Platinum given rare termination notice

MLC has taken the unusual step of terminating a mandate with Platinum Asset Management, one of four managers dropped in a global equity overhaul aimed at boosting after-tax returns.

Platinum has been the darling of global equities for Australian retail investors and MLC since the boom of the late 1990s, and its race to $12 billion funds under management continued when its hedge fund-like style cushioned it from the worst of the post-1999 downturn.

However, Lonsec analyst Grant Kennaway said MLC’s decision to terminate reflected a view that Platinum could be reaching capacity, due to the short positions involved in its process, and its search for “special opportunities”. The performance of Kerr Neilson’s firm has tapered off from its giddy heights over the past 18 months - the Platinum Global Fund used by MLC returned 2.92 per cent for the 12 months to May 31, but 17.92 per cent for the two years to that date.

Kennaway said the termination of Platinum, Fidelity, Lazard and Vanguard - and their replacement with Alliance Capital, DFA Australia, Walter Scott & Partners and Wellington Management Company - would broadly serve MLC’s intention to become less benchmark-driven in global equities.

The addition of two global property securities managers, LaSalle and Morgan Stanley, to one-quarter of the listed property portfolio, was a timely move that would probably improve MLC’s returns from that sector, Kennaway added.