Perpetual merger spooks some to the tune of $1.2bn but assets under management are up

While $1.2bn was pulled from Perpetual ahead of its merger with Pendal, its total assets under management grew.

Vince Pezzullo and the man he replaced as head of equities, Paul Skamvougeras. Picture: Hollie Adams

Some $1.2bn was pulled from Perpetual funds ahead of the investment house’s merger with Pendal – but total assets being managed rose, buoyed by a higher market.

In an update, Perpetual said it had received the sign-off from 98 per cent of Pendal clients by revenue to bring their managed funds into the combined group.

Assets under management at Perpetual rose 4 per cent over the prior period – the three months to the end of September – and came in at $93.7bn on December 31.

Perpetual chief executive Rob Adams described the period as a “significant quarter”, and that the Pendal deal was on track to be finalised on Monday.

Perpetual chief executive Rob Adams. Picture: John Feder

“The acquisition will see Perpetual substantially grow its asset management business, creating a leading global multi-boutique asset management firm focused on active asset management, with a truly global distribution footprint and leading ESG investment strategies – better positioned to manage industry headwinds and to drive future growth,” Mr Adams told investors.

“Despite what was a very tough operating environment in 2022 for asset managers, Perpetual has ended the December quarter in a strong position. All areas of our business experienced growth in the quarter.”

The company expects underlying net profit after tax for the six months to December 31 to come in between $65m and $70m.

“Perpetual remains on track to deliver FY23 expense growth at the higher end of its previously stated expense guidance,” it said in a statement, adding that guidance for the combined group would be provided in an update in April.

Total assets rose from $89.8bn on September 30 to $93.7bn – hit by outflows of $1.2bn and foreign exchange impacts of $3.8bn. But they were more than offset with a $8.9bn boost from the market.

Perpetual head of equities Vince Pezzullo.

Perpetual’s US equities strategies saw outflows of $2.7m, offset by inflows of $2bn into the global equities strategies in the quarter.

Vince Pezzullo was, in the period to December 31, promoted to head of equities after the departure of Paul Skamvougeras.

Morgan Stanley analysts Andrei Stadnik, Charlie Hall and Sally Zhou said the guidance was “well ahead of consensus”, while funds were “modestly ahead”. It was the smallest funds outflow in 15 months, they added.

Credit Suisse brokers said the update “displayed trends that were positive and were either in line or ahead of expectations with the exception of asset management flows (which at least improved QoQ)”. “Stronger asset balances and higher-than-expected (first half underlying profit) guidance led us to upgrade EPS (in the merged group)” by 10 per cent this year, 7 per cent in the next financial year, and 6 per cent for the 2025 financial year, the Credit Suisse analysts wrote.

Further clarity on the (first half) earnings beat will be required to assess its sustainability, but we expect it to be at least partly driven by core revenues,” the note to clients reads.

Mr Adams, who was unavailable for an interview on Friday, said Perpetual had “benefited from a rebound in equities markets in the quarter”.

“US equities continued to be a tough segment for our business, consistent with industry trends,” Mr Adams added.