Doug Goodwille from Kayne Anderson speaks to Drew Meredith from The Inside Network on market thinkers.
While a surging gold price is on hold as the world adjusts to a Trump presidency, all the factors that saw its price rise more than 50 per during his first term in office – trade disputes, fiscal deficits and geopolitical tensions – are almost certainly guaranteed the second time around.
Market is ‘too negative’ on China: Platinum
Value managers are seeing somewhat of a renaissance in 2022; at the very least, those which have been overweight underperforming materials, financials and traditional cyclical companies have done exceptionally well.
Platinum Asset Management (ASX:PTM) remains one of Australia’s most well-known value managers, but the last decade has not been easy for the firm. In fact, shares in the company just fell to a record low after assets under management (AUM) fell by as much as $2 billion, on outflows of around $200 million.
In the quarter ended March 2022, the torrid time for global equity managers was on display once again, with the flagship Platinum International Fund falling 7.7% for the quarter, slightly besting the benchmark, which fell 8.4%. However, performance over the last 12 months has been more difficult, falling 6.7% versus a gain of 8.8% for the benchmark.
One of the biggest drivers of this performance has been a sustained overweighting to China, rather than any exposure to Russia, about which many had been concerned. The core International Fund has an exposure of 19% to China, based on a view that the country remains among the most contrarian and undervalued plays available in the world today.
Commenting on the events of the quarter, Andrew Clifford, CIO of Platinum, suggests “the market is being too negative on China’s independent view” of the Russia-Ukraine conflict, referring to the circa 305 fall in the market following the crisis on concerns of a similar invasion of Taiwan.
Expanding, he says “China is deeply integrated in, and benefits from, the global economic system; it should not jeopardise this.” He flags a “surprising” rally in the Nasdaq in the second half of March, despite surging bond yields pushing back on valuations, as a further concern for investors.
This rally is put down to investors moving back to their “safety playbook” or flight-to-quality, which Platinum “struggles with,” given that market “bifurcation” is at extremes. “The disruption-driven bull market is running out of steam,” Clifford says, with exposures to decarbonisation, travel, semi-conductors, healthcare and Chinese consumers dominating the portfolio.
Platinum’s International Brands Fund was one of those inadvertently caught in the Ukraine crisis, holding Sberbank (MCX:SBER) of Russia, a popular stock among global active equity managers. The result was a significant underperformance of the benchmark for the quarter ended March.
