Is It Time to Buy Platinum Asset Management Shares?

What happened to the Platinum Asset Management share price?

After reaching an all-time high of $9.50 in February 2015, shares in Platinum Asset Management [ASX:PTM] have been on a slow slide ever since. After a disappointing profit result in August, shares fell a further 20%, and have been struggling to stay above $5.

But in just over a week, the share price jumped an incredible 20%, before once again falling back to Earth. It’s taken only two days to give up its recent gains.

Why did Platinum Asset Management do this?

Platinum — like any other funds management business — derives the majority of its revenue from the size of its funds under management (FUM). The more funds they manage, the more revenue they generate.

The issue for Platinum is that the size of FUM has been decreasing. A major US fund pulled over $1 billion of investment earlier this year, and the value of many of their funds have gone backwards, if only slightly, over the last 12 months.

The unexpected election of Donald Trump, though, reignited perceptions that Platinum — which specialises in international equities — could once again see an uptick in FUM. And the euphoria that accompanied Trump’s win could flow through to the US economy and equity prices.

What now for Platinum Asset Management?

Despite the brief jump in the share price, the subsequent address to shareholders by Platinum’s Chairman highlighted the real challenge the fund manager is facing. In total, for the 2015/16 financial year, he reported a 15.5% drop in FUM.

And while Trump’s $1 trillion infrastructure plans could be a boon for the US economy, much of the detail on how it will be financed is yet to be revealed. Until Platinum can show the downwards trend in FUM has reversed, its share price will remain under pressure.

Matt Hibbard,
Money Morning

Money Morning Australia