Morningstar’s grim assessment of smaller Platinum

Research and ratings house, Morningstar has projected a major decline in funds under management (FUM) turning Platinum Asset Management into a smaller fund manager as a result of the exit of co-chief investment officers and portfolio managers, Andrew Clifford and Clay Smolinski.

An analysis of the situation by Morningstar equity analyst, Shaun Ler saw the ratings house cut its fair value estimate for Platinum from 80 cents to 50 cents, noting that the earnings hit from declining fee margins would be particularly severe for Platinum “given its high fixed cost base, primarily wages”.

It said cost reductions could partially offset some of this pressure, but not all that firm needs to maintain reasonable capabilities to function effectively.

“New initiatives, such as distributing external funds and launching new products, could help moderate the earnings decline. However, these initiatives are early stage, and we expect their overall contribution to be limited in the medium term,” Morningstar said.

“Our base case assumes Platinum shrinks into a smaller fund manager and for after-tax profits to decline 26% per year, reaching $10 million by fiscal 2029, down from $45 million in fiscal 2024. Client redemptions have accelerated, reaching 38% of FUM in the 12 months to January 2025, up from 17% a year prior.”

“Clifford and Smolinski’s transition away from portfolio management responsibilities, combined with staff reductions (a 20% reduction since September 2024) could erode confidence in Platinum’s investment capabilities and team stability, potentially fueling further outflows.”

“We project FUM to decline to $3 billion by fiscal 2029, down from $13 billion in fiscal 2024, driven by net outflows averaging 33% of FUM per year. In dollar terms, this implies annual net outflows averaging $2.6 billion—from $5.7 billion in fiscal 2025 to $1.1 billion in fiscal 2029.”

The Morningstar analysis said the departure of Clifford and Smolinski represented a material change, given their long tenures and reputation among investors.

It said Ted Alexander, who will manage the Platinum International Fund and other global strategies, “has a decent track record from prior roles at BML, Orca, Magellan, and Neptune”.

“However, he is not as well-known as Clifford and Smolinski. Alexander will need to demonstrate maintained outperformance over benchmark and peers, and restore confidence among asset consultants—both challenging goals we do not expect to be met in the medium term.”