Perpetual flags job cuts after $2.7bn merger with Pendal amid client outflows

The fund manager targets job duplications while controlling ongoing client outflows, just three months after wrapping up its $2.7bn merger with Pendal.

Fund manager Perpetual said it would further reduce its global workforce as it integrates its business with Pendal Group, and reported $100m worth of client money was pulled from its funds in the third quarter of fiscal 2023.

The outflows reported on Thursday were an improvement from those from the $1.2bn pulled the previous quarter.

The Sydney-based investment house completed its acquisition of Pendal in January and said it had found an extra $20m in annual savings stemming from synergies since then.

That would take total synergies from the acquisition to $80m, achieved through reductions in management and role duplications, as well as the consolidation of vendor, product distribution and overheads.

“We’ve now been in place for three months now. So things like travel, entertainment, vendors, policies, etc. marketing consulting. We believe there’s more benefits there than we had originally thought,” said chief financial officer Chris Green.

“We’ve been able to identify further synergies – a combination of FTE (full time employee) synergies and non-FTE synergies across the globe as we’ve been able to get in there and understand the businesses better and identify further opportunities.”

Its immediate focus will be on executing the integration and on defining and implementing “an operating model for the combined business”, the company said.

Perpetual did not say how many jobs it expected to cut.

Total assets under management rose 4 per cent to $21bn for the three months to March 31, driven by the inclusion of Pendal’s AUM for the first time and positive market movements that offset the outflows.

Investors reacted positively to the update, with shares rising 3c to $23.85 on Thursday.

Analysts were also pleased, with Morgan Stanley noting the flows came above the investment bank’s estimate. Combined with the increased synergies, they said the update was “better than expected”.

In a release to the exchange, Perpetual admitted to having lost a mandate on its International Select strategy worth about $1bn from a longstanding client in the US after a trade publication in that country reported the exit. The outflow will be accounted for in the fourth quarter.

“That was disappointing news,” chief executive Rob Adams said at an investor call on Thursday, but added that the client remained in “other capabilities, so it’s an ongoing relationship.”

When talking about the pipeline, Mr Adams said Perpetual’s “performance profile” was “healthy and is getting healthier” adding that its track record was strong. Some 85 per cent of its strategies have outperformed their benchmarks over the three-year time horizon.

Mr Adams expected to see more investors seeking active equity strategies, which would benefit the group.

“We have seen a material improvement in our net flow position for the period across the newly combined group,” he said.

“We are on track with the integration of Pendal. It’s early days, of course, but across all key streams, we believe we’re nicely on track.”