Several negative events affecting ASX-listed asset managers strengthen Morningstar’s assessment.
Ler highlighted several challenges, including inconsistent performance at group level, limited product diversification and risks associated with a concentration of key personnel.
“Platinum is a good example, having seen net outflows in eight of the last ten years, even excluding distributions,” Ler said.
His comments follow Platinum’s announcement on Monday that the planned acquisition of Regal had come to an end, an event that Ler said was “probably” exacerbated by continued net outflows at Platinum over the past two months.
“This dashed the hopes of shareholders seeking a favorable exit,” he said.
The same day, GQG announced that its funds under management (FUM) had remained reasonably stable in November, after the fund manager’s share price plunged as much as 20 percent following the announcement that executives of Adani – a key GQG holding – had been charged. with allegations of corruption in the United States.
While GQG’s November FUM remained stable, after falling in October, Ler said it was “rare in the company’s history” and indicated some customer buyouts.
“We are reducing our fair value estimate for GQG, reflecting lower net flow expectations in the short to medium term,” the equity analyst said.
“We expect high gross buybacks in the near term, driven by weaker near-term performance and some reputational setback. However, these events are unlikely to harm GQG’s ability to raise new funds for its clients.
For Platinum, Ler also announced a reduction in the company’s fair value estimate, reflecting its new special dividend of 20 cents per share, funded by its cash and investment assets.
“The dividend, with a deadline of December 12, 2024, was likely introduced to appease investors after the failed acquisition of Regal,” Ler said.
He also cautioned fund managers considering mergers, pointing out that “not all fund manager consolidations have gone smoothly.”
Citing Perpetual’s acquisition of Pendal in 2023 as an example, Ler argued that the similarity in investment styles and products between the two companies hindered value creation.
He emphasized that successful mergers require complementary differences, such as distinct asset classes, distribution teams and investment strategies, to generate revenue synergies and cost savings.
