Platinum Asset Management have posted the transcript of a recent interview with Kerr Neilson, the firm’s founder, conducted by Mark Draper from GEM Capital. Neilson answered questions about his long-standing career in fund management and what he has learnt along the way.

Some highlights below, but the full interview is worth reading (direct quotes are from the transcript):

• On the market: “There are signs of excess in specific areas such as cryptocurrencies, perhaps biotech, certainly there is quite a lot of heat in the whole e-commerce world, but there is also quite a lot of concern, so it’s unusual in this whole bull market – which started after the crash of 2008/09 – has been characterised by there being a fair amount of concern throughout and that does remain in place and is not in keeping with the typical wild bull market. The hints of the bull market here are those specific areas, but also valuations have lifted a lot and strangely, the bonds are not showing any signs of responding to the huge funding needs of the US government or anything else.”
• On potential asymmetric opportunities today: “I think we can see [them] in China where certainly the country has too much debt, as have most countries, and yet we can find companies trading at very low valuations that are growing at 15%-25% a year and we are paying about 80% of the world’s PE – we are paying about 12 times versus the world’s PE of maybe 15 or 16 and that strikes us as an asymmetrical play because it’s not as if these companies are necessarily going to be forced to do things by their government which are to the detriment of the investors (that is one of the threats but I don’t think that’s so likely in the case of some of these companies).”
• On passive vs. active: “With passive what most people are [now] doing is they are saying well its worked so well since the [2008/09] crash, why should we not do it.  The only question they need to address is the opposite, why should it persist, what has given rise to all of this enthusiasm and so what I think you’ll find is when we have the first big upsets they’ll be sitting with ETFs or passive holdings that are actually not doing what they expected and then what do they do, do they panic because they have nothing to hang on to? That’s very different from having a very strong view about the inherent value of each of the stocks that form your portfolio; it’s a very different set of comforts.”
• Worst investment: “In the early 90s we were spending a lot of time in Latin America and we found this interesting company that had tourist interests and was buying hotels in Peru from the government and indeed we helped them buy some wonderful properties which turned out to be massive because at that time tourism was minute. Machu Picchu used to take two hundred, three hundred thousand visitors a year, and is now taking more than 2.2 million a year. So we saw what could change, the only trouble is we didn’t make any money out of it. So it was a great idea and in theory should have been quite profitable but because of a whole lot of other circumstances we never made a cent out of it, in fact we lost money.” The lesson learnt was that “you need pretty transparent markets to ensure that you get most of what you’re entitled to.”
• On how individual investors can expand their knowledge base: “I suggest [investors] should think about logging on to a company’s website and either listening or reading the transcript of their quarterly or half yearly investor calls. What you will find is there is a prepared section and then there is the Q&A section which I find very useful because it’s really where the management is put to the test by analysts asking questions about aspects of their business.” Apart from that, the standard advice to “read extensively and broadly because you’re all the time trying to conjure up a world that will be, rather than what is.”