Why is Kerr Neilson paying himself half a million from Platinum Asset Management?

I was flipping through the 2015-16 Platinum Asset Management (PTM.AX) financial statements the other day and was quite surprised when I came to the remuneration section. We see there that Kerr Neilson received $488,700 in remuneration for 2015-16.

Now, under normal circumstances, that level of remuneration would be considered quite modest for the Managing Director of a company the size of Platinum. But Kerr Neilson is not your average Managing Director, he (and his wife) have an interest in just over 312 million shares in Platinum which have a market value of around $A1.8 billion.

The dividend income paid on those shares during 2015-16 was more than $A112 million! That’s equivalent to about $2.15 million per week! On 22 September 2015, Kerr received a bit over $62 million in dividends and six months later on 22 March 2016, Kerr received another $50 million.

Now, please ask yourself why someone who receives dividend income of $112 million needs to pay themselves an additional $488,700 in remuneration, which, incidentally, includes the laughable payment of $19,308 in superannuation – I don’t think he will have any problems funding his retirement!

It’s even worse in the context of Platinum’s poor performance. Platinum lost 15.5% of its funds under management during 2015-16. Of these lost funds, 43% was due to market losses, 36% was due to clients pulling funds out of Platinum and the rest was due to distributions.

The Platinum Trust Funds and Global Fund lost 7.7% of their starting value (excluding distributions). It’s hard to understand. Did they not realise that there has been a bull market in the US for a few years now?

For some unfathomable reason, Platinum has always preferred Japan and Europe over the US, despite the fact that the US is home to the vast majority of quality companies in the world and US levels of research and innovation leave most of their competitors in the dust.

I made the observation in a 2011 article (on this site) that:

The other problem is that Platinum seems to form (not always accurate) macro- economic views and then invest accordingly (and I might add somewhat stubbornly, being slow to change a view when circumstances clearly change).

This I believe is still the case as is their flawed concept of a division of funds based on geographic areas (with no US fund!) and specific industry funds.

I just don’t know how any shareholder could support Platinum’s remuneration policy (as far as Kerr is concerned).

I should say that I don’t have any shares in Platinum and have no intention of buying any.

Platinum had, for a long time, a lot of the Australian market in international shares largely to itself, but it now has a number of formidable listed competitors that will continue to make life difficult for them.