Picking technology crash pays dividends
Selling short has been the key to Platinum Asset Management’s winning performance in 2000, says investor services manager Liz Norman.
"Essentially, one of the primary reasons for good performance was shorting individual companies," she says.
Platinum repositioned its portfolio in February last year and got out of many tech stocks before the bloodbath in April.
"By the time April came we didn't have a huge exposure (to tech stocks)," she says. "We had had a good run and were getting nervous, so it was time to move the portfolio."
Although the early departure left Platinum sacrificing some performance, the subsequent dip in tech stocks more than covered this position.
Just before the crash Platinum went against the global benchmark by having a low exposure to US stocks. Norman says some managers had up to 50 per cent of their portfolios in this area, whereas Platinum has very little, having shifted to Europe and Japan.
"We had 30 per cent of the portfolio in Europe and about 20 per cent in Japan, which was very different weighting to the MSCI Index," Norman says.
By the end of 2000, the fund manager had 34 per cent in Europe, 20 per cent in Japan, 19 per cent in North America and 5 per cent in emerging markets such as Korea. The remaining 22 per cent was in cash.
Emilio Gonzalez, chief investment officer of Perpetual Investments saw 2000 as a turning point for investors.
"Tech stocks came and went," he says. "Then there was the a hyperbole factor where prices went shooting ahead and a lot of investors questioned the value in some stocks."
Gonzalez says most fund managers had forecast a crash in the sector. The smart stuck to their advice, while the rest tried to go that extra metre, he says.
"There were a lot of managers who didn't manage the crash very well," he says.
"Then we had the shift back to basic, old economies versus new economies. Again, a lot of managers hadn't the experience to handle this."
Gonzalez says the fund managers with older heads did better as they taught the younger guys not to be so greedy.
"It was easy to go with the flow," he says.
Perpetual's success in 2000 was achieved by taking a long-term view of holding stocks, sometimes up to five years, says Gonzalez.
"By taking the longer picture, the best opportunities arise because the companies were often underpriced," he says.
"Today we are in a world where the good stock picker wins through."
International Equities
1. Platinum Asset Management
2. Credit Suisse Asset Management
3. Perpetual Investments
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