Perpetual’s outgoing managing director, David Deverall, has brushed aside criticism that the firm’s Exact Market Cash Fund (EMCF) was a mistake.
Perpetual’s EMCF made a $14.9 million after-tax loss in the first half of 2009, but then made an $11.1 million after-tax gain in the first half of 2010.
The firm has recently given guidance that it expects to generate further profit from the EMCF in the 2010 financial year.
“The product is still a very good product. It serves a really useful purpose for the clients that are looking for a very regular return on their cash,” Deverall told Investor Weekly.
“I mean the blowout in spreads were just mind-bogglingly unprecedented, if that’s an expression you can use.
“But we were able to differentiate between what was happening in the markets and the panic that was taking over markets versus the underlying quality of the portfolio we had there and so we never doubted the quality of the portfolio.”
His comments came after Intelligent Investor senior analyst James Greenhalgh said the EMCF was an “ill-designed product” and he was relieved when the Perpetual chief announced his resignation on 23 June.
“We have to admit to a certain relief at the announcement that Perpetual’s managing director David Deverall will resign,” Greenhalgh said.
“Subsequent failed expansions and ill-designed products such as the EMCF show that we were right to be worried.”
Deverall said the EMCF would make Perpetual “massive money” this year.
“With the EMCF it was a case of having mark-to-market losses as credit spreads blew out during the global financial crisis. But we held our position, spreads have come back in, so I think this year you will see we make very significant profits on the EMCF,” he said.
