September, 2023
The Fund (C Class) returned -0.2% for the quarter.
The main factor driving markets over the quarter was changing expectations for interest rates globally. While we believe the tightening cycle is either at or near its end, significant interest rates cuts seem unlikely, especially in the US where the economy remains robust on the back of ongoing fiscal stimulus. In China the drag of a weak property sector remains the key concern and although the government continues to implement policy measures to boost the economy and the property market, stock markets – for now – remain unconvinced.
In our portfolio, strong contributors to performance included pulp producers Suzano (share price up 22% over the quarter) and UPM (up 19%) as a result of higher pulp prices.
PDD Holdings (up 40%), a Chinese e-commerce business, produced strong earnings as Chinese consumers boosted their online purchases and new competition rules allowed the company to take market share. UBS Group (up over 22%) rallied as the market gained confidence in the value of its Credit Suisse acquisition. Our short positions added modestly to overall returns.
Detractors included our investments in airlines Wizz Air (down 31%) and InterGlobe Aviation (down 9%) as a result of concerns over rising fuel prices. LG Chem (down 25%) fell due to concerns that fading momentum in global electric vehicle (EV) sales would affect results from their EV battery business.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/PIFqtr_0923.pdfJune, 2023
The Fund (C Class) returned -0.9% for the quarter compared with the market’s return of 6.8%. Over the year, the Fund returned 13.9% compared with the market’s return of 20.4%.1
Three main factors led to the Fund underperforming the market over the past quarter:
• The recovery in markets this year has been led by an extraordinary bounce in the technology sector, up 40% in the first six months of the year and 13% for the quarter.2
• China’s stock markets performed poorly over the quarter due to concerns about the subdued nature of the country’s economic rebound and ongoing political tensions with the US. As a result, the Fund’s holdings in Chinese companies reduced returns by 1.5%.
• The Fund’s positioning remained cautious, with an average net invested position of 71% and an average short position of 15%. Our short positions detracted 2.5% from performance over the quarter. While this is a disappointing outcome in the short term, we remain of the view that the popular growth stocks that have driven the market this quarter remain unattractive and are best avoided, and better returns can be found in out-offavour areas such as China. We will expand on this later in the report.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/PIFqtr_0623.pdfMarch, 2023
The Fund (C Class) returned 17.7% for the year, a 13.9% outperformance of the market, which returned 3.8%.1 The Fund’s long portfolio performed well, returning 10.7% (for an overall contribution to performance of 8.4%), which was supplemented by a strong 8.8% contribution from our short positions.2 The year was characterised by the deflating of the speculative bubble in growth stocks and illustrates the benefit of Platinum’s investment approach of seeking out opportunities in areas that are 'out of favour' with investors and avoiding the 'much-loved' investment ideas of the day. We believe the past year represents a strong start to the Fund’s performance in the current bear market in global equities.
The Fund returned 5.4% for the quarter, compared with the market’s return of 8.7%. Market returns in local currency terms were similar across regions, with Europe up 8.5%, North America up 7.4% and Japan up 7.1%, with Asia ex-Japan being the exception, up only 4.5%.3 However, there were significant divergences by sector, as investors responded to the failures of Silicon Valley Bank and Credit Suisse by seeking out perceived safe havens in growth stocks and selling economically sensitive sectors. Information Technology was up 20.3% while Energy fell 3.5%. Those sectors in the eye of the storm also performed poorly, with Financials down 1.8% and Real Estate up 0.5%.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/pifqtr_0323.pdfDecember, 2022
The Fund (C Class) returned 10.4% over the quarter.
The US equity market underperformed the rest of the world during the quarter, as markets started factoring in the impact of tighter fiscal and monetary policies on future company earnings. By region, in local currency terms, Europe led the way, returning 10.6%, followed by Asia ex-Japan (+8.2%) and North America (+6.9%).
In line with these outcomes, our European holdings dominated the largest contributors to performance, with financial stocks Intesa Sanpaolo (+22%), Beazley (+21%), Erste (+32%) and Raiff eisen Bank International (+26%) amongst the best performers. In China, online travel agent Trip.com (+26%) was a strong performer on the back of China’s pivot away from its zero-COVID policy. Heavy-duty truck engine manufacturer Weichai Power (+41%), insurer Ping An Insurance (+32%) and Tencent (+25%) also provided strong performance. Short positions contributed 0.9% to returns.
Key detractors at an individual stock level included Allfunds Group (-14%), which was impacted by volatile markets and the sell-down of significant stakes by two large shareholders, and precision components manufacturer MinebeaMitsumi (-8%), which weakened on a stronger Japanese yen.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/pifqtr_1222.pdfSeptember, 2022
The Fund (C Class) returned -1.3% over the quarter.¹ The largest contributors to performance were an eclectic mix, including InterGlobe Aviation (+16%), UPM-Kymmene (+12%), and Microchip (+5%). European fi nancials (Raiffeisen Bank +18%, Beazley +13%, Allfunds +3%) also contributed to performance. Shorts contributed 1.3%. Our Chinese holdings were key detractors from performance over the quarter, with major holdings Weichai Power (-40%), Alibaba (-30%), and Tencent (-25%) falling sharply.
Over the year, the Fund returned -6.4% compared with the market’s return of -10.9%. In the fi rst nine months of 2022, a period that coincides with the beginning of the current bear market in global equities, the Fund returned -6.6%, well ahead of the market’s decline of -15.9%. When examining the performance of global stock markets over the last 12 months, there have been some drivers of market performance that we have clearly anticipated and for which the portfolio has been well positioned, and others for which the portfolio holdings were not ideal.
Having said that, as long-term investors, we are making decisions based on views of the long-term earnings power of businesses, knowing full well that short-term economic trends may not be in our favour. Indeed, it is often the fear of short-term trends that provides the greatest opportunities. Still, given the extraordinary macroeconomic environment that has been the backdrop for investing over the last 12 months, it is worth examining how these variables have contributed to or detracted from the Fund’s returns.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/pifqtr_0922.pdfJune, 2022
The Fund (C Class) returned -1.9% for the quarter and -11.5% for the year.¹
The economic situation in Europe is deteriorating. Most worryingly, consumer price inflation accelerated to 8.1% per annum in May. This compares to a rate of under 2% a year ago.²
A silver lining is that underlying or ‘core’ inflation (excluding food, energy, alcohol and tobacco) is lower in Europe (3.8%) than in the United States (6.0%). The implication is that this affords the European Central Bank the ability to tighten monetary conditions with less urgency and aggression than the US Federal Reserve. This will see less pressure applied to asset owners and large borrowers, namely governments.
However, one key reason that core inflation is lower in Europe is that wage growth is running at a comparatively pedestrian 2.7% per annum. While this may spare the region from more aggressive rate hikes, it puts ordinary households under signifi cant stress as their purchasing power erodes. Indeed, real household incomes are currently falling 5.4% per annum.
Unsurprisingly, consumer sentiment has plummeted to levels only previously observed during times of crisis.
For now, the unemployment rate remains low, by European standards, at 6.8%. This should be supported in the near term by business sentiment, which remains comparatively buoyant despite having pulled back from recent highs.
However, these data are backward-looking. It is unrealistic to expect this situation to persist with a strained household sector, the war in Ukraine, ongoing supply-chain disruptions, rolling lockdowns in China, rising interest rates and potential energy shortages.
Against this backdrop, the relatively resilient performance of European equity markets - at least up until early June - has been remarkable. We took the decision in late March to
position the portfolio much more defensively. Our net
invested position was reduced from 73% to as low as 50% during the quarter, achieved through a combination of
individual stock shorts, index shorts and holding cash. This defensive positioning made a strong positive contribution to our performance.
The best-performing sectors in Europe over the last three months were Energy, Consumer Staples, Utilities and
Pharmaceuticals. The Fund has very little exposure to these sectors, which significantly hurt our relative performance.
Within the Fund, our best-performing stock was Sardinian oil refi ner Saras (+99%). Saras is benefiting from skyrocketing refi ning margins. The elevated margins reflect an underlying erosion of supply conditions, including economic sanctions on Russia, lower refining activity in China, refinery closures in many markets, and extended supply chains as traders
struggle to redirect products with limited shipping capacity.
Saras’ position as a coastal refinery in the middle of the Mediterranean with the ability to process a broad array of crudes bestows it with considerable flexibility over both inputs and outputs. This leaves it well-placed to benefit under such conditions.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/pifqtr_0622-1.pdfJune, 2022
The Fund (C Class) returned 2.5% for the quarter, well ahead of the market’s 7.9% decline.¹
The key factor driving markets was the decision by the US Federal Reserve (Fed) to sharply increase interest rates from 0.5% to 1.75% over the course of the quarter in response to the accelerating rate of inflation. This resulted in a signifi cant setback for the popular growth stocks that have led the bull market over the last three years. Notably, the US market was the weakest of the developed markets over the period (-17% in local currency terms), reflecting its heavy weighting to such companies. Asia (-6%), particularly China (+5%), was the notable outperformer for the quarter.²
Our short positions were the strongest contributor to the Fund’s performance, adding 7% to returns. On the long side, many of our Chinese investments provided a positive return, a good outcome given market circumstances. Online travel agent Trip.com (+19% over the quarter), parcel delivery giant ZTO Express (+10%) and property developer China
Overseas Land & Investment (+6%) were key contributors to performance. Contributors outside of China included energy companies Saras (+99%) and Suncor Energy (+11%), global insurance player Beazley (+19%) and Japanese bathroom fixtures manufacturer Lixil (+11%).
Detractors from performance included Allfunds (European fund platform, -30%) and St. James’s Place (UK wealth management, -24%). Both businesses have revenue streams based on assets under management, and as such, falling stock markets reduce short-term earnings. MinbeaMitsumi
(industrial and electronic components, -14%) and Microchip Technology (semiconductors, -23%) saw share price declines due to concerns around slowing global growth prospects.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/pifqtr_0622.pdfMarch, 2022
The Fund (C Class) returned -7.7% for the quarter, marginally ahead of the market’s -8.4% return. The performance within the Fund and markets differed dramatically over the course of the quarter. In the period prior to Russia’s invasion of Ukraine, the Fund returned 2.3% while the market fell -8.6%. This period was marked by rising interest rate expectations as the global economy continued its post-pandemic recovery.
During these initial weeks of the quarter, expensive growth stocks performed poorly with the Fund benefiting from short positions in these types of companies. Post the invasion, stocks that were poised to benefit from the economic recovery, such as cyclicals, travel stocks and European banks, experienced significant price falls, as did Chinese companies, reflecting concerns about geopolitical risk and the struggling Chinese economy as it faced a new wave of COVID-19 infections. Investors once again favoured the growth names, with the growth-heavy US Nasdaq 100 Index finishing up 10% over this period. During the final weeks of the quarter, the Fund ceded its strong absolute and relative performance of the earlier period to finish slightly ahead of the market.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/pifqtr_0322.pdfJune, 2021
The Fund (C Class) returned 1.6% for the quarter and 26.1% for the year.
The global economy continued its strong recovery out of the 2020 COVID-induced recession. In the US, employment growth, higher wages and a drawdown in the extraordinary level of savings stashed away last year, have more than made up for reduced government spending following the winding back of unemployment benefits and other government payments. In Europe, the economy is making steady progress, even if at slower rates than the US, while the Chinese economy is strong enough that the government is once again focused on slowing credit growth and deleveraging the economy
The Fund’s net invested position increased from 67% to 79% over the quarter. This was the result of a reduction in short positions from 22% to 6% and an increase in cash from 11% to 15%.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/pifqtr_0621.pdfDecember, 2020
The Fund (C Class) returned 13.3% for the quarter and 2.6% for the calendar year.' Given the economic downturn, loss of jobs, collapse in profits and general uncertainty created by the COVID-19 pandemic, it is remarkable that the stock market' ended the year in strong positive territory. Having said that, the global economy has continued its recovery as we approach the post-COVID era.
During the quarter, key events included the announcement of successful COVID-19 vaccine trials and subsequent commencement of vaccination programs across the globe. While significant logistical challenges remain, given the enormity of the task, it provides a clear pathway to the end of lockdowns and restrictions over the course of 2021, ensuring an ongoing economic recovery. The other event of note was the election of Joe Biden as the next US President, which brings a much greater level of certainty to the global business environment.
While there was strong bipartisan support for the actions taken by the US against China on trade and security, we would expect a more conventional negotiated approach to these issues, that take into consideration the economic interdependence of the two nations. As such, it is likely that the election result will lead to improving business and investor confidence. These events sparked a strong rally in the share prices of economically sensitive businesses that will likely benefit from the ongoing recovery, including many of the Fund's holdings. Our semiconductor stocks, led by memory chip producers Samsung Electronics (up 39% over the quarter) and Micron Technology (up 60%), were major contributors to performance.
Spot prices for DRAM (memory) chips rose in the latter half of the quarter, as manufacturing for 5G mobile handsets ramp up for delivery in 2021. Aerospace companies General Electric (up 73%) and MTU Aero Engines (up 50%) and other travel-related stocks, such as Amadeus (airline booking systems, up 25%) and Booking Holdings (online travel agent, up 30%) rallied as the roll-out of vaccination.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/pifqtr_1220.pdfasset_class: Foreign Equity
asset_category: Long Short
peer_benchmark: Foreign Equity - Long Short Index
broad_market_index: Developed -World Index
manager_contact_details: Array
ticker: PLA0002AU
release_schedule: Quarterly
commentary_block: Array
factsheet_url:
https://www.platinum.com.au/Our-Products/All-Products/Platinum-International-Fund
Updates & Reports
Quarterly Investment Manager’s Report
fund_features:
Platinum International Fund aims to provide capital growth over the long term by investing in undervalued companies from around the world. The Fund primarily invests in listed securities.
- The Portfolio will ideally consist of 70 to 140 securities that Platinum believes to be undervalued by the market.
- Cash may be held when undervalued securities cannot be found.
- The Fund primarily invests in listed securities.
- The Portfolio will ideally consist of 70 to 140 securities that Platinum believes to be undervalued by the market.
- Platinum may short sell securities that it considers overvalued.
- The Portfolio will typically have 50% or more net equity exposure. Platinum may use Derivatives for risk management purposes and to take opportunities to increase returns.
structure: Managed Fund