The two things Kerr Neilson fears in pandemic

Kerr Neilson is chuckling as he recounts a story about the audacity of Bernard Arnault. The richest man in Europe and chairman of the luxury goods behemoth LVMH, Arnault last November obtained a prize he had long lusted after, America’s fabled jeweller Tiffany & Co.

Less than four months later, Arnault ingeniously raised the money for the $US16.2 billion ($25 billion) transaction in the bond market. Thanks to the European Central Bank’s aggressive policy stance intended to keep finance costs low, some of the bonds were priced at negative yields, meaning the market was paying LVMH for the privilege of lending it money to sell engagement rings and charm bracelets. The ECB even ended up owning tranches of LVMH debt, a marker of the topsy-turvy world in which we now live.

“It’s going to be very interesting to see how social change evolves out of this,” Neilson says, speaking to The Australian Financial Review Magazine via telephone in the middle of the COVID-19 shutdown. “It will be interesting to see whether shopping habits shift and what people wear.” While Australians were told to limit their shopping to essentials at the beginning of pandemic restrictions, Louis Vuitton was somehow still open by appointment.

Neilson has a good understanding of the tropes of the luxury business (“I can’t wait” he deadpans at the prospect of dropping in to one of Arnault’s monogrammed temples). Known for being appropriately suited, he has let his work-from-home look regress to a shabby but much-loved pullover.

The topic of LVMH entered our discussion because Neilson is uneasy about the instinct to socialise loss and privatise profit. The stock has been on Platinum’s radar forever; it rallied 60 per cent last year, and lost 18 per cent in the March 2020 quarter. “It’s a great business,” he says. Platinum has no position currently.

Neilson stepped away as the chief executive officer of Platinum Asset Management in 2018 (erasing $539 million of market value overnight). He is still on the board and the investment team, but it’s impossible to pretend he’s just another portfolio manager.

He’s the fund manager who brought global investing to Australia. He’s our first billionaire stock picker, and is pegged at 60th spot on the 2019 Financial Review Rich List with an estimated net worth of $1.5 billion. He doesn’t collect board seats like trophies. Outside of the business world you could say he’s better known as the former husband of arts, architecture and journalism patron Judith Neilson.

These days, Neilson is revelling in the freedom to do what he couldn’t when he was running the business, which is staying up late to listen to company earnings calls. “I’m enjoying not having the pressure of actually making the difficult decisions and these markets have been very difficult so I’m pleased I don’t have to do that,” he says.