News: PTM Platinum Asset Management Says HY Profit After Income Tax Expense A$60 Mln, page-58

To follow on from the last post, I had a debate with a friend today who suggested that PTM management may defend their lack of action in this regard by saying something like "portfolio managers only jump ship when they have a record of strong multi year outperformance, and therefore with this is not an immediate threat". My friend has a point, but such a defence is short sighted, and I would hope that the PTM Board are wiser and more forward looking than this. It appears that the cycle is slowly turning towards favouring the value style of investing, and relative performance numbers can improve quite quickly (I recall immediately pre techwreck and pre GFC having conversations with colleagues who were calling PTM a dog in performance terms, yet only shortly thereafter, they were one of the top performing funds).

When performance improves (which it should do), fund flows take a while to come through, it is never immediate. And around this same time that FUM inflow begins to pick up, the performance track record of the various portfolio managers also looks good and they start getting offers to jump ship. So you end up with a situation where just as the market is willing to direct new FUM to PTM, you have a high profile portfolio manager jumping ship, which triggers ratings houses like Morningstar etc and the various asset consultants within the industry to all review their recommendations and this in turn damages the ability of PTM to attract new FUM inflows and capitalise on the good relative performance.
Time and again, we see that past performance is what drives new inflow from investors...I'm not saying that is smart, I'm just saying those are the facts when it comes to the fund management industry.

So to the PTM major shareholders and Board of Directors, please get your house in order now, so when the relative 1/3/5 year performance numbers begin to look good again, you can actually capitalise on it rather than run any risk of being forced to run around putting out fires and frantically re-hiring people (at desperate above market rates) and meeting with worried investors (like Magellan are currently having to do).

Institute some form of loan scheme and on market buyback for staff (and shareholders as well)...it would be a comparatively cheap and effective way to create staff alignment and lock in key talent. The stock is cheap and you'd be putting it into "safe hands" whilst simultaneously addressing a key business risk. What are you waiting for?