Morningstar has reaffirmed its ‘gold’ rating for Platinum Asset Management’s flagship fund, Platinum International Fund, after assessing the impact of the departure of founder, portfolio manager and chief executive Kerr Neilson.
Platinum announced in February that Neilson, one of Australia’s most celebrated investment managers, would be stepping down at the end of the financial year.
Neilson will remain involved with the investment team to provide ideas and he will remain on the Platinum board as a director.
Chief investment officer Andrew Clifford, who has been at Platinum since it was launched, will take over as chief executive.
Clifford and portfolio manager Clay Smolinski will assume Neilson’s existing portfolio responsibilities.
In a note to clients following the announcement, Morningstar said: “Clifford and Smolinski are investors we respect highly, having demonstrated their credentials on both the International Fund strategy and other vehicles in the Platinum stable.
“To its credit, Platinum has managed the succession issue proactively by promoting staff such as Clifford and Smolinski to more prominent portfolio and management roles and developing an impressive lineup of managers across its suite of funds.”
In its latest update, Morningstar says: “Platinum has stuck resolutely to its valuation-conscious, absolute return mindset, even as the International strategy’s fortunes dipped as Asian and emerging markets lagged. This patience and conviction was rewarded greatly in 2017.
“We remain confident on Platinum’s uncommon insight and, while tools such as short selling and active currency positions aren’t without risk, they are used prudently.”
Platinum accumulates exposures in regions or sectors it thinks will benefit from valuation normalisation or changing industry dynamics. It has heavily favoured companies in the Asian region, especially China and India.
At the end of last year the fund had only 15 per cent of its assets in US stocks, while most international equity funds have 50 or 60 per cent.
Over the year to the end of February, the fund produced a return of 27.4 per cent, compared with the 15.9 per cent return of the MSCI World Ex-Australia Index (AUD).
Over the past three years it has returned an average of 10.6 per cent, compared with an average of 8.5 per cent for the index. And over the past five years it has returned an average of 17 per cent a year, compared with 17.2 per cent for the index.
The fund’s standard deviation is 9.5 per cent over three years.
During the years between 2011 and 2016, the fund underperformed the MSCI index. Its underweight position in US equities counted against it as that market rallied.
This turned around in 2017. Holdings including Samsung, Tencent and Ping An Insurance were among the fund’s big winners.
Morningstar says: “Platinum International has endured some patchy years but a return to form in 2017 has helped to restore its long illustrious record.
“Platinum has been highly effective at protecting investors during market dips, reflecting the absolute return mindset that is facilitated by short selling and active currency positioning to manage portfolio risks.”
Platinum charges a management fee of 1.35 per cent, having cut the fee from 1.54 per cent last year.