Platinum Asset Management: Not FUM anymore

A bet on Platinum Asset Management is a bet on a rising sharemarket. Do you feel lucky?

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published January 10, 2012 4:22 pm AEDT

Platinum Asset Management Limited (ASX: PTM) released a profit update on 9th January 2012 advising that profit before tax for the 6 months ended 31 December 2011 will be between $92m and $96m.

Compared to previous corresponding period to 31 December 2010 of $113.5m profit before tax, this is a fall of 15%. The market seemed to take this news in its stride, with the share price falling just 3 cents to $3.56.

The company stated that this is due to the decline in funds under management (FUM). Since January 2011, FUM has fallen by 20% from $18,857m to $15,143m, due to both negative investment performance and investors withdrawing their funds.

Platinum Asset Management is an Australian based fund manager, specialising in investing in International equities. The company's managing director is renowned stock picker, Kerr Nielson, who also holds 57% of the company's shares.

As you can see from the chart below comparing funds under management (FUM) and share price, you can see that they are correlated. Declines in FUM correspond to declines in revenue, net profit and the company's share price.

Like other listed fund managers, Perpetual Limited (ASX:PPT) and BT Investment Management Limited (ASX:BTT) as well as the Australian Stock Exchange operator ASX Limited (ASX:ASX), share registry business Computershare Limited (ASX:CPU) and stock market software provider, IRESS Market Technology Limited (ASX:IRE), the performance of the equity markets virtually dictates their fortunes.

To invest in any of these stocks, you are basically forecasting that equity markets will rise.

Do you feel lucky? Are you looking for quality stock ideas? Readers can click here to request a new free report titled The Motley Fool's Top Stock For 2012.

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Motley Fool contributor Mike King owns shares in ASX Limited. The Motley Fool's purpose is to educate, amuse and enrich investors. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Click here to be enlightened by The Motley Fool's disclosure policy.

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