A burst of realism from listed investment fund management group, Platinum Asset Management yesterday.
The market crunch and financial crisis has made it hard for even the smartest stock picker to see anything other that a lot of value.
But the problem remains the lack of confidence about committing to an investment in case the market turns turkey again.
We have already been through at least two, perhaps three false dawns/dead cat bounces since the crisis erupted in August of 2007.
But Platinum isn’t calling a ‘market bottom’. The shares finished off 5 cents at $3.51 yesterday.
So Platinum shareholders were told yesterday that while management is "excited about the choice of companies available" around the world, they are "cautious" about the fiscal year 2009, given the continuing high level global market volatility.
Prudence instead of bravado is what you want to hear in the fund manager, as well as someone who doesn’t use the terms ‘lack of visibility’ or ‘economic headwinds’ to describe the hurdles seen in the market and the wider economy for investors.
Chairman Michael Cole told shareholders the fall in funds under management, investment management fees and profitability over the past year was hopefully a short-term cyclical issue.
"Reflecting that markets continue to be highly troubled and investors remain wary and largely invested in government guaranteed cash," Mr Cole told the annual general meeting.
He said the company was also becoming increasingly excited about the choice of companies now available and can identify "broad swathes of value across the globe," Mr Cole said.
"However, this is not calling a bottom in markets generally.
"For the full 2009 financial year, we remain cautious and recognise that markets remain highly volatile.
"Costs are generally tracking predictably; the unknown factors are investment performance, funds flow and FUM (funds under management).
"It is most likely nil performance fee will be earned in the current year."
Platinum said first quarter net profit before tax for the three months to September 30 was $50.7 million, down on the $58.7 million earned in the same period of the 2008 financial year.
The Company earns management fees as a percentage of Funds Under Management, or "FUM" (in industry jargon) which fell over the 2008 year, from $21.2 billion to $14.995 billion.
The $6 billion fall was split almost equally between the negative impact of market value declines and net redemptions plus net distributions.
"FUM at 30 September 2008 remained at $14.995 billion with positive investment performance being broadly offset by continued net redemptions. The FUM at 30 October 2008 was $14.334 billion," Mr Cole said in his address.
Costs fell from $60.8 million to $44.4 million, largely as a result of the cost of the IPO being incurred in 2007.
"As a financial service provider with limited capital requirements, there are at present relatively small needs for high retentions.
"Owing to the volatility of revenues, the Directors intend to smooth Dividend payments and plan to pay out 80% to 90% of net profit after tax.
"Since November 2007, the world’s stock markets have been adjusting downward, with record high levels of volatility! No stock has been immune to these wild gyrations.
"The investment performance for Platinum’s clients has been good on a relative basis and more recently has delivered positive absolute performance.
Our flagship fund, the Platinum International Fund, has returned +7.51% against the MSCI’s +1.46% [and the ASX S&P 200’s -10.48%] for the September 2008 quarter. The one year numbers are -9.19% against the MSCI’s – 17.96% [and the ASX S&P 200’s -29.95%]. (That’s out performance, but this quarter will be a test).
"Indeed the bulk of our competitors are typically reporting declines of 20 to 30%.
"The fact that FUM, investment management fees and profitability have declined over the past year is hopefully a short-term cyclical issue reflecting that markets continue to be highly troubled and investors remain wary and largely invested in government-guaranteed cash.
"Platinum, in its most recent Quarterly Investment Report to clients notes that it is "becoming increasingly excited about the choice of companies that are now available" and it "can identify broad swathes of value across the globe". However, this is not calling a bottom in markets generally.
"For the full 2009 financial year, we remain cautious and recognise that markets remain highly volatile.
"Costs are generally tracking predictably; the unknown factors are investment performance, funds flow and FUM. As indicated in the Annual Report it is most likely nil performance fees will be earned in the current year.
"Consistent with our policy the Board does not offer earnings guidance or forecasts," Mr Cole told the meeting.
