LIC & LIT Platinum Capital Limited (PMC)

PIF

Management costs:
1.10% p.a. of NAV, plus
15% of outperformance over benchmark (MSCI AC World Net Index (A$))

 

Nicely put oracle.

Another reason for most of us to keep it simple and stick to things that are easy to understand.

 

The examples given are simply a result of dividend “collection” from a broadly diversified, low turnover portfolio. It applies to older LICs and traditional index ETFs. Of course LICs can apply dividend smoothing.

As mentioned in previous posts PMC is a product us geriatrics invested in when there was bugger all else for Global Diversification. Nowadays there’s a lot more choice including Index product.

I tried to make it clear that for me it’s more an opportunistic holding nowadays. We’ve held it for a very long time and to be honest it hasn’t given us anything to complain about given our objective for originally purchasing it in the first place being Global diversification with income. I think @SatayKing might also agree that it has done it’s job for what we care about.

Due to the often high premium it’s not something one can just blindly DCA into and as @Hodor noticed this makes the mgr’s theoretical NTA returns rubbish for the real world investor. The best buying opportunities are few and far between. It can be years in between purchases for me. As @dunno stated: eyes wide open if thinking of investing in this one.

Of course our “core” global holding is the index developed markets ETF VGS. I treat PMC as a satellite to us.

Reasons that pop into my head on the fly why PMC continues to be of interest are:

Many investors have never known or have forgotten what it’s like to experience a major bear market. The massive US economic expansion / bull market has made investors complacent as growth / momentum rules. On the back of this movements like FIRE have taken off as extraordinary capital growth in some markets seems to have no bounds. I’m beginning to feel uncomfortable with this so have added to the beaten up local and global value mgr Satellites given this has coincided with discount opportunities available in same.

We reached our retirement goal regarding portfolio income long ago. I don’t want more and more banks, miners and a few other large cap holdings that dominate the older LICs and index ETFs. We have too much of that already. For global diversification as mentioned above I’m not comfortable with blindly putting “everything” into a Global Index fund. A contrarian global fund that is very much index “unaware”, income focused and able to take advantage of falling markets appeals.

I also feel very uncomfortable with the political direction of China so I will not invest in a dedicated Asia ETF. I am however happy to invest indirectly through a pen active global Mgr with a tilt to these markets but not being “locked into” same.

Being an LIC now and then rare discount opportunities arise. Taking advantage of this at times in chosen product has more times than not proven worthwhile.

PMC actively manages currency.

It satisfies the contrarian in me which has always been there for better or worse.

Importantly there’s a theme of behavioural issues in previous points. I try to continue to improve but I’ve learnt it’s not wise to try to be someone I’m not. Hence I will invest in what / ways others might see as sub-optimal to meet these behavioural needs.

It would be interesting to hear @SatayKing ’s view given he has likely held PMC even longer than me. It’s not like we don’t know of the alternative of indexing, PMCs faults which others here are only too happy to point out to us. God knows we’ve been through PMC’s ups and downs but for some reason it’s been good enough for our needs to have us continue to invest in it. Perhaps it’s a case of we just don’t care, it meets our needs so that’s all that matters. That is the “me me me” / “it’s all about me” criteria!

 

Yep. It's an active punt. Not so many moons ago as international exposure was in short supply but it has now morphed as far as I am concerned. ETFs are ETFs and LICs are LICs. Non-involvement versus possible human goof ups.

 

This is exactly what I am doing as well, PMC is still very small compared to what i have put in VGS,

 

‘Challenging year’: Platinum questions investment approach - InvestorDaily

 

@Nodrog with all due respect your reasoning to invest is very logical and sound.

The faults being pointed out are all to do with numbers which I fail to understand and am hoping someone could shed some light. I have no trouble understanding past returns of AUI DUI SOL etc. But when you are paying 1.1% ongoing fees and 15% performance fees don’t you think it is only fair to ask questions like why is DUI which was also worth $1 in 1994 has a NTA close to $5 and latest dividend of 15.5 cents whereas PMC has NTA of under $1.60 and latest dividend cut from 10 cents to 7 cents in spite of claims of returning almost 12% pa since inception?

For anyone wanting to invest in active funds should they not do some research and find out why should they be paying this manager high fees? What are they getting in return? Is the manager really working in shareholders interest or not?

Again I emphasise that I fully respect your reasons for investing in PMC. The only reason I am posting all this data and research is to improve my understanding and in the process others might benefit and decide for themselves if they wish to invest.

Cheers
Oracle

 

Thanks @oracle, the more information the better. Always appreciate anything that helps me continue to learn. I hope I didn’t come across as defensive or whatever. In short I was also highlighting my faults / weaknesses and that sometimes I invest in something that despite its faults I still wanna own it.

Hopefully @dunno will follow up with his “acid test” so better understanding of the numbers will be possible. Then I might be a leading contender for “mug of the year” award ... again.

 

Reading the PMC fine print, they do tell you that returns have not been calculated using share prices.



Last Time we did a bit of a deep dive on a LIC (WHF), Nordog got back a response that if I recall right, had WHF defending the way returns are calculated on NTA and assuming dividend re-investment as an industry standard. PMC seem to follow that industry standard. I say they can blow the standard out their arse because it is meaningless in telling me what I earned as a shareholder. It’s a blight on all of them.

Some of the reasons the standard deviates from reality in this case is that PMC has at many times raised capital via DRP or other means at a premium to NTA. This is NTA accretive. The accretion sticks in the published returns regardless of what future share price does. Calculating based on Re-investment just rewards the most volatile share prices. A highly fluctuating but ultimately long-term flat share will benefit more from dividend re-investment than a relatively smooth but increasing price journey.

So, what did shareholders earn from PMC, using 17/9/19 close price of $1.45 as the sale price.

10 year return 17/9/2009 -17/9/2019 = 3.7% (PTM figure, 8.6%)

Since inception until 17/9/2019 = 9.7% (PTM figure 11.9%)

PMC since inception figures are much better that 10year figures because inception price of $1.00 was at NTA and they had good early income distribution.

PMC’s do not try to flatter the return by franking credits which most Aussie LIC’s do. When you take them into account, the returns jump significantly. 10 year becomes 6% and since inception becomes 13.3%

PMC have to pay tax on their realised capital gains, and they seem diligent in getting those franking credits to shareholders – distribution of franking seems to trump smoothing and I have no problem with that. Whether you want a LIC paying tax on your capital gains or not depends on your personal tax position. If you are tax exempt, franking credits are wonderful things, you pay no tax. If you are in super accumulation mode, you effectively pay 15% for discountable capital gains received via a LIC structure and only 10% via a trust structure. Different tax rates have different implications.

I can see PMC being a crap investment for @oracle who has a passive leaning and hence an efficiency bias. He wants a limited number of funds, faces accumulation phase taxation and buys shares regularly so wouldn’t want to be forced to buy at a premium.

I can also see PMC being a good investment for @Nodrog who doesn’t mind having more holdings only needs to buy when it’s at a discount and has a zero-tax rate. 13.3% since inception, its no wonder the long-term holders have found contentment with it especially for those that like income because most of the return has come in the form of income. Nordog has an active leaning for part of the portfolio, when the pieces of the puzzle fall into place, (discount, value out of favour etc) the opportunistic potential might just be worth the extra costs. (average says probably not but who wants to be average)

Different strokes for different folks. (aka - don't be dumb and follow others)

Return reporting for all LIC’s sucks. They are a marketing numbers, with no legislative guidelines. Take them with a grain of salt. At least until somebody takes them to court for deceptive….. Oh, wait there it’s all disclaimed in the fine print. Yes despite the whinge about active manager behaviour, I’m still considering PTM……………Investing is nothing if not filled with contradictions. The catalyst to act will be a turnaround in fund flows into PTM.

The shareholder cash flow data for PMC attached.

 

Thank you so much for that @dunno. I can’t help but think perhaps you’ve gone out of your way to be kind to me.

Given I don’t have the direct stocking picking / analytical skills but I’m familiar with the LIC environment and have this innate contrarian leaning it’s impossible for me to ignore such opportunities. High fees, deceptive reporting etc will likely have me under performing the index but albeit my interpretation of Aswath’s video I’m comfortable with the eventual outcome. I think you understand me pretty well now albeit I’m still very much the amateur.

I continue to try to improve including trying to put any ego related tendencies aside and be more and more humble. Many years spent investing doesn’t automatically equate to greater skill. Bit by bit I’m getting there.

 

I reckon ppl will be jumping ship and joining @Falcon and sir jack on the etf side then........

 

I will cancel my AFR subscription and subscribe to @dunno ’s Review

 

. Might need to confirm facts first.

Investing is a journey where one can be whipsawed from one direction to another. Somewhere along the way you will find your place in all of this and peace along with it.

 

Note with LICs or any shareholding for that matter I’ve never participated in DRPs. Dividends are collected and reinvested where I feel appropriate more often than not based on value. I’ll let others participating in DRPs at a premium be accretive to my existing shareholdings.

Passive investors might be shaking their heads in disbelief but really it’s not that difficult at all. Plus it’s not all or nothing. Indexing as the main core and active satellites to satisfy a whole range of factors financially and behaviourally!

 

You actually pay for AFR? But yes a subscription to @dunno is worth paying for!

 

My opinions are freely given and overpriced at that.

Just an amateur myself with a view that us DIY investors deserve better than to be hood winked left right and centre by the ‘professionals’ as they pocket their economically unjustifiable fee income.

The relentless pressure from those selling a message to generate a living ‘from’ investors through fees and sales rather than from investments themselves is endless. Including on certain threads on this site. Which brings me again to saying bye for a while as my means to avoid a fight which I don’t need to have. (yes I have a problem with looking on and turning the other cheek, So I choose not to look)

Read broadly, question thoroughly and stay safe out there.

 

Thank you for your review @dunno - I always love to read what you post. And it always gets me thinking.

 

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I've also recently averaged down into PMC and also PTM as it looks good value at the moment. I suppose the on market buy back should also act as somewhat of a floor?

"In the short run, the market is like a voting machine. But in the long run, the market is like a weighing machine."

 

I greatly appreciate your overpriced ramblings @dunno. Your contrarian / insightful detailed analysis is invaluable.

Even when you use the term "economically unjustifiable" you are being more accurate than my politically incorrect "unethical". FAs are performing their role within the legal framework provided. Maybe 1.5% is just their break-even point?