Perennial fund off to flying start

Perennial Investment Partners has formed a new subsidiary to offer value-style management in equities and has already attracted $50 million the new fund.

Perennial Investment Partners has formed a new subsidiary to offer value-style management in equities and has already attracted $50 million the new fund.

The new subsidiary, called Perennial Value Management (PVM), will be headed up by former Westpac Investment Management head of equities John Murray.

The board of PVM will consist of Mike Crivelli, one of the founders of Perennial, Ian Macoun, Perennial chief executive and Murray.

The investment team will comprise five investment professionals. Key executives of PVM will be able to earn equity in the company, with Perennial as a major shareholder committing financial, marketing and administrative support.

Murray believes the value style is a proven means of generating long-term returns, despite the investment style being out of favour for the past couple of years.

While major fund managers like Maple-Brown Abbott and Perpetual offer the value style, Murray believes there is room for another player.

“Both globally and in Australia, valuation differentials between value and growth stocks are at or near all-time highs,” he says “This is highlighted by comparing the Frank Russell/ASX Value and Growth indices. During the last two years, value stocks have moved from a 20 per cent discount to growth stocks (based on P/E’s) to a 34 per cent discount and from a 27 per cent discount to a 46 per cent discount on a price to net tangible asset measure.”

Murray believes these differentials are unsustainable, as many good-quality value stocks are simply becoming too cheap for investors to ignore them for much longer.

“The recent take-over bids for Pioneer and Siddons, both of which featured in value portfolios, are positive signals confirming this view,” he says.