Australian equity manager Perpetual Limited (ASX: PTT) this morning announced it had seen net fund inflows of $500 million for the three months ending 31 December 2014. As at that time total funds under management (FUM) stood at $31.8 billion.
Once again it seems as though Perpetual is far from piling on the FUM when you note that $250 million of inflows came about due to the recent launch of Perpetual Equity Investment Company Ltd (ASX: PIC). Indeed, the cash and fixed income business saw net outflows of $200 million over the quarter.
Overall, when discounting the one-off effect of the PIC listing net FUM inflow was $250 million for the quarter, hardly an amount to set investors' pulses racing.
For a long while now the group's Achilles' Heel has been the seeming inability to translate decent investment performance into significant net fund inflows.
Indeed net retail FUM flows have failed to gain any real traction over the past two years and institutional business development has been patchy at best. If Perpetual is to justify the buy ratings of several analysts it will need to see better results from the strategic refocus on its sales and distribution strategy.
Indeed those considering the investment case may look back in concern at a prior 10-year period which has seen the stock fall more than 25% in value. The disappointing long-term returns, despite a recent five-year equity bull market, huge cost-cutting program, and the significant tailwind of Australia's compulsory superannuation system.
What's more is that having taken at least two years to cut costs in response to the reality of the GFC, Perpetual has been slow to react to the opportunity to grow by offering more international equity products. Until recently the almost exclusive focus was on Australian equities, with management fees also higher than some other fund managers.
To add to the embarrassment is the fact that other more dynamic fund mangers like Magellan Financial Group Ltd (ASX: MFG) and Platinum Asset Management Limited (ASX: PTM) have been able to grow far larger in market size despite being in existence for only a relatively short period of time.
Perpetual does have a private wealth advisory and trustee business that sit alongside its core asset management business, although neither of these businesses are expected to shoot the lights out anytime soon.
Selling for $45.54 Perpetual is trading on around 17x analysts' estimates for financial year 2015's earnings. Investors may be better off looking elsewhere for businesses that are exhibiting potential to deliver out-sized returns.
