Perpetual reviews Fidelity alliance

Perpetual Trustees Australia has hinted its funds management arm, Perpetual Investments, may consider developing an in-house international equities division by building its own manufacturing capabilities in place of its existing relationship with US-based Fidelity Investments.

Perpetual managing director David Deverall says he has commissioned his senior staff to formulate a strategy on how the group can best approach opportunities in the global equities arena.

“There is a very large market in the global equity space, [so] it’s a very important and strategic question to get right. I’ve asked my team to come back to me with an assessment as to what our potential response might be,” Deverall says.

According to Deverall, the review could see the group develop an international equities in-house capability, although at the other end of the spectrum he says the review may in fact result in Perpetual consolidating its alliance with Fidelity.

Perpetual sources $2.5 billion to Fidelity for it to invest in global equities.

Deverall, speaking after announcing a 16 per cent rise in net profit for 2004 of $90.4 million, says the group has developed a new three pronged strategy.

These strategies are to develop a more balanced portfolio, create new sources of growth for the group and to fully engage its team to deliver on the strategy.

In essence Deverall says Perpetual will focus specifically on the investment and advice ends of the value-chain, with a reduced focus on administration.

“The middle part of the value chain, which we broadly call administration, is very much a scale driven part of the industry and we’re not necessarily looking to focus on that part of the market,”

However Deverall stressed that Perpetual’s WealthFocus platform will remain integral to the business, although elements of its administration will be outsourced.

“WealthFocus is an important product for us in terms of defending and potentially growing our retail funds under management. [However] there are components of the product offering that we are actively looking to [outsource],” he says.

Deverall says the group will seek a more balanced portfolio in terms of return on capital and will include the restructuring of its advice business in order to improve customer service and profitability.

He says there will also be a continued focus on cost management along with expanding its product range to include offerings from the mezzanine debt and hybrid areas.

Perpetual will also appoint a new credit team of three next week to focus specifically on the Australian credit market, Deverall says.

As for profit the group announced an increase in after tax operating profit of 29 per cent to $88.2 million for the year ending 30 June 2004, to exceed the minimum 25 per cent forecast to shareholders in May.

Meanwhile Perpetual chairman Charles Curran, says the board has reviewed the firm’s capital management policy and will return surplus capital to shareholders by way of an additional special dividend.

“The board has determined that Perpetual’s dividend policy in the future should be set at a 90 per cent pay-out ratio of Perpetual’s underlying profit, which is our net profit after tax before goodwill amortisation and before gains or losses on investments,” Curran says.