This is an interview between Firstlinks’ James Gruber and Ted Alexander, Portfolio Manager – Global Strategies at Platinum Asset Management. He recently took over running the Platinum International Fund.
James Gruber: There have been some changes in investment management at Platinum recently – can you outline those changes and your role?
Ted Alexander: I've been brought in to manage the Platinum International Fund (and Platinum’s global strategies), which is a huge honour because the fund has been going for 30 years, which is an immense record, and it's outperformed the market over that time.
Andrew Clifford and Clay Smolinski have recently stepped aside. My role is not about changing Platinum’s underlying approach to investing but more about enhancing the process.
JG: You have made some changes to the actual portfolio, though. Can you outline what they are?
TA: You have a process in place, do a deep dive on every stock, every holding in the portfolio. As Portfolio Manager, you've got to be 100% confident that you understand the stock, the investment, the idea, the thesis behind the investment, and that still stands.
When I came in, we got the whole global investment team to do a deep dive on every stock and looked at where we are now.
We kept most of the stocks in the portfolio. We've rotated about a third of them out. Some of those because they'd made a profit, and it was time to sell others because my view on the philosophy of that particular investment was slightly different.
We've been making some changes, but broadly we've kept being buyers of China, buyers of Europe - prefer that to the US – and looking at picking stocks with huge upside potential.
If we're thinking of thematics, we've made a few changes. We brought in some more low volatility stocks. I'm talking about consumer staples, pharmaceuticals, even telecoms. We bought some in so if we do get those slightly rockier markets, you've got a bit of safer, lower volatility stocks coming through. We’ve also changed some of our China stocks from offshore to more domestic thematics and listings.
JG: Are you sticking to the funds’ contrarian, value roots, or do you think that needs refining?
TA: Well, you've got this 30 year proof of concept that it works. And in my view, there's never been a more important time to hold those contrarian values in place. And the reason is we've had this rise in passive investing, and so most Australian investors have got these ETFs that have a high weighting towards US technology stocks, and they need diversification, and that's what Platinum is bringing to them. We've got diversification into the UK, into Europe, into China, into sectors like industrials, pharmaceuticals, and financials. That's why I think at the moment, it's absolutely essential to stick to those roots in contrarian, value investing,
JG: The International Fund is long-short and manages currencies – in your view, how are these best used to enhance performance?
TA: When we look at the outperformance of the Platinum International Fund over 30 years, one of the biggest drivers has been our use of shorting the market in a crisis. So really protecting the upside that we've gained on positive markets when we get those big stock market events - I'm talking the dot com crash, I'm talking the GFC - we provided invaluable protection to investors, and that's been the core drivers.
We're still looking at ensuring we've got that great crisis protection in place. It's not that we're always bearish or we're always using heavy shorts; it's trying to use them to protect our investors during those serious market events.
JG: Is that shorting a bottom-up or top-down process?
TA: There's a bit of a combination of the two because when you're looking at identifying a crisis that would normally come from top down analysis but can also come from company earnings results and talks with management. But we also do bottom-up shorting as well. We'll find individual stocks that the analyst sees as really offering skewed potential downside over upside, and thinking that's a great place to put shorts on. So there is some of that bottom-up shorting, but the big crisis protection tends to be a top-down.
JG: A big talking point is Trump and the moving feast of tariffs. How do you think about that and the market environment?
TA: You can see the thinking, right? If we can raise cash through tariffs and through government efficiency programs, we push this American first agenda, but we also raise money for tax cuts. You can see how they think it could work, but it's using a lot of political and financial capital, and what seems like a bad bet.
My view is that the standard of living in America will decline through this, and you're asking the American consumer to take on extra price rises at the tail end of a cost-of-living crisis. I think this is a net negative overall.
But you can get the theory, and if other countries blindly say, ok, we'll accept a 10% tariff in return for nothing, the US gets this extra income as part of it, then trade isn't massively affected. You can see how that could work. I think in the long run, countries aren't likely just to accept that 10% - there's going to be some reciprocal action. And you've got the big sticking point on China coming through as well. Because of this dislocation occurring in the global economy, it seems like a net negative overall.
JG: What are the biggest opportunities and areas of risk around the globe?
TA: Opportunities are looking where other people aren't. We try to find stocks that have got wonderful businesses, wonderful operating models that aren't necessarily broadly appreciated or priced in.
We've been investing in China liquor via Moutai, Norwegian salmon producer Mowi, Korean bank Shinhan, Danish wind farm Orsted, Hong Kong lawnmowers via Techtronic, and Canadian uranium Cameco. They're all these diversified themes around the world. These are contrarian value plays.
Then you've got whole sectors that aren't loved or appreciated like consumer staples and pharmaceuticals – there are lots of areas that people aren't investing in. That's where the great opportunity is at the moment.
Whereas the risk is if all your investments are in one thematic in US large cap technology, and we get a big reversal there, then your whole portfolio can be really upset. Not having that diversification is a risk at the moment.
We see outside that core theme in US technology that there are many opportunities around the world to invest in great companies at reasonable valuations.
Ted Alexander is a Portfolio Manager – Global Strategies at Platinum Asset Management, a sponsor of Firstlinks. He recently took over running the Platinum International Fund.
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