Perpetual Investments saw net outflows of $800 million during third quarter, which combined with COVID-19-related market declines, led to its funds under management (FUM) decreasing by 19 per cent to $21.4 billion.
The outflows were primarily from Australian equities ($600 million) and cash and fixed income ($200 million).
Notably, cash and fixed income strategies represent 39 per cent of the division’s FUM.
Total average FUM for the three months to 31 March was $25.2 billion, compared to $26.3 billion in the previous quarter.
Although the advice segment, Perpetual Private, had positive flows of $200 million for the quarter, it was offset by negative market movements, ultimately leaving it with its 13 per cent decline in funds under advice (FUA) over the quarter to $13.2 billion.
But total average FUA for the quarter was $14.9 billion, no change from the average from the six months ended 31 December.
Chief executive and managing director Rob Adams stated although it had been an “extremely challenging quarter”, Perpetual is in a strong financial position, with its available liquid funds of $305 million being above total base capital requirements of $169 million.
“Unlike ‘pure play’ asset managers, more than 40 per cent of our total revenues are not directly linked to investment markets, which [provide] us with some protection from global investment market volatility,” Mr Adams said.
Perpetual has revised its cost growth guidance down from 4.5 per cent to a range of 2.5-3.5 per cent for the full year.
The group has already taken steps to reduce its costs, implementing a new operating model with a redesigned and “more nimble” workforce, use of automation and elimination of duplicated activities.
The initiative, Mr Adams said, remains on track to be completed by the end of June, but Perpetual is seeking more ways to cut costs.
“Given the current environment, we have identified further cost-saving opportunities and now expect expense growth of approximately 2.5 per cent to 3.5 per cent for FY20,” he said.
“We will continue to seek efficiencies across our businesses as we respond and adapt to the broader economic impact of COVID-19.”
He added the group has continued to add advisers, despite the fall in funds in Perpetual Private.
“We welcomed 12 new advisers this quarter across our Melbourne and Sydney offices, with one more to join later in the year,” Mr Adams said.
“These additions will mean that we have added 20 new advisers since we commenced this growth initiative, taking our total number of advisers at 31 March to 82. We are now starting to see positive flows from our new advisers as they transition their clients across to Perpetual.
“We have also started to see benefits from the recently acquired Priority Life business. As a specialist risk advisory firm working specifically with lawyers, medical professionals and owners, it has been pleasing to see a steady increase in the level of cross-referral of clients between Priority Life and our Private Client advisory teams.”
Meanwhile, Perpetual Corporate Trust won new mandates over the quarter, with its funds under administration slightly climbing by 1 per cent for the period to $782.9 billion.
“Over the March quarter, our Managed Fund Services (MFS) business continued to benefit from the growth in investment in Australian real assets, which [remain] an attractive market for both domestic and foreign investors,” Mr Adams said.
“The business also benefitted from the market continuing to shift to appointing independent responsible entities.”
Perpetual added its acquisition of US ESG specialist Trillium Asset Management is still on track for completion by 30 June.
But the sale for US$36 million day one consideration was hedged prior to the depreciation of the Australian dollar in late February.
Mr Adams commented work has commenced on the launch of an Australian domestic fund to take to institutional and retail investors, using Perpetual’s distribution network.
“Chuck Thompson, our head of distribution and corporate strategy – Americas is now on board and has been working closely with Trillium to build out their product and distribution strategy,” he said.
“Our strategy remains clear. We believe that adding world-class global investment capabilities to complement our existing Australian capabilities will set up the business for long-term success. We do note, however, that current market conditions may make execution of transactions more difficult in the shorter term.”
