Ann: 2023 Half-Year Financial Results Analyst Presentation, page-12

This is a shocking result.

The problem I see with this company is that it's run as if it were a private company, which it once was.

Often this can be a good thing, operations are run efficiently, management care for owners (as often they are owners) and capital is allocated sensibly with a long-term view.

The challenge I see with PTM is that it only exhibits the worst features of a private company, one where agency costs creep in, as the staff who are also part-owners operate largely for themselves. This is a classic problem in the funds management business as the investment team are typically beyond entitled and get carried away with their own sense of self-importance and remuneration expectations.

When PTM business performs well, the staff all expect to participate in the upside, as it currently witnessed with the gifting of staff equity, because the founder hoarded it all. Charlie Munger he ain't.

Alternatively, when the business performs poorly, yet the investment performance hits what as been a David Warner like rare patch of form, the staff then expect to be paid on the basis of investment performance, not company performance.

As one commentator put it, this is the very definition of heads i win, tails you lose.

With minority shareholders always the big losers when it comes to PTM.

The irony now of course is that the founder has now gone public in his displeasure with how PTM is run. Seemingly oblivious to the fact that he was at the wheel when all these problems were set in train. He appointed the CEO. He tolerated the bloated and efficient operating method during his time on the Board (see another post of mine where I highlight all the duplicated C-Level roles and the pains PTM goes to in pointing out how each and every executive is performing dual roles that are beyond mere mortals).

The challenge at PTM is how to fix the rot? The old guard appear on egregious compensation packages, for what it must be acknowledged has been middling performance (at best), and some of the investment performance has been outright dreadful. The performance of the healthcare fund has been a shocker on every single time frame. The performance of the international fund has been weak for a long period of time. Given their mandate and capability, they should have performed better.

There are many decent parts of PTM (high component of retail customers, sound investment approach, robust systems), and there is no reason that the business couldn't be run well and deliver for customers, staff and shareholders all at the same time. It just doesn't seem the current management, and convoluted operating style will permit this as the changes are either beyond them, or against their interests.

What happens from here, I'm not sure, but something has to change.

A logical combination would be with Magellan.

PTM bring the investment smarts (with a few tweaks to their team)
Magellan brings the distribution capability

Combined they form a strong retail and institutional investment management business.

Alternatively, I suspect Regal could run PTM far better than the existing PTM management can. The challenge would be how to run PTM's rigorous investment philosophy under the Regal roof. As a starting point the VGI funds that Regal swallowed "merged" could definitely benefit from some of PTM's investment rigour compared with what they have had in the past.