Q: Our SMSF has holdings in the Platinum International Fund, its European fund and also in Platinum Capital Listed, and we received an invitation to invest in Platinum’s new Asia focused listed investment company (LIC) – PAI. Could you please comment on the relative merits of investing in PAI, as opposed to investing in the existing Platinum Asia Managed Fund?
A (by Paul Rickard): The key question is – do you want to invest in Asia (ex Japan)? If you do, this is a good vehicle to do it through (based on the track record of the manager, proposed management fee, listed investment company structure). If you don’t, then go no further.
I wouldn’t get too hung up about the “Priority Offer”. This is a marketing strategy, and they will take over-subscriptions. You will be paying $1.00 for a share that is really worth $0.98 – due to broker placement fees. Okay, so they will throw in a free option to buy more shares at $1.00 – however in the medium term, this will potentially cap any rise in the share price as exercised options at $1.00 will dilute the overall asset value.
Bottom line – if you miss out in the IPO, you won’t pay that much more, if at all, by buying the shares subsequently on the ASX.
As to the relative merits of the LIC versus the existing fund, I understand that the same investment strategy is to be deployed; as a quoted product, pricing should be more transparent; and that the fees in the LIC may be lower if it becomes big enough (1.1% per annum plus company expenses plus GST versus 1.54% per annum). A potential downside is that the LIC also pays a performance fee, whereas the managed fund doesn’t do this in the standard option. There are also some tax differences.
Bottom line – I probably prefer the LIC – however if I was investing over $500,000, I would look at the managed fund and the performance fee/lower base fee option.
Q2: After reading the report a while ago, I bought some IRE shares. They have now dropped in value. Do you feel they are still worth holding?
A2 (By Paul Rickard): No one likes losing money on paper – however, I don’t see anything remarkable in Iress’s (IRE) recent share price. They peaked at $11.29 in February – at the moment at $10.31, they are off around 9%. The market peaked at 6,000 – at 5,660, it is off 6% – within the margin of error.
I am not aware of any recent news that has impacted Iress, apart from a small acquisition, or change of market sentiment.
According to FN Arena, the brokers are marginally positive. Sentiment is +0.3 (scale -1.0 is most negative to +1.0 most positive), consensus target price is $9.95.
Iress will report later this month – I think I would hold for the time being.
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