PM Capital Portfolio Manager, John Whelan talks about PM Capital GO 2025 and its new Portfolio Tracking Exchangeable Redeemable Securities or PTrackERS (ASX:P25PA) securities. Using the same global equities investment strategy as its Global Opportunities Fund (ASX:PGF), GO 2025 will have the added benefit of allowing investors to redeem at net tangible asset value (NTA) in the future, even if it's trading at a discount.
Jessica Amir: Hello I’m Jessica Amir for the Finance News Network. Joining me from PM Capital Limited is Portfolio Manager, John Whelan. Hi John and welcome to the Network.
John Whelan: Hi Jessica.
Jessica Amir: First up, for those who aren’t familiar. Just give us an introduction to PM Capital?
John Whelan: PM Capital is an Australian based global asset manager. We have a 20-year track record, our main global equity strategy has returned over 450 per cent since inception. And that compares to the MSCI Index, which did approximately 140 per cent. We were ranked number one by Morningstar over multiple time periods. And recently, we’ve picked up the Lonsec, Long/Short Equity Fund Manager of the Year in 2018.
Jessica Amir: Before we talk about your new offering. Can you tell us why should people look at investing in global funds and some of the risks?
John Whelan: Basically the Australian equity market is quite small when you look at it globally. It currently represents around two per cent of global equities. We believe that the global market just offers a whole much bigger array of opportunity, for Australian investors. And then when you overlay that with the fact that Australian retail investors are chronically underweight globally equities, it makes a compelling argument to go overseas.
Jessica Amir: Now to your offering in some detail. Just start off by telling us about the underlying assets?
John Whelan: The new offer is called a PTrackER and what that really means is, it’s redeemable equity. So basically we issued a listed investment company called PGF (PM Capital Global Opportunities Fund (ASX:PGF)), back in 2013. And this PTrackER is another listed investment company, but it has the additional features that investors have the option to redeem at the net tangible asset value, the NTA, in seven years time. Or alternatively, to rollover into the existing PGF company at the NTA.
Jessica Amir: Can you tell us about the PTrackER issue?
John Whelan: The PTrackER issue, the portfolio will be exactly the same as our existing listed investment company, PGF (PM Capital Global Opportunities Fund (ASX:PGF)). And in addition to being able to redeem after seven years, PM Capital will also pay all the upfront costs, which means that a dollar invested will actually mean a dollar invested.
Jessica Amir: So how can people get involved John?
John Whelan: There’s three ways to get involved. There’s an entitlement offer, there’s a broker firm offer and there’s also a general offer. You can go to our website and apply directly.
Jessica Amir: Changing pace now. Tell us about the portfolio itself and your approach to managing the fund?
John Whelan: It’s pretty simple, what we’re looking for are long-term anomalies in global equity markets. Basically, we believe that 80/85 per cent of equities out there are efficiently priced. So we’re looking at that 10 to 15, maybe 20 per cent of equities that are mispriced, either too expensive or too cheap. And then what we can do is spend a lot of our time on those particular equities, which results in us having quite a focus concentrated, in our high conviction portfolio.
Jessica Amir: Can you tell us about some of the largest positions and why you like them?
John Whelan: So one of our largest positions at the moment, are our investments in the alternative asset managers. So they’re brand names like Blackstone, Apollo (NYSE:APO) and KKR (NYSE:KKR). Basically we bought these companies two years ago when their performance fees dropped off significantly. We believe there was a cyclical trough in performance fees and these companies were growing funds under management 10/15 per cent per annum, and do a price on around 10 times earnings.
And they were also structured as US partnerships, which meant that the majority of the market were not interested in buying them, because they were not part of the US indices. And subsequently with the days of the Trump tax cuts, these companies have now started to convert into corporations, which means that they will be put into the indices. And the huge buying power of ETS and passive investment managers will begin to buy them.
Jessica Amir: And what’s the key message that you would like to leave with investors?
John Whelan: The key message is that the PTrackER offers investors more choice, more flexibility and more control over their international equities. Australian investors are still chronically underweight global equities, and this structure allows them to invest internationally with a well-credentialed fund manager.
Jessica Amir: Thanks John and what’s the key message that you would like to leave with investors?
John Whelan: The key message is that this is a major step forward for the listed investment company market. And it greatly improves the governance and control that investors have. It just gives them more choice, more control and more flexibility, with their international equity holdings. Australian investors are still chronically underweight global equities, and this structure allow them to invest internationally with a well credentialed fund manager.
Jessica Amir: Thanks so much for your time and good luck with the issue.
John Whelan: Thank you Jessica.