Christine St Anne: Perpetual Investments was recently awarded Morningstar's Australian Fund Manager of the Year. It comes after some recent stellar half year results. Today, I'm joined by Perpetual's Chief Executive, Geoff Lloyd to look at some of the highlights and challenges for the business. Geoff, welcome.
Geoff Lloyd: Thank you. Thank you for your time today.
St Anne: Geoff, firstly congratulations on your reward. Now the strength of the equity market is a key driver behind your business. How do you steer Perpetual through volatility and how do you capitalize on the good times?
Lloyd: Right, I think in Perpetual Investments, it's actually about performing throughout cycles and Perpetual as a deep value active manager has outperformed many cycles and we've worked really hard, the quality of our asset management team and the leadership there under Matt is second to none. It also has within Perpetual Investments, equities, income and multi-sector, and so our funds are sort of two-thirds, one-third there and that brings a lot to our process, brings a lot to our brand and what we stand for, but it does help us perform throughout cycles, but look it all comes down to the quality of our people, and the process that's been embedded as part of Perpetual's culture through all leadership and then that's something we're very honored to have been recognized by Morningstar. It's something that the team don't go out to achieve, but particularly winning Fund Manager of the Year two years in a row is a great honor for Perpetual, something we're very humbled by, but ultimately we're most proud that we've been delivering great returns for retirees now for many decades and that's just hard work.
St Anne: Geoff, on the point of a quality investment team, you've had some high profile departures. How do you manage key person risk?
Lloyd: Well, Perpetual's managed that key person risk over 20 years, I think, more than any other business that I can think of in Australia and so, it's always been about the team and every one of those departures have said that before they left, they said that, when they're leaving and they've said that since and they like the current leadership, particularly in equities under Matt. We're very proud of the team that they're building. The depth and breadth of our team at Perpetual is the best it's been for over a decade. The talent in there, their commitment to the client and to each other, it's quite a competitive environment. There's no doubt and it's a collaborative environment as well and they have a little fun. They do that though, starting at 7.00, they're the first team in this building and they're the last to leave and they're focused on delivering those returns consistently. It's not just peaks and troughs of performance. This is a team like no other. It's unrivalled to have consistently delivered over our flagship funds of one, three, five, seven and 10 years.
St Anne: Your recent half year result highlighted the success of the transformation project. Geoff, what were the challenges of bringing the cost efficiencies to the business?
Lloyd: Well, the program's about fixing Perpetual and growing it. So, it's a lot more than just cost-out. Actually, it was about transforming our business, which is something you have to do. Change is something that happens to you and we chose the path of significant change which meant transformation and that meant that we needed a great strategy, we needed courage to execute it, we needed to make sure that we had clarity of what we'd be and what we wouldn't be and what we do, what we wouldn't do and have conviction through that.
Now, 18 months on, that hard work has really started to deliver even more results for our shareholders and for our staff, but it's about clarity and control and we set that path, we had that conviction and the people at Perpetual rallied around that change. They helped drive that change. Unfortunately it meant, we did lose a lot of staff, but we got back to the core of Perpetual and what made it great and that's something that people were equally excited about and wanted to see happen.
St Anne: We of course have a growing compulsory super system. Geoff, what are the competitive advantages of a business like Perpetual and what are you doing to reinvest in them?
Lloyd: Well, unrivalled performance is our competitive advantage in Perpetual Investments, and that's about our people and our process, and so, at the moment, we're investing in different talent programs, high performance and measurement around high performance, the accountability for all that, reward and recognition, all those things are sort of easily said. It's about getting even better at them.
St Anne: So Geoff, are you looking at expanding that unrivalled performance to include other funds perhaps in the global equities area?
Lloyd: Well, we've certainly been expanding our product set, as I said, over – for the last 5 to 10 years, Perpetual is no longer just an Aussie equities manager, a third of our funds under management are in income in multi-sector assets. Within equities, we've continued to expand what we call extensions from the core industrial strategy. So, the last half, we've launched a Pure Value Micro Fund and that's been really important to showing continued growth there. These are concentrated conviction strategies with higher margin and performance fees attached to them.
Prior to that, we've launched a Pure Equity Alpha Fund, a Long-Short Fund and so we've got a good track record now of five plus funds, plus our Diversified Income Fund. So, at a time when Australians are looking for more income, less growth as their life stages change, our Diversified Income Fund with five plus years is really now starting to have traction in the marketplace.
St Anne: Finally Geoff, as a relatively newish CEO, how are you enjoying the role?
Lloyd: Well, look I joined Perpetual for the growth opportunities that I knew it always had. It's a wonderful brand. It's got a great culture. It's got a heritage, second I think to no other business. Independence that we have, for now, a 127 years mean something post the GFC. So, you've got to believe in it. You've got to have the passion and energy every morning to think about our clients and our staff and how we're going to care for each other. It's a really lovely place to work. It's a challenging environment for everybody and we think we've got a lot more to do.
St Anne: Geoff, thanks so much for your time today.
Lloyd: Great, well, thank you.