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This listed fund manager just posted record profits and a 16% dividend uplift

The financial sector may be under a cloud but that hasn’t stopped the share price of Pendal Group Ltd (ASX: PDL) from surging 8.4% in early trade to $9.97 after management reported record interim profits and a nice bump in its dividend.

Pendal, formerly called BT Investment Management, posted a 30% surge in its cash net profit to $114.5 million for the six months to end March 2018 and declared an interim dividend of 22 cents a share (15% franked), up 16% from last year.

This is the sixth consecutive year that management has lifted its interim dividend and its results stand in contrast to the disappointing market updates from AMP Limited (ASX: AMP) and Magellan Financial Group Ltd (ASX: MFG).

Pendal’s record result was driven by strong performance of its funds, increasing base management fees, improving base management fee margin and the weakening Australian dollar.

The good performance of its funds has not only lifted its Funds Under Management (FUM) by 9% to $99 billion, it has allowed the group to collect performance fees worth $47.6 million – a whopping 70% increase over the same time last year.

The outlook for global equities remains positive for the rest of 2018 and the Australian dollar is likely to stay on the back foot as well, in my opinion. This bodes well for Pendal’s second half performance, although the fund manager, like many of its peers are suffering from net fund outflows due to redemptions.

Management reported net outflows of $2.1 billion that is driven by changes to Westpac Banking Corp’s (ASX: WBC) MySuper portfolio, a big mandate loss in one of its UK funds and outflows from another European collective investment vehicle.

MySuper is a low-cost super product that is a federal government initiative and further reconfiguration of the MySuper portfolio is expected to suck out a further $2 billion from Pendal’s FUM in the current half year.

There’s no mention of the impact from the federal government’s plan to ban exit fees from superfunds that was announced when Treasurer Scott Morrison handed down the budget on Tuesday evening, although this could impact the platforms like Link Administration Holdings Ltd (ASX: LNK) rather than fund managers.

Pendal isn’t the only fund manager with good news for investors. The share price of Platinum Asset Management Limited (ASX: PTM) surged over 8% on Tuesday on higher FUM for April.

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Motley Fool contributor Brendon Lau owns shares of Westpac Banking. The Motley Fool Australia owns shares of Platinum Investment Management Limited. 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 Scott Phillips.

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