Spirit of entrepreneurism delivers cumulative returns of 480%
“I like to describe ourselves at Platinum Partners as entrepreneurial traders. We select and promote entrepreneurs who have an understanding of how to structure transactions in a way that caps the limit to the downside while giving us all kinds of upside opportunities,” says Uri Landesman, president and managing general partner of the New York-based firm.
Platinum Partners was started by Mark Nordlicht (pictured with Landesman) in 2003. Nordlicht’s background was in trading natural gas volatility. He also specialised in making senior secured loans to private companies. These two strategies are still used by Platinum today in its flagship multi-strategy fund: Platinum Partners Value Arbitrage fund.
Since 2003, the fund has built an enviable track record, generating average annualised returns of 20.13 per cent – outpacing the firm’s target of 15 per cent annualised. Its best performance to date came in 2007 when it returned 53 per cent, which Landesman attributes to a number of factors: “Three of our underlying strategies had their best ever years, no single strategy underperformed, and also we started that year with a relatively low asset base, which meant the gains we made had a big impact. The best strategy was volatility trading in natural gas. Uncertainty in the markets allowed us to set up some trades that created a tail-risk for free and made impressive gains,” confirms Landesman.
The PPVA fund accounts for USD700million of the firm’s USD1.125billion in AUM, and as Landesman says, one of the hallmarks of the firm’s success is the ability to swing back and forth across different strategies. “We are completely focused on risk-adjusted returns. That has enabled us to deliver returns of over 20 per cent net of fees to investors, along with a high Sharpe Ratio (3.31). We try to avoid correlation between strategies at all times.”
Those strategies range from long/short equity, event-driven, energy arbitrage, asset-based convertible debt (direct lending), volatility arbitrage to physical commodity arbitrage. “Portfolio Managers who get turned away from box-ticking institutions find a home with us. Over the last decade we’ve built a reputation as the place to go, particularly for idiosyncratic strategies,” says Landesman.
Within the PPVA fund, long/short equity accounts for up to 20 per cent of the risk allocation, with three quant strategies, three energy-focused portfolios and two Asian trading strategies accounting for another 40 per cent; the direct lending strategy is between 10 and 12 per cent.
Although mindful of the challenges of increased correlation within global equity markets, Landesman says that the current team of four managers is about to become five, with a clear emphasis on telecoms, media and technology (TMT): “The new hire will be a media expert,” says Landesman.
Last year’s performance – up 21.03 per cent – was largely thanks to the special situations side of the book, says Landesman: “One strategy, which we call physical commodity arbitrage, is with a 71 per cent stake we own in Black Elk Energy, a private oil and natural gas producer in the Gulf of Mexico; this enjoyed a fairly significant write-up last year. The other big contributor was our event-driven healthcare basket, specifically an investment in biopharmaceutical firm Navidea.”
Landesman confirms that the PPVA fund’s two event-driven baskets are set to become three: event-driven healthcare, event-driven energy, and ‘event-driven other’: which covers all other strategies, particularly those focused on China. “The main theme we’re playing over the long-term in China is the transition of the lower classes to middle class and taking advantage of their increased purchasing power.” YTD the PPVA fund is up 8.20%.
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