Platinum Asia Investments Limited

Platinum Asia Investments Limited is an Australian Listed Investment Company (LIC) that is publicly traded on the Australian Stock Exchange with the ticker code PAI. It specialises in investments in Asian equities, focusing on the Asian region (excluding Japan). PAI has been listed since September 21, 2015, and has been operating for 8 years, and has a market cap of approximately $300 million.

PAI's primary investment objective is to provide investors with the potential for long-term capital growth. To achieve this objective, PAI primarily invests in undervalued listed securities of companies located in the Asian region, spanning various sectors. The company aims to deliver net returns over a five-year plus investment horizon that surpass its benchmark index. PAI is externally managed by Platinum Investment Management Limited.

PAI's primary investment focus is on Asian equities, without a specific portfolio bias towards any particular sector within the Asian region. To evaluate its performance, PAI employs the MSCI All Country Asia ex Japan Net Index (A$) as its benchmark. This benchmark represents the broader Asian equities market (excluding Japan) and serves as a reference point for PAI's performance relative to the region.

Platinum Asia Investments Limited (PAI) primarily focuses on global equities, which inherently carry growth and risk characteristics. It's important to recognise that PAI itself is a growth/risk asset, and this should factor into your overall asset allocation and investment strategy. The LIC structure offers the advantage of retaining profits and providing a smoother income stream, resembling an income-oriented vehicle for investors. However, it's crucial to note that income isn't guaranteed, and market fluctuations could lead to decisions by the company to adjust future dividend payments.

With this understanding and acknowledgment that PAI is a risk asset, consider these essential metrics when evaluating PAI as an investment option:

• Long-term Performance: Assess PAI's historical performance over an extended period, typically 5 years or more. Has the company consistently delivered after-fee returns that meet or exceed its benchmark index, the MSCI All Country Asia ex Japan Net Index (A$)?
• Dividend Reliability: Examine PAI's track record of maintaining or increasing its dividend payments over the long term. This indicator helps gauge the reliability of income generated by your investment.
• Underlying Holdings: Dive into the specifics of PAI's portfolio. As LICs like PAI invest in various assets, including equities, infrastructure, property, and more, review the underlying holdings. This information can usually be found in monthly updates or the latest annual report. Ensure that you are comfortable with the types of investments PAI makes on your behalf.
• Fees: Evaluate the cost of investing in PAI by examining its Management Expense Ratio (MER). This ratio divides the total costs of the fund by its net tangible assets. For LICs on the ASX, MER can vary, ranging from as low as around 0.15% to as high as 3%. Lower MERs translate to lower fees for investors. PAI's most recent MER stood at 1.48%, which provides insight into the expenses associated with your investment.

A Listed Investment Company (LIC) is one type of investment fund structure (i.e. shareholder funds pooled together and invested together, either actively by a manager, or passively). Other types of investment funds include Exchange Traded Funds (ETFs) (which can be both actively managed or passive), Listed Investment Trusts, or Managed Funds.

The different structures have their own positives and negatives, which are dependent on the goals of the investor and their own individual investment structure.

Some of the benefits of the LIC structure (the structure of PAI) include:

• It's a closed-end investment vehicle: Meaning the manager has a fixed pool of capital to invest with a long-term mindset, and doesn't have the risk of fast redemptions by investors in a time of market panic.
• They can smoothen out income to the investors: Which can be beneficial for both tax efficiency and emotional mindset, due to being able to retain profits over time (as compared to the trust structure, which must distribute income and crystallized capital gains to the investor in that financial year).
• The income will most likely be in the form of fully franked dividends: Which is an attractive form for Australian retirees due to the franking system in Australia. Since LICs are companies themselves and pay tax in Australia on profits, they receive franking credits paid on the tax they pay, in addition to the franking credits they receive from their investment portfolio. Well-managed LICs ensure their franking credit reserves are sufficient to pay future fully franked dividends (see 'franking reserves' chart above).