SYDNEY (Reuters) - Listed Australian fund manager Platinum Asset Management (PTM.AX) said its portfolio would post a paper loss in the first half as the U.S-China trade war unraveled big bets on Chinese and Asian growth, sending its shares lower on Wednesday.
The fund manager, founded 25 years ago by stock picker Kerr Neilson, dubbed “Australia’s Warren Buffett,” said late on Tuesday it would post an unrealized loss on its investments for the half-year to Dec. 31.
It expects to collect little in the way of performance fees, and said funds under management fell by about A$100 million ($71 million) in December to A$24.09 billion, for an annual drop of 11 percent.
The warning underscores how far the firm’s flagship fund’s bets in east Asia - mainly in China which the company called “the investment opportunity of a generation” - have come undone as an economic slowdown and trade tensions have hammered stocks.
“I can see why they bought it (China). They’re contrarian, they like value and China was cheap,” said Chad Slater, joint chief investment officer at fellow fund manager Morphic Asset Management.
“I can see why they held it, so I wouldn’t begrudge the idea, but at the end of the day performance is what drives flows,” he said, although he noted Platinum’s outflows were modest in a tough year for managers.
Platinum shares fell more than 7 percent to an 18-month low in early trade and have almost halved since a peak in February 2018, as its investments have stumbled and Nielson himself stepped down as the fund’s CEO.
The broader market rose 0.5 percent.
East Asian equities comprise about a third of Platinum’s flagship portfolio, with China the single largest bet, occupying about a fifth of its holdings.
In its most recent market update, Platinum said market weakness has been caused, in part, by China’s slowdown, triggered by financial reform and exacerbated by the trade war with the United States.
Shares in the flagship fund's top stock, Samsung Electronics Co Ltd (005930.KS), fell 17 percent over the six months to Dec. 31, while Chinese blue chips were hammered, with the index .CSI300 shedding about 15 percent over the same period.
In Japan, the second-largest investment destination for Platinum's top fund, the Nikkei .N225 ended the year with a loss of 10 percent for the six months to December 31.
Reporting by Tom Westbrook, Jonathan Barrett and Byron Kaye; editing by Richard Pullin