Virus spike just a ‘hurdle’ in return to growth: Perpetual

The threat of a broader second virus wave, hasn’t shaken the fund manager’s view of an economic recovery, tipping a “good return to growth”.

Perpetual CEO Rob Adams.

Perpetual chief Rob Adams says the spike in coronavirus cases in Melbourne, and threat of a broader second wave, hasn’t shaken the fund’s views of an economic recovery, tipping a “good return to growth”.

“The rise of COVID-19 in Victoria­ is unfortunate, especially as business and consumer confid­ence had been on the improve.,’’ Mr Adams said.

“The most recent spike won’t change our views, but we have some hurdles to get through first.

“We are in an incredibly lucky position in Australia, we can’t take that for granted.

“The fact that we have had some spikes shows that to be true.”

Perpetual’s Melbourne team of roughly 180 staff has reverted to work-from-home arrangements as the state grapples with harsh lockdowns across 37 postcodes, and threats of penalties if restrict­ions are breached. 

If anything, the pandemic has highlighted opportunities for ­Perpetual’s latest acquisition, Boston-based ESG investor Trillium Asset Management, which ­man­ages a $5.7bn portfolio of investments based on environmental, social and governance principles.

Mr Adams noted that events of the past six months — first the summer­ of bushfires, then COVID-19 and rising US racial tensions — had galvanised the importance­ of the sector and the potential for greater returns.

The Trillium global equity fund as at March 31 delivered gross returns­ of 6.42 per cent over 10 years, versus a benchmark of 5.88 per cent and, according to chief Matt Patsky, has had markedly less volatility during the coron­avirus rout.

“ESG is no longer just a tick-the-box exercise, the weight of money investing in true ESG, as opposed to simplistic greenwashing, that will impact investment,” Mr Adams said.

“These are real, fundamental issues to the successful operation of companies and C-suites around the country are taking notice.”

Perpetual plans to launch a Trillium ESG offering in the local market in the first half of the year alongside broadening of its US distribution, followed by expansion into Europe “as soon as COVID-19 and travel restrictions subside”.

US chief Mr Patsky described the deal as the perfect comple­ment of “product long” Trillium, which was short on distribution, and Perpetual, which has the distribution, thanks in part to the huge $2.7tn superannuation pool, without the product breadth.

“The same problems plaguing the core Perpetual investments division are those helping out the ESG universe,” Mr Patsky said, in a nod to the fund’s struggle to stem outflows, losing $800m in the March quarter. “There are a lot of investors moving out of Australian active equities and into more ­global investments, including a growing appetite for the integ­ration of ESG.”

After a tumultuous six months on global markets, he added, volatili­ty in integrated ESG portfolios had been much lower than the overall market “because we are moving into higher-quality companies that are better able to respond to the multiple crises”.

Mr Patsky called out Facebook for its response to social justice issues­ as a key example of the power of investing along ethical principles, noting the move was now hitting the tech giant’s bottom­ line as businesses take steps to boycott the platform.

Similarly, he added that employ­er responses to COVID-19 and racial injustice would have a “huge impact on reputation”.