L1 Capital has moved to convert Platinum Asset Management’s listed investment company, Platinum Capital, into a global long-short vehicle, thwarting a board proposal to transform it into an exchange-traded fund (ETF). This decision by the Melbourne-headquartered hedge fund has sparked criticism from activist investors, who favoured the ETF conversion for its potential to unlock profits on their holdings. Platinum Asset Management manages several funds, including Platinum Capital, and earns fees from these operations. Platinum Capital is a listed investment company, meaning investors can only exit by trading their shares.
The board of the $420 million Platinum Capital fund announced it would abandon its ETF conversion plan after L1 Capital, which holds a 17 per cent stake, indicated its opposition. Instead, the board proposed an on-market buyback of up to 20 per cent of the units, a move supported by L1. Simultaneously, L1 has put forward a non-binding proposal to terminate Platinum Capital’s management agreement with Platinum Asset Management and replace it with L1, which would manage a global long-short strategy.
L1 already manages a $2 billion long-short fund listed on the ASX. The proposed global vehicle is described as “substantially the same” as the existing L1 Long Short Fund but without geographic constraints. L1’s global strategy was seeded on January 1 and has since returned 27.3 per cent. In contrast, the L1 Long Short Fund returned 13 per cent up to June 30. L1’s Mark Landau described the $75 million capital commitment as the largest investment in a new product, driven by the strong performance of global stocks in their current long-short fund.
The move has faced opposition, with some unitholders and activist investors expressing disappointment, arguing it betrays shareholder interests and deviates from reasonable corporate governance. Units in Platinum Capital fell 0.7 per cent on Tuesday, trading at $1.41, a 10 per cent discount to the weekly pre-tax net asset value late last month. L1 has nominated three representatives to Platinum Capital’s board, subject to shareholder approval.
