The Platinum Asset Management Ltd (ASX: PTM) share price is trading near 7-year lows after yet another dismal earnings report this week sent its shares crashing below the $4.10 mark for the first time since 2012. It's a spectacular fall from grace for what used to be one of the most successful Australian fund managers.
What were Platinum's numbers like?
Put simply, there's not a lot to love in what Platinum has put out:
- Total revenue was down 15.3% to $299.32 million
- Profits after tax were down 17.4% to $158.34 million
- Funds Under Management (FUM) came in at $24.8 billion – down 3.8% and resulting in investment management fee decline of 4% (excluding performance fees)
- Even Platinum's final dividend was cut by 12.5% to 14 cents-per-share
What's gone wrong for Platinum?
Platinum has noted that the poor and 'market-lagging' performance of its investment vehicles has underpinned this result – underperformance can translate into lower fund flows and lower investment performance fees in a self-perpetuating cycle. Primarily a value investing firm, Platinum has clearly been struggling with the record 10-year bull-run of global markets – with Platinum's Chairman lamenting the "growing divergence between growth and perceived safety on one hand and attractive valuation on the other".
Whilst I personally sympathise with Platinum over the (likely temporary) death of value investing, you can't ignore that Platinum's arch-rival investment firm Magellan Financial Group Ltd (ASX: MFG), which also follows a value bias (albeit with more of a growth twist), has seen a surge in FUM over the past two years on top of the stellar outperformance of its own investment vehicles. This has seen Magellan's share price more than double over the year so far, whilst Platinum is at 7-year lows.
Foolish Takeaway
If an examination of the history of the stock market tells us anything, it is that shares move in patterns that may persist for a time, but never in perpetuity. Platinum CEO Andrew Clifford did have a pertinent observation in his letter to shareholders: "Value, having outperformed growth for much of the period since the 1930s, has now trailed growth for 12 years, the longest period in history. Indeed, it is worth noting that the last period of significant outperformance of growth over value ended with the 'tech wreck' of 2001." Whilst I am not encouraged by these results from Platinum, I do think its time in the sun will come again.
