Perpetual Limited investors head for the exits

Australian equities fund manager Perpetual Limited (ASX: PPT) today announced net fund outflows of $400 million for the quarter ending March 31 2016, including $100 million in outflows from the Australian equities channel.

Overall funds under management (FUM) were down $1.1 billion for the quarter, as market falls shaved another $700 million off total FUM, which stood at $29.8 billion at quarter end.

What may have worried some investors are some of the recent calls by the group’s equities team that include an estate agent, free-to-air television broadcaster, department store operator, and personal injury law firm. Let’s take a look at some of them.

McGrath Ltd (ASX: MEA) shares fell 30% today and are down around 45% since February when Perpetual bought up 11.56% of the estate agency. By March 2016 Perpetual had increased its stake to a substantial 13.23% – just in time for today’s huge price falls. Real estate agents are hardly a classic share market investment and the price falls come as little surprise to many.

Shine Corporate Ltd (ASX: SHJ) shares plummeted around 75% in a single day in January 2016 just after Perpetual had disclosed a 5.01% stake in the personal injury law firm in December 2015.

Nine Entertainment Co Holdings Ltd (ASX: NEC) shares fell around 25% in a single day in April after Perpetual had built a substantial 10.39% stake in the television broadcaster by March 2015. The tough outlook for free-to-air TV due to the fast-rising competition from online and new media is no secret as the sector continues to experience falling advertising revenues.

Myer Holdings Ltd (ASX: MYR) shares fell nearly 30% in a single day in September 2015 at a time when Perpetual held about 9.79% of the department store. If you’re ever out shopping and want to escape the crowds a good tip is to head into a department store operated by Myer. However, Perpetual remains a big backer of the department store as it fights rising competition from overseas fast-fashion rivals and the rise of online shopping.

As at March 31 2016 Perpetual’s Wholesale Industrial Share Fund had lost 27.15% of its value over the past year, while the Australian Share Fund had lost 22.8% of its value.

Given some of the embarrassing returns recently, it’s no surprise FUM is heading out the door again.

In fact, total group FUM of $29.8 billion is only marginally ahead of group FUM of $27.7 billion recorded on July 31 2010, nearly six years ago!

Over the past 10 years Perpetual shares are down 38% and today’s news of quarterly outflows doesn’t do much for the outlook.

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Motley Fool contributor Tom Richardson has no position in any stocks mentioned.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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