Everything Goes Wrong for Billionaire’s Successor at Stock Fund

(Bloomberg) -- Andrew Clifford took on the top job at Platinum Asset Management Ltd. after 30 years working alongside his former boss Kerr Neilson, who became a billionaire and one of Australia’s most famous fund managers. It’s proving to be a tough act to follow.

Since Clifford was anointed the new chief executive offer in February last year, the firm’s stock price tumbled 36 percent, assets under management shrank about A$3 billion ($2.1 billion) and analysts became more bearish about the company than any other listed money manager in the world.

Clifford isn’t flinching, keeping faith with a value-investing approach that’s been the bedrock of the company from the start, betting on beaten down and “unfashionable” companies on global equity markets like banks in Italy and Austria to turn around performance. He’s seen it all before and says snapping up shares at depressed valuations will ultimately prove a winning strategy.

“Markets are throwing up some pretty remarkable opportunities to buy stocks,” 52-year-old Clifford said in a recent interview in Sydney. “When those returns are realized, you never quite know.”

When Clifford left Bankers Trust with Neilson to set up Platinum in 1994, they lured backing from George Soros to their new international share fund. The portfolio has since returned 12 percent per year compared with 6.6 percent on its benchmark, according to its most recent monthly report to investors.

Performance has lagged since Clifford became chief investment officer in 2013 and Platinum’s share price remains 47 percent below its record high reached in February 2015. Despite recent outflows, the main fund still houses more than A$10 billion of the firm’s A$24.7 billion of assets.

Unfashionable Stocks

Still, the investment process hasn’t changed and morale among its more than 100 staff is pretty good, Clifford said. Small teams discuss ideas, hunt for quality stocks that have good cash flows and prospects for returning money to shareholders. Finding cheap equities is also key -- the long portion of the portfolio trades with an estimated price-earnings ratio of 10, compared with a multiple of about 15 on its benchmark index.

Platinum is just one of many funds across the world that suffered in recent years as so-called growth stocks beat out their inexpensive brethren. Value investing, espoused by Warren Buffett and his mentor Benjamin Graham, struggled in part due to the extraordinary length of the current economic cycle.

Neilson remains the firm’s controlling shareholder and his involvement continues despite stepping back from the CEO role. He chips away at work on stock picks, arriving at the office early in the morning and discussing ideas with staff, Clifford said. But Neilson doesn’t have a veto on decisions that clash with Clifford’s stance, he said.

“He would let me know he didn’t like it,” Clifford said. “I’ve worked with him for 30 years, so I’m sort of used to having disagreements with him.”

The Bets

Here are some of the stocks Clifford is banking on to improve performance. Many, he says, have fallen out of favor as investors worry about the impact of a softening global economy:

• Samsung Electronics - lifted exposure last month
• Intesa Sanpaolo
• Raiffeisen Bank
• Facebook
• Alphabet
• Ping An Insurance
• Glencore

Those bets may be starting to pay off. The fund has returned 5 percent in the past three months, outperforming 94 percent of peers, according to data compiled by Bloomberg.

“It’s been a very challenging time in terms of what markets have thrown at us,” he said. “But nevertheless, we still need to deliver.”

To contact the reporters on this story: Matthew Burgess in Sydney at mburgess46@bloomberg.net;Sarah Wells in Singapore at smcdonald23@bloomberg.net

To contact the editors responsible for this story: Divya Balji at dbalji1@bloomberg.net, ;Edward Johnson at ejohnson28@bloomberg.net, Adam Haigh, Ravil Shirodkar

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