Investors’ hunt for yield boosts Perpetual funds

Cash and fixed-income inflows boosted Perpetual’s funds under management in the December quarter.

Perpetual chief executive Rob Adams

Cash and fixed-income inflows boosted Perpetual’s funds under management in the December quarter as investors searched for yield in a ultra-low interest rate environment.

In a quarterly update on Wednesday, Perpetual reported funds under management of $26.3bn at year’s end, up $200m on the prior quarter.

The move is the fund’s first quarterly net inflow since March 2017, after a period chief executive Rob Adams has described as a “difficult year”.

Inflows of $1.1bn to Perpetual’s cash and fixed-income asset class were the key driver amid slowing global growth and rate cuts from central banks.

In the same period the Reserve Bank cut rates to historic lows of 0.75 per cent and investors weighed up a “lower for longer” narrative, with potential for quantitative easing.

The fixed-income and cash asset class now makes up more than a third of Perpetual’s funds under management, with $8.7bn invested.

Over the past year the group has fought hard to defend its value stock-picking model as its own funds underperformed those tracking the benchmark S&P/ASX 200. The local market clocked an 18.4 per cent gain for 2019, beating the Perpetual Australian Share fund return of 16.17 per cent.

The growing popularity of passive investments and the escalating number of super funds veering away from external managers in favour of bringing mandates in house has weighed on Perpetual’s fund flows.

In the last quarter, Perpetual lost $800m from its Australian equities arm, taking its 12-month drain from the asset class to $5.6bn. The fund said the outflows were primarily from its intermediary and institutional channels. Its total funds under management in Australian equities is now $15.4bn, while global equities at $1.3bn.

Sluggish performance has been a driver of cost cuts at the fund. In August, Mr Adams said he was setting a new operational model for the group, with hopes to save between $18m and $23m.

Perpetual shares rose 0.35 per cent to $42.72.