Platinum has admitted cautious positioning on its International fund has hindered performance but said it would continue to maintain this exposure in light of the “uncharted waters” market environment.
In a quarterly update, Platinum International managers Andrew Clifford and Clay Smolinski said they had questioned the merit of holding shorts but decided they provided downside protection in a volatile market. It had closed some short positions on the fund during the quarter but since opened new ones.
Its total net invested position moved from 60% to 78% during the quarter.
“The fund’s cautious positioning has resulted in significantly reduced investment returns over the last year and quarter, entirely attributable to losses on our short positions. This raises the question of the merits of holding short positions at all. Certainly, in periods where markets are rising, it will always appear a futile exercise,” they said.
“We are in an unprecedented environment in financial markets and we continue to believe that maintaining short positions and cash holdings is appropriate to provide a level of downside protection.
“We are in uncharted waters for financial markets. There is potential for a wide range of outcomes and we expect markets to remain highly volatile for some time.”
According to FE Analytics, within the Australian Core Strategies universe, the Platinum International fund returned 1.94% in the three months to 30 June and lost 10.1% in the first half of the year. This compared to quarterly returns of 8.5% by the global equity sector and losses of 4.6% in the first half of the year.
On the other hand, the fund had added to travel stocks which it expected to recover in the long term and which it said was a “major focus” of its purchases. This included Booking Holdings and aerospace business General Electric.
“Our view is that travel will return to favour in time and that the advent of an effective vaccine will facilitate a recovery. Either way, we expect it is likely to take at least three years to recover to prior levels and business travel will potentially take longer,” they said.
“It should be remembered, that prior to the pandemic, the travel industry had showed steady growth for many years.”
These additions were funded by trimming positions in Chinese parcel service ZTO Express, semiconductor firm Microchip and exiting a holding in biotech company Moderna.
