Morningstar unimpressed with Platinum
Research houseMorningstarhas givenPlatinum Asset Managementa two out of five business and management strength rating, citing the manager’s track record of solid international equities returns as a positive, but its failure to establish best practice management procedures and systems, leaving it unnecessarily exposed to risk.
Morningstar’s business and management strength rating constitutes 25 per cent of Platinum funds' star rating. A ‘two’ rating places the manager in the bottom 32.5 per cent of all fund managers in Morningstar’s rating system.
Platinum has been something of a favourite among rating houses in the past. For instance, the manager won the international equities category of the 2002Money Management/AssirtFund Manager of the Year. It also finished third in the overall fund manager of the year.
This new rating by Morningstar, however, focuses on the areas that Platinum is weakest in. Namely, a lack of diversity and strategic planning, along with significant key person risk based around chief executive Kerr Neilson.
Positioned as an international equities specialist, Platinum was rated by Morningstar in the stability and profitability rating as average, with a positive outlook. Its inherent lack of diversity, 70 per cent of the managers’ funds under management are tied up in two funds, remains a key business risk, with continued strong performance in international equities critical to the company’s success.
Parent support and strategy was rated by Morningstar as strong with a positive outlook. Founded in 1994 by Neilson and some of his former colleagues fromBankers Trust, Platinum has clearly defined ownership and is free from parental influence.
However, Morningstar was less impressed with the strategic planning component of Platinum’s business, stating that “there was no documented marketing or business plans, perhaps reflecting the control of Neilson over the planning process”.
Morningstar attributed Neilson’s dual role as chief investment officer as well as chief executive officer as the reason to blame for the manager’s lack of readily measurable business development planning. The research house also suggested that “allocation of further resources to this will be necessary to take Platinum to the next stage in terms of business development”.
Platinum also scored weak ratings for human resources and compliance. Reflecting the small size of the group, these more bureaucratic functions are being filled by key personnel who might otherwise be better employed in business development or investment management, according to Morningstar.
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