THE effect of the fall in financial markets on fund managers was confirmed yesterday, with large-cap and small-cap managers signalling weak earnings.
Platinum Asset Management late yesterday flagged a decline in its operating profit before tax to between $92 million and $94 million for the December half. In the same period a year earlier, its operating profit before tax totalled $113.5 million.
It has experienced a decline in the value of funds under management as a result of the continued weakness of sharemarkets, which has hit management fees.
At the end of December, funds under management had fallen to $15.14 billion from $18.3 billion a year earlier.
The company did not provide any detail yesterday, although it is also anticipated that negligible performance fees have contributed to the profit decline.
At the small-cap end of the market, investment company Mirrabooka expects sharemarket volatility to continue for the next six months before a return to some normality later this year.
The investor in small and medium companies said falling share prices had contributed to a 9.5 per cent drop in its net profit for the six months to December 31, to $6.9 million.
But Mirrabooka said its portfolio outperformed the general small and mid-cap market sectors during the period, which fell by 12.6 per cent. Its investment returns were down 2.3 per cent.
"Our expectation is the market will experience ongoing volatility in the coming months before settling into a period of more normalised returns in the second half," the company said in its first-half report.
The local sharemarket should benefit from further falls in interest rates, plus evidence of a more sustained recovery in the US, Mirrabooka said.
Managing director Ross Barker said the company's focus had been on companies that were well positioned in their industries, with strong balance sheets and cash flows that would lead to growing dividends.
It benefited from corporate activity, with a takeover bid launched late in the half for Hastings Diversified, a pipeline owner and operator, along with strong price rises for holdings such as Senex Energy, James Hardie and Campbell Brothers.
Mirrabooka's largest acquisitions in the half-year were stocks in gloves and condoms maker Ansell (costing $2.8 million), four-wheel-drive accessories manufacturer ARB Corp ($2.3 million) and Ramsay Health Care ($2.2 million).
Mr Barker said Mirrabooka had a relatively strong level of cash and he expected market volatility to provide further buying opportunities. The company declared an interim, fully franked dividend of 3.5? a share, the same as in the previous first half.
Frequently Asked Questions about this Article…
How has the weak sharemarket affected fund managers and their earnings?
The article says falling sharemarkets have reduced the value of funds under management, which lowers management fees and can cut operating profit for fund managers. It also notes that negligible performance fees are anticipated to have contributed to some profit declines.
What did Platinum Asset Management report for the December half and why does it matter to investors?
Platinum flagged its operating profit before tax for the December half would fall to between $92 million and $94 million, down from $113.5 million a year earlier. This matters because it reflects how market weakness reduced funds under management and fee income.
How much did Platinum’s funds under management fall, and what is the investor impact?
At the end of December, Platinum’s funds under management had fallen to $15.14 billion from $18.3 billion a year earlier. For everyday investors, a drop in funds under management can mean lower management-fee revenue for managers and potentially less capacity for new investments from those firms.
What did Mirrabooka report about its half-year profit and investment returns?
Mirrabooka said falling share prices contributed to a 9.5% drop in its net profit for the six months to December 31, to $6.9 million. Its investment returns were down 2.3% over the period, although the company highlighted that its portfolio outperformed the broader small and mid-cap sectors.
How did Mirrabooka’s portfolio perform compared with the small and mid-cap market?
Mirrabooka reported that its portfolio outperformed the general small and mid-cap market sectors, which fell by 12.6% during the period. That suggests the manager’s stock selection limited losses relative to the sector benchmark.
What notable stocks and corporate activity helped Mirrabooka’s performance?
Mirrabooka benefited from corporate activity such as a takeover bid for Hastings Diversified and strong price rises in holdings including Senex Energy, James Hardie and Campbell Brothers. Its largest half‑year acquisitions were Ansell ($2.8 million), ARB Corp ($2.3 million) and Ramsay Health Care ($2.2 million).
Did Mirrabooka pay a dividend and what does it mean for income investors?
Yes — Mirrabooka declared an interim, fully franked dividend of 3.5 per share, the same as in the previous first half. For income-focused investors, a maintained fully franked dividend can provide reliable cash returns even through volatile periods.
What is Mirrabooka’s outlook on market volatility and potential opportunities for investors?
Mirrabooka expects ongoing market volatility for the next six months before a return to more normalised returns later in the year. The company said it has a relatively strong level of cash and expects volatility to provide further buying opportunities, while also noting potential tailwinds from further falls in interest rates and signs of a US recovery.
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