With this curiously worded press release
last week, Perpetual Trustees, one of the country’s premier fund
managers and a long time driving force toward better transparency and
corporate governance, has badly dented that reputation.
To put it bluntly, it has shot itself in the foot and only the Fin Review
thought so highly of the story that they quizzed Perpetual and CEO
David Deverall, who was recruited from Macquarie Bank Millionaire
Factory last year, about the $52 million self-enrichment program.
Perpetual is doing is planning to issue shares to a select group of
employees with a value of $52 million. Its designed for a group of
unknown but high performing fund managers, but presumably includes the
likes of former Age and SMH business reporter John
Sevior and Matt Williams. Perpetual will not say how many, except that
it is five to ten people, nor will it give any idea of performance
hurdles. The AFR quoted Deverall saying the issue of 988,324 shares at an issue price of $53.12 each, as a “very good outcome for everybody”.
is separate to the $28 million equity issue to four Bank of Ireland
fund managers to bring them onboard at Perpetual and establish an
international fund management business in Ireland.
shares peaked at $67 in February and sank to $51.49 on Friday before
jumping $1.30 to $51.79 in early trading Monday when news of the issue
Perpetual has had problems holding fund managers:
the best known, Peter Morgan, left to start his own company 452 Capital
three years ago. Perpetual lost more than a $1 billion in funds under
management as a result, so you can understand them trying to lock in
the remaining talent.
One curious point was that the
announcement was in the name of Perpetual’s Human Resources “Group
Executive” Steve Rowe and not CEO Deverall. You’d think on an issue
with some controversy like this that the statement would be issued in
the name of the CEO who would stand up and defend it.
has maintained a low profile at Perpetual since joining from Macquarie
Bank. The way of rewarding his select group of fund managers in a
secretive way has the hallmarks of a Macquarie Bank approach. Perhaps
Deverall should heed the words of Warren Buffett, the legendary US
investor who told his annual meeting at the weekend that he never gives
his managers targets because that might encourage them to take risks or
do something that might cost the company money.
While the size
of the package will upset many, the lack of disclosure, especially the
performance hurdles, is particularly offensive. If it’s good enough for
the CEO and others, its good enough for fund managers.
bottom line from this whole saga is that funds management remains one
of the great gravy trains, courtesy of Paul Keating’s superannuation
guarantee charge. Many fund managers still gouge close to 2% a year out
of what is now a $700 million pool of money, and those that can claim
to have created value can write their own tickets. Look no further than
what Chris Cuffe and Greg Perry extracted out of Colonial.
Perpetual used to be regarded as one of the cleanskins, but on Friday they lost their innocence.