Perpetual Suffers $547M Loss Amid $12B Fund Outflows from Pendal Subsidiaries

Perpetual (ASX: PPT) is set to take a significant $547 million hit to its bottom line, following substantial net outflows from two offshore subsidiaries acquired through its $2.5 billion takeover of Pendal last year. The Sydney-based investment manager first hinted at challenges within its $200 billion asset management division last month, citing a difficult quarter marked by net outflows, market volatility, and currency fluctuations.

Today, Perpetual disclosed the full extent of these challenges, revealing that Pendal’s subsidiaries, J O Hambro and TSW, experienced net outflows of $8 billion and $4 billion respectively during FY24. As a result, the company will recognize a non-cash impairment charge of approximately $547 million before tax in its upcoming financial results.

Perpetual attributes the outflows to “key strategies” implemented by J O Hambro and TSW, which underperformed, particularly in the latter half of the financial year. The impairment charge includes $417 million against the carrying value of goodwill for J O Hambro and $130 million for TSW.

The J O Hambro and TSW businesses were inherited as part of Perpetual’s acquisition of Pendal in January 2023. At the time, the merger was heralded as a significant union of two major Australian financial services firms, positioning Perpetual as a leading global asset manager.

However, in May, Perpetual announced a strategic review of its operations, which led to the decision to sell its Wealth Management and Corporate Trust businesses to private equity firm Kohlberg Kravis Roberts (KKR) for $2.175 billion. Perpetual will retain its Asset Management division as a standalone business.

This strategic shift has also resulted in the resignation of CEO Rob Adams, who will deliver his final earnings report this Thursday, ahead of Bernard Reilly assuming the role on 2 September. Adams previously noted the mixed performance of the company, with the Corporate Trust and Wealth Management divisions performing steadily, while the Asset Management business faced challenges from client redemptions and delayed inflows.