The S&P/ASX 200 Index (ASX: XJO) is having a rather miserable end to the trading week this Friday. At the time of writing, the ASX 200 has retreated by a nasty 1.03%, wiping much of the gains that we’ve seen this week. But let’s talk about one ASX 200 share that is faring far worse this session.
It’s Perpetual Ltd (ASX: PPT). Perpetual shares are having a day to forget indeed. After closing at $25.90 a share yesterday, this ASX 200 share opened at $25.55 a share this morning but quickly dropped to as low as $23.13 a share (down 10.7%).
At present, the shares have bounced off of that low, but are still down a substantial 7.57% at $23.94 a share
So what’s going on here that has seen this ASX financial services company and fund manager drop so precipitously?
Why did this ASX 200 share tank 10% today?
Well, it looks like this hefty fall is an acceleration of the pessimism we saw yesterday, with the company’s milder 1.5% drop. This was prompted by the release of Perpetual’s latest quarterly update. This update covered the three months to 30 June 2023.
The report revealed that Perpetual’s total funds under management (FUM) over the quarter increased by 0.8%, or $1.7 billion, to $212.1 billion.
That might seem positive, but the ASX 200 share also revealed that it recorded $5.1 billion in fund outflows over the quarter. The total FUM figure was saved from a drop thanks to investment performance contributing $4.5 billion to the total, with another $2.4 billion coming from positive foreign exchange movements.
The outflows mostly came from the company’s global and international equities strategies and fixed income divisions.
Perpetual also provided some guidance for the 2023 financial year, revealing that the company expects expenses to rise by 40% over FY2023.
Higher costs and fund outflows weigh on Perpetual investors
This includes costs related to the acquisition of Pendal Group, as well as “a number of one-off expense items such as expenses related to an IT security incident and outperformance in Wealth Management’s PriorityLife business, resulting in an earnout”.
Here’s some of what Perpetual CEO Rob Adams had to say on these numbers:
We have continued to focus on integrating Pendal Group into our business and while we are only six months in, we have already made solid progress in delivering the synergy benefits of the acquisition which are tracking to plan…
As foreshadowed in our third quarter business update, the macro environment has remained challenging and is driving general caution towards equities, particularly in the US…
Investment performance across the Group remains strong with 79% of the Group’s strategies outperforming their benchmarks over the important three-year time horizon. In particular, we have seen very strong investment performance in Perpetual Asset Management, in Australia, and Barrow Hanley and TSW in the US.
Even so, ASX investors seem mightily unimpressed by this update, judging by the lacklustre share price performance we have seen with this ASX 200 stock today.
The Perpetual share price remains down by just over 3% year to date, as well as by 20.7% over the past 12 months:
