PLATO INCOME MAXIMISER LTD (PL8) - Maximizing Retirement Income: Don Hamson on Innovative Strategies, Active Trading Advantages, and Future Market Insights

Unlock the secrets to maximizing income with Don Hamson, the Managing Director of Plato Investment Management, as he shares the innovative strategies behind the Plato Income Maximizer. Promising a blend of income generation and robust total returns, this fund stands out with its fully-franked monthly dividends, specifically designed for retirees and income-focused investors. Discover how Plato's active trading approach ensures optimal performance, setting it apart from traditional buy-and-hold strategies and competitors who rely on derivatives or options.

Join us on ASX Briefs to explore the insights on navigating current market dynamics and what to watch for as we approach 2025. Learn about the dual objectives of the Plato Income Maximizer and how its strategic management of Australian and global equities consistently aligns with benchmark performances. Whether you're a seasoned investor or new to the market, this episode is a valuable resource for anyone looking to grow their income and deepen their understanding of the Australian equity landscape.

Transcript

Andrew Musgrave Host

00:05

Welcome to another episode of ASX Briefs, where we bring you insights from the leaders of Australia's most dynamic investment firms. And today we have with us Dr Don Hamson, managing Director of Plato Investment Management. Plato Investment Management, well known for its focus on income generation and tax effective strategies, manages the ASX-listed Plato Income Maximizer, a fund designed specifically for retirees and income-focused investors. PL8 has been delivering consistent, fully-franked monthly dividends and has shown resilience in different market conditions. Don, thanks for joining me today and welcome to the ASX Briefs podcast.

Don Hamson Guest

00:42

Thanks Andrew. 

Andrew Musgrave Host

00:42

Now Don for investors who may be unfamiliar with Plato Investment Management. Can you just give us a brief overview of the company before we touch on the fund? 

Don Hamson Guest

00:50

Yeah, yeah. So, Plato Investment Management is an Australian-based, or Sydney-based funds manager. We started about 18 years ago. I'm the sort of founding managing director. We mainly manage Australian equities, but we have also global equities and we have, at the end of December, $18 billion of fund under management about $15 billion in Australia and $3 billion in global equities. 

Andrew Musgrave Host

01:14

Okay, and the Plato Income Maximiser Fund has consistently delivered fully franked monthly dividends. So, what are the key strategies behind sustaining this level of dividend payments? 

Don Hamson Guest

01:24

Well, maybe I should just introduce Plato Income Maximiser, because Plato Investment Management is the manager of the company Plato Income Maximiser, which is a listed investment company on the ASX of which I'm a director. I suppose that we've been running an income strategy both in the fund and for the last seven and a bit years in Plato Income Maximizer. It's an Australian equity income strategy really targeted for retirees who want regular income and who love franking credits, because if you're in pension phase super, you get a full refund of those franking credits. Other investors do get a refund, but they might offset that refund against tax payable. So really it pays regular income, and I think one of the differentiating features is it pays monthly dividends and not many. In fact, I suppose a copycat recently listed that does the same, but I'd say it was a bit of a copycat, but I know a lot of clients love just getting that regular monthly income. 

It's fully franked as well, so when you put your tax return at the end of
 
 Andrew Musgrave Host

All right, and the latest report shows a 9.9% per annum total return since inception, which is a pretty good result, aligning with the benchmark performance. So how do you ensure the fund remains competitive in an evolving market and what are some of the key investment themes that you work on? 

Don Hamson Guest

02:46

Well, I think this is where we're quite unique. So clearly, it's an income strategy, income maximizer. So, we focused on income. But we also focused it has a dual objective on total returns, because there's no point in having great income and the funds actually going backwards in total return terms. So, we very actively trade our strategy. And this is where we're different. 

We buy stocks for income, but we don't necessarily hold them for the whole year. It's not a buy and hold strategy, it's actually an actively traded strategy. We'll buy a stock might be a big bank, get its dividend, hold it for at least 45 days because it's a tax rule that ensures that we can get the franking and then we may trim or sell out all of our position in that stock and roll into something else. So, we actively trade about half of our portfolio. The other half is there more for that total return perspective. We want to buy the stocks we like. They may be in some cases fairly low income stocks, but if we think they're going to have a great total return, we can buy those. So, we can get the income and still get decent returns. And I think that's sort of part of the uniqueness. And the other thing is we do not use derivatives, we don't use options, and quite a few competitors use options to get income. 

Andrew Musgrave Host

04:01

And the Australian equity market last year experienced a small decline in December but overall it returned sort of between 11% and 12% last year on the ASX 200. So, what are your thoughts on the current market dynamics and what investors should keep an eye on for 2025? 

Don Hamson Guest

04:12

Well, I've got to say, certain parts of the Australian market after a couple of years of good rallies I used CommBank as an example biggest stock in Australia and 10% of our index now looks pretty expensive to us at 28 times PE, which is sort of, I think, a record for them. It's trading on about twice the PE of JP Morgan, which is the biggest bank and arguably one of the best run banks in the world. And Commonwealth Bank's a very good bank, low bad debts, very well managed, but does it rate at sort of premium and it's also at a significant premium to the other big banks in Australia. But I think it's a bit of an indictment that the Australian equity market has rallied for the last couple of years, but our earnings and dividends haven't gone up nearly as much. So, we've seen PE expansion and to us the market's looking a little bit expensive. 

We've seen a good rally in January already which erased those falls in December. But yeah, I'm a little nervous on valuation. But valuation, stocks and even markets can be overvalued for some time. So, we are in a lower interest rate environment I think or I think we will be come later in this month and I think that will help support the market. I think the market's already sort of factored in. There'll be one or two or three rate cuts this year. So, I think it's going to be an interesting year. 

So, it's tough to find good value out there, but you know, with interest rates being lowered, we should start to see more growth in the Australian market .
 
 Andrew Musgrave Host

05:28

And sort of. Last year as well, there was an outperformance by growth stocks as well, by a fair margin actually. So, being an income-focused fund, how does Plato balance the need for yield with exposure to growth as well? 

Don Hamson Guest

05:49

Well, I've partly answered that in one of the previous questions is that we rotate to get the income. So, it's not like we just overweight banks, overweight the big yielding miners at the moment and other heavy yielders and have no growth stocks in our portfolio. So, because we rotate to get the income that's how we get higher income we can afford to hold some of what we'd call the good growth stocks. Now we don't hold all of them, but if we see a good growth stock, we're able to put that in the portfolio and we also have good risk management. So, we make sure we don't take excessive risks like having zero exposure to growth stocks, and I think that's where there have been one or two income managers that have struggled in the last 12 or 18 months because they didn't have that exposure to some of those growth stocks. 

Andrew Musgrave Host

06:34

And just touching on that, currently you've got a market cap of just under a billion dollars, so you've established yourself as a leader in listed investment, as a listed investment company. So, what makes PL8 unique compared to other income-focused funds or your peers? 

Don Hamson Guest

06:48

Three months ago I would have said we're the only company with paying monthly dividends. We're now. There's now a smaller competitor, but there's still only two of us. We've got a good track record of doing that, even through COVID. So, you know we've got the runs on the board. We're not just a Johnny-come-lately. We've been doing well. We have an underlying fund which has followed the same strategy for about nearly 14 years, and we've had the listed version for about, you know, coming up for eight years. So, we have a very good track record. We've got a very experienced team. Everyone says we've got a great team. We've got four guys with, or people with, PhDs and the average experience in our team's over 20 years, and you can add another 10 or more for me. So, it's an experienced team. We've got the runs on the ball. We've been doing it through, you know, going for 18 years. We've gone through a GFC, and we've gone through COVID and they're pretty interesting things. So, I think we have, say, the experience and we've demonstrated it over that period. 

Andrew Musgrave Host

07:50

All right and just to wrap things up, looking ahead, there's plenty going on globally at the moment, particularly in the US. We just don't know what's going to sort of come day after day at the moment. So, we had that market correction in December, we have a bit of a rally in January, obviously current earnings season in the US, which is probably a little bit of a mixed bag at the moment. So, and with the uncertainty coming out of the US, what do you see as some of the opportunities in 2025? 

Don Hamson Guest

08:18

Well, we still like some of the insurers. We like a couple of the good retailing stocks, like JB Hi-Fi, but I think there are a lot of uncertainties and that's why another sort of hallmark of us is consistency. We build a very well diversified portfolio because we don't know what Trump's going to say tomorrow and we want to make sure that we say diversification is a free lunch. We've got a well diversified portfolio, and we very actively manage it. So, if things change, you know we change our portfolio almost daily. 

Andrew Musgrave Host

08:49

All right, Don. Well, it's been great to chat, get an update on where the fund's at, what you're looking to do in the future, and we look forward to further updates in the coming months. 

Don Hamson Guest

08:56

Thank you, Andrew, it's been a pleasure. 

Andrew Musgrave Host

08:58

That concludes this episode of ASX Briefs. Don't forget to subscribe and we look forward to catching you on our next episode.