As markets hang on an announcement from the US Federal Reserve to taper quantitative easing, two of Australia’s best performing and most respected international fund managers are taking wildly different bets on the global economic outlook, placing them on a collision course from which there can only be one winner.
Both the Platinum and Magellan funds have in recent years become the benchmark for betting on global investing themes.
Magellan CEO and chief investment officer Hamish Douglass has built respect on top of returns to amass more than $4.3 billion in his global flagship fund in less than six years; while the revered Kerr Neilson has leveraged his reputation and track record to grow Platinum’s flagship international fund to almost $9.4 billion.
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The performance of Magellan (14.6 per cent) and Platinum (10.6 per cent) flagship funds are running neck and neck over five years’ performance, but a look into the respective portfolios shows the managers see the world very differently.
Asia and European stocks are a feature within Platinum’s top ten holdings, while Magellan’s big bets are focused on US technology, banks and consumer staples.
Portfolio breakdown, Platinum v Magellan
Platinum International Fund
|Region||Long %||Net %||Currency %|
|Europe - Euro||16.3||15.9||21.9|
|Europe - Other||9.9||7.9||8.3|
|Cash & Accruals||6.5||19|
Long – 181 stocks, 1 option, 7 swaps, 1 index. Short - 10 stocks, 6 indices.
Platinum’s second-biggest portfolio holding (2.5 per cent) is invested in Intesa Sanpaolo, the Italian bank. It also owns Japanese auto components business Toyota Industries (1.9 per cent) and Korean Semiconductor (2.1 per cent) Samsung Electrics. Meanwhile, Magellan differentiates itself with bets on US home and hardware company Lowe’s as well as clothing company Target.
As Charlie Aitken, managing director of stockbroker Bell Potter Wholesale pointed out last week, the portfolios of the two star global funds are the polar opposite of each other right now.
The biggest difference, according to Aitken, is Magellan’s portfolio is skewed towards the more defensive stocks in the US with big predictable cash flows, while Platinum has is leveraged to a rejuvenation in cyclicals.
Platinum CIO Andrew Clifford says he prefers stocks away from the defensive or “safer” sectors that have been bid up as the talk of the US Federal Reserve ending its $US85 billion monthly bond buying program continues to be pervasive.
“It’s a big world out there are there are much more exciting places to invest than in the US,” Clifford tells Smart Investor.
Magellan’s portfolio breakdown by region shows 46.9 per cent of its holdings are invested in North American-based stocks with no exposure to Europe and Japan. However, based on source of revenue, 21.5 per cent of the portfolio has exposure to Europe and 24 per cent “rest of the world”. Magellan is playing its ex-North American global expose through US-listed companies.
Meanwhile, Platinum’s International fund has a much lower (18 per cent) geographical allocation to North America, with its allocation to Japan (17.4 per cent) and Europe (15.9 per cent) a major point of difference.
Clifford says he believes there are scenarios that aren’t given much weighting in the context of the global story outside of the Fed taper.
In particular, he says European countries have seen massive improvements in their current account, meaning they are no longer as reliant on external funding.
He also points to the possibility that reform in labour flexibility in Japan will further add to the thesis for a strengthening Japanese market.
Clifford says the recent sell off in Korea what has lead to good buying opportunities there – Korea’s largest bank KB Financial is one of Platinum’s significant holdings.
Magellan Global Fund
|Region||% of Fund|
|*Greater than 50 per cent of revenues outside home country|