Growth over value trend hurts Perpetual’s profit
Investment house Perpetual has seen its profits weaken as it continues to lose funds under management amid investors' shift from value-seeking, active fund managers to cheaper, index-tracking funds.
Net profit fell 17 per cent to $115.9 million in the year ended June 30, the Sydney-based wealth manager said in a statement to the ASX on Thursday morning.
Perpetual has seen nine straight quarter of fund outflows, due to weak performance by some of its funds and amid a trend of big institutions such as super funds to bring money management functions in house.
Perpetual chief executive Rob Adams said market uncertainty combined with fund outflows had hindered the company’s performance.Credit:
Average funds under management (FUM) dropped to $28.8 billion, from $31.5 billion a year earlier, while revenue was down 4 per cent to $514.1 million.
Underlying profit before tax of $162.2 million fell short of some analysts expectations.
Chief executive Rob Adams said financial market uncertainty combined with fund outflows had hindered the company's performance.
Markets continue to favour growth over value.
Perpetual "was also impacted by prolonged low volatility, record low interest rates, and an extended market cycle favouring passive and growth investment styles, meaning our value style underperformed when compared to the broader peer group," Mr Adams said.
Most of Perpetual's profits are generated by its funds management arm, Perpetual Investments, an "active", asset-picking manager, which is under pressure from low-cost index-tracking funds.
"Markets continue to favour growth over value," the company said in a statement.
"Net outflows (largely from institutional clients) reflect a shift of larger superannuation funds to managing investments internally and changing asset allocation."
The company said its long-term outlook remained strong, bolstered by people's growing need for investments, advice and income in retirement.
However, "given the sensitivity of Perpetual’s revenue and profitability to movements in Australian equity markets, net flows, and investment performance, near-term results are subject to significant variability, particularly during periods of high market volatility as experienced during [financial year 2019]."
The company will pay a final fully franked dividend of $1.25 per share, taking the full year payout to $2.50 per share – down 9 per cent on fiscal 2018-19.
Perpetual shares staged a big recovery – along with the equity market – early this year, climbing from $30.67 to a peak of $44.43 last month. They have since lost momentum, closing on Wednesday at $36.37. They traded 2.85 per cent lower at $35.34 as of 10:43am AEST.
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