My worry with PTMis their operating structure.
It seems that they are going to tremendous lengths to shield the CEO fromhaving to act as, or be held accountable as, a CEO.
I'm sure he's done fabulously well for himself at PTM, as theprincipal founder did. However, since listing, PTM has notperformed well for shareholders they sold shares to.
A few concerns I have are asfollows:
1.Operating entropy at PTM
Let’s look at how PTM describesthe situation.
Appendix 4E - Managing DirectorsLetter 2022Page 4
"Recently, we appointed Douglas Isles to the role of Head of Investment(HOI). Douglas has previously worked at Platinum as an
investment analyst and subsequently established our investment specialist team.In his new role, Douglas will take on responsibility
for managing the investment team and the investment process, allowing myselfand my Co-Chief Investment Officer (CIO) Clay
Smolinski to place greater focus on the day-to-day debate around investmentideas. Clearly, the roles of CIO and HOI will require a close workingrelationship in order to ensure a co-ordinated approach to managing the team."
If the CEO wants to just focus on day-to-day debate around investment ideas, whynot have him as a Portfolio Manager, and then hold him accountable forinvestment results over a reasonable timeframe. 5 and 10 year would be ideal. Whenviewing the International Fund, performance across both tenors remainunderwhelming at PTM when compared to the rising tide across all markets.
Inexplicably, PTM has:
1 x CEO
2 x CIO (including the 1 x CEO)
1 x HOI
1 x CFO/COO (apparently operating at a level above this post)
1 x Director of Investor Services (apparently operating at a level above thispost)
Seems like bureaucracy gone mad. It's as if they've sought to model theirbusiness on the worst lessons from AMP.
Appendix 4E - Remuneration Report 2022
Page 22
"When assessing the market positioning of our KMPs’ remuneration againstother peers (both listed and unlisted), it is important to consider Platinum’sorganisational structure and the broader scope of our KMPs’ accountabilities.Both the CEO and the Finance Director perform dual roles: the CEO is alsoPlatinum’s co-CIO; the Finance Director also acts as Platinum’s Chief FinancialOfficer (CFO) and Chief Operating Officer (COO). Similarly, the Director ofInvestor Services and Communications’ primary business
development accountabilities are more closely aligned to those of a divisionalCEO, in addition to being responsible for managing investor relations andexternal communications."
So in addition to this jumbled architecture across the investment team, theDirectors seek to further elevate the CFO (costs keep rising, profit keepsreducing and capital allocation is woeful) and Director of InvestorServices (FUM keeps dropping, outflows aren't replaced by inflows, nor performancein the underlying funds for that matter).
2. Chairman
Sorry to labour this point, however the first thing the Chairman did uponjoining PTM was to increase his own fees. $284k for let's call it 10 meetings ayear?
3. Dogma around investing in China
Takenfrom the September 2021 Trust Report:
Andrew Clifford stated:
"Property is a booming and important part of the Chinese economy, butif house prices get out of control, it becomes a political issue. It's awell-founded market, not a bubble by any standards that I can see."
It's fair to say that this insight hasn't aged well. The Chinese propertymarket has been exposed as a bubble at best.
It was surprising that the Platinum investment team felt it prudent to filltheir boots in China, during what must be close to peak autocracy (almost bydefinition strangling the dynamics that had delivered 30 odd years ofprosperity), coupled with an inexplicable Covid zero policy and yet to seeany serious outbreaks following the initial one, which everyone could see wasbound to come...
Furthermore, anyone with even a modicum of experience in Asia would be wellaware that when a country that has repressed a market economy and capitalism opens up, you get the first 20-30 years of growth for free. Yet it'safter that, that things get tricky. This is where good public policy and thestrength of public institutions start to make the difference.
4. Iris Energy
Again, sorry to labour the point, but... investing in a bitcoin miner....... If there is a poorer place to allocate capitalthan this activity, I'd rather not know about it. In terms of expending hugeamounts of energy on nonsense, it's beyond comprehension.
5. Performance
For years Platinum has been articulating concern about US markets beingovervalued, interest rates being too low, a change in the cycle being imminent,risk being poorly priced and markets too frothy.
Yet here we are, the Nasdaq is off 33% ytd, so it’s fair to ask where is theperformance to show for it? A few points of outperformance as the US marketstumble sure. But when you are charging full freight on fees, and almost (excludingChina) all of your long, long-term calls come off, one would hope theexecution of these ideas would have delivered more in the way of returns forinvestors in the funds.
(20min delay)