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.