Poor Returns and Portfolio Manager Change Lead to Lower Fair Value and High Uncertainty on Perpetual

Founder Evidente. Top rated quantitative analyst, Evidente

Sam Ferraro

Founder Evidente. Top rated quantitative analyst

Evidente

Evidente is an independent financial education firm that delivers innovative financial advice to wholesale investors, including active long only funds, hedge funds, pension funds, and sovereign wealth funds, in Australia and globally.  Drawing on academic research in asset pricing, behavioural finance and portfolio construction, Evidente provides wholesale investors with commercial solutions to stock selection and asset allocation decisions across equities and other asset classes.

Equity Bottom-Up

<ul><li>Perpetual dived by over 6% on the announcement that it had suffered a net outflow of A$1.6 billion outflow in the June quarter, its biggest quarterly outflow in&nbsp;more than three years.&nbsp;</li><li>The announcement is a sign of the times and should&nbsp;re-focus investors' minds on the structural&nbsp; headwinds facing Australia's domestically focussed asset managers: lack of scale, domestic focus, poor penetration in fast growing segments, ASX200's poor diversification attributes, the backlash against active management, and the growing influence of asset owners.</li><li>Given the consensus EPS outlook for Perpetual, the stock's book&nbsp;multiple is not&nbsp; stretched&nbsp; But against the backdrop of powerful and persistent structural headwinds, the growing risk is that analysts'&nbsp;ROE projections are too optimistic.&nbsp;&nbsp;I recommend that: long-only investors use any renewed price strength to reduce the size of their bets to zero weight; and hedge funds short the stock.</li></ul>

Perpetual dived by over 6% on the announcement that it had suffered a net outflow of A$1.6 billion outflow in the June quarter, its biggest quarterly outflow in&nbsp;more than three years.&nbsp;The announcement is a sign of the times and should&nbsp;re-focus investors' minds on the structural&nbsp; headwinds facing Australia's domestically focussed asset managers: lack of scale, domestic focus, poor penetration in fast growing segments, ASX200's poor diversification attributes, the backlash against active management, and the growing influence of asset owners.Given the consensus EPS outlook for Perpetual, the stock's book&nbsp;multiple is not&nbsp; stretched&nbsp; But against the backdrop of powerful and persistent structural headwinds, the growing risk is that analysts'&nbsp;ROE projections are too optimistic.&nbsp;&nbsp;I recommend that: long-only investors use any renewed price strength to reduce the size of their bets to zero weight; and hedge funds short the stock.

Perpetual outflow: Don't discount the structural headwinds

Perpetual Ltd

Perpetual outflow: Don't discount the structural headwinds