversubscribed that a minimum application had a lesser chance of getting scaled, that's all I put in for. I am not an investor in the funds, so maybe that counted against me?

I guess we can always buy on listing to top up.

[COLIN]

For a negative take on this one, refer to my posting under "PMC".
I am sure I will be slated for my comments, but the facts speak for themselves.

[SEC]

quote:Originally posted by COLIN

For a negative take on this one, refer to my posting under "PMC".
I am sure I will be slated for my comments, but the facts speak for themselves.

No problem with your views Colin. I personally do not and will not invest in managed funds but will look at investing in fund managers because the whole sector is such a gravy train. Platinum at IPO price was priced at a discount to its peers, and over a longer time frame has outperformed its peers. As such it will probably trade on the market at a PE at least similar to its peers, 20 - 30% above the IPO price. Any more than that opens up a good stagging opportunity.

As for your comments re recent underperformance and the (unwarranted?) deity status of Kerr Neilson, there is a certain fund listed on the NYSE called Berkshire Hathaway that has been underperforming the market for the past nine years yet its manager still has deity status[B)].

SEC

[mark100]

Hi Colin,

My take on your posts is this:

Platinum are not just a 'long-only' fund manager. They are closer to being a hedge fund manager as they also hold short positions to protect themselves from the downside. In theory this will result in underperformance in a bull market and outperformance in a bear market.

So in my view Platinums underperformance over the past 3 years is normal and to judge their true performance you have to look at the 'full cycle'. Which is why Platinum's 10-year performance figures are so good.

This throry will be tested when this market eventually heads down (who knows when!). When this happens I would expect Platinum funds to start outperforming their 'long-only' competitors.

Like SEC, I think funds management is a gravy train and I have been lucky enough to get a good allocation in the IPO. It has been priced at a discount to its peers which in my view means the shareprice can go only one way on listing. The 80-90% payout ratio will also provide a handy yield.

Cheers

[COLIN]

Thanks for your inputs, SEC and mark100.
I agree that the issue will no doubt go to a significant premium, based to a large extent on Neilson's overall record to date and expectation of continued out-performance of most of the Funds under management, and I guess I am "biting off my nose to spite my face", but I have been taken by surprise by PMC's miserable out-turn over the past couple of years or so. Surely, if Neilson is so good, he would be better able to judge when the climate is right for going long or going short. Admittedly I had done quite well out of my holding in PMC in previous years and I naively expected the good times to continue - although I was surprised at the extent to which the shares had risen in excess of net asset backing; I put that down to the market's assessment that Neilson's shorting strategies would pay off handsomely, but they didn't.
Over recent years I have gradually pulled my investments out of managed funds. I had a significant portion there, in my earlier investing days, before I felt more confident to make my own investment decisions (I now prefer to make my own mistakes! But at least I avoid the management fees). However, I still invest in the likes of NZT and KFL (on the NZX) where very capable managers such as Carmel Fisher and Simon Botherway have been able to achieve returns well above the relative indices, on a consistent basis.

I wish every success to holders in the PTM IPO. And yes, I suppose it is somewhat surprising that Warren Buffet still retains his super-guru status.

[patsy]

Most of the Platinum funds are performing OK but the real problem is with Platinum International Fund. This has been the case over the past three to five years or so.

After having a look at the reasons why this may have been the case, my conclusion is that they have made a number of wrongly timed bets: (1) they've had a relatively high overexposure to the Japanese market, (2) a relatively low exposure to the American market, (3) overoptimistic about the sustainability of high economic growth in Japan (leading to shortening Japanese bonds), (4) an overexposure to a very volatile biotech and health industries.

However, the real "last drop" is that the size of the Platinum International Fund has become unmanageable. Plenty of studies have demonstrated the inverse correlation between fund size and performance and the International Fund is suffering such effect.

This in no way will affect the performance of PTM, at least in the short to medium term.

[Toulouse - Luzern]

The flagship Intl Fund has underperformed the index over the last three years. The PMC share chart trend is down. Some investors are disappointed at their returns from Platinum. There may be $$$ in the stock - just keep using the TA.

[edison]

So it is all set now.

Cannot wait with the listing tomorrow morning.

[Lawso]

Got confirmation today of my minimum allocation of 2000 shares @ A$5 each. Can't wait to see how PTM debuts tomorrow.

In the accompanying letter Neilson says demand was so overwhelming that the vendors increased the offer from 20% of the shares in Platinum (worth A$561m) to 25%. Even so, applications were "severely scaled back, many even to zero".

[Heavy Metal]

Well done those who got their full allocation. Sounds like existing Commsec/ASB clients got preference over unitholders. Also good to see retail holders get preference over the instos.

Shares of Platinum Asset, Favored by Soros, May Rise (Update1)

By Kevin Foley

May 22 (Bloomberg) -- Shares of Platinum Asset Management Ltd., the Australian hedge fund that won George Soros as a customer, may surge when they start trading in Sydney tomorrow.

``The price will go nuts on the first day,'' said Credit Suisse Group analyst Arjan van Veen. ``The shares were more than five times oversubscribed and no institutions were allowed on the register, so they've got to buy on-market.''

Platinum's founder Kerr Neilson, who manages $18.2 billion of international shares, has generated returns twice those of the MSCI World Index for more than a decade.

His biggest holdings at the end of April included Mosaic Co., North America's second-largest fertilizer maker, Microsoft Corp., the world's biggest software maker, and International Paper Co., the largest paper company.

New York-based Soros Fund Management LLC hired Platinum to manage global equities in 1994 and 2003, and to oversee a Japan and Korea mandate in 2003. It also held a minority stake in Platinum for 10 years from the firm's founding in 1994, according to Platinum's sale documents.

Platinum's share sale was priced at less than 14 times its estimated 2008 profit, compared with price-to-earnings ratios between 18 times and 22 times for its publicly traded competitors in Australia, according to Credit Suisse. Domestic rivals include Perpetual Ltd., AMP Ltd. and Axa Asia Pacific Holdings Ltd.

Neilson offered 20 percent of Platinum's stock in the sale, with the rest owned by himself and employees, valuing the Sydney- based company at A$2.8 billion. The firm said earlier this month it may raise the amount offered to individuals to 25 percent owing to demand.

`Huge Demand'

``There was a huge amount of demand for the stock,'' said Greg Canavan, an analyst at Fat Prophets Management Ltd. in Sydney. ``Not many people managed to get their hands on it.''

A surge in the stock price would boost Neilson's fortune, estimated at A$480 million by Business Review Weekly magazine last year.

Neilson, 57, worked at fund manager Bankers Trust before starting Platinum in 1994. His firm targets returns better than benchmark indexes, and sometimes sells securities it doesn't own but has borrowed, with a view to profiting by paying for them after the price has fallen.

The Platinum International Fund, the firm's biggest by assets, managed A$9.6 billion at the end of April, and has returned 17.4 percent a year on average since it was started in 1995, compared with 8.1 percent for the MSCI World Index.

Commonwealth Securities Ltd. and Bell Potter Securities Ltd. managed the IPO, the biggest in Australia since Boart Longyear Ltd., a drilling-services company, raised A$2.35 billion early last month.

To contact the reporter on this story: Kevin Foley in Sydney at k.foley@bloomberg.net
Last Updated: May 21, 2007 22:35 EDT