Inside the business of funds management – Perpetual Ltd w/ CEO Rob Adams | Summer Series

Bryce: [00:00:15] Welcome to another episode of the Equity Mates summer series, proudly brought to you by superhero over 12 episodes where diving into some of the most exciting, interesting and well-known companies from both here in Australia and over in the U.S. in some instances will be hearing directly from the CEOs to give you firsthand insight into their companies. My name is Bryce and as always, I'm joined by my equity buddy Ren. How are you going? 

Alec: [00:00:38] I'm very good, Bryce. Great to be talking about one of Australia's oldest companies, a company that people probably don't pay a lot of attention to, but one that's that's pretty fascinating. So excited to get stuck into it today.

Bryce: [00:00:53] That's it. Ren We're talking about Perpetual, one of the largest fund managers here in Australia Perpetual Ltd, the ASX ticker is PPT. You can find it over on Superhero app and platform. And a reminder the summer series is brought to you by super superhero, who will allow you to buy Aussie and US shares and ETFs with no monthly account fees, and you can now earn Qantas points with Superhero. A reminder as well that you can win a thousand bucks off the back of this episode. To go into your superhero wallet or you need to do is. Listen to this episode, pull out some of your favourite facts about Perpetual and drop it in the comments section on our Instagram post about Perpetual and then Ren, and I will choose a lucky winner to to win that thousand bucks and you can start your investing journey, all thanks to superhero. So before we get stuck in, this is one of those episodes where we are fortunate enough to be hearing directly from the CEO. So the second half of this interview we're going to be hearing from Rob Adams all about his thoughts on Perpetual fund management, industry and all things for the future, as well as, yeah, everything that's going on in the funds management space. 

Alec: [00:02:14] Yeah, let's start at the top. And I think we wanted to start here by helping everyone conceptualise the industry because if you get straight into the way the company itself, it can sum its can sometimes get a bit messy into how this industry works. And us as retail investors, you know, we kind of look at these big financial institutions and sometimes they can sort of blur together and can not quite make sense who's who in the zoo. And that's because a lot of the zoo is meant for us. 

Bryce: [00:02:48] Well, like the little birds that are lucky enough to be floating around, we're 

Alec: [00:02:53] like flies in the zoo, like they don't make specific cages for flies. They sort of are just buzzing around everywhere. Not really. People aren't really paying any more. And sometimes you get swatted away or brushed away. Sometimes you land on the elephant and you sit there for a while, but no one come to the zoo to see the fall. So no, you 

Bryce: [00:03:14] know, I can see the flies. No one feeds the fly, the flies. 

Alec: [00:03:21] Sometimes some of the flies make a podcast to talk to other flies and able to quit their job full time. Yeah, but there's still a lot of flies, 

Bryce: [00:03:32] and hopefully one day the big lions and the elephants will pay attention to the fly. 

Alec: [00:03:37] Well, hopefully one day the flies can band together in like a Power Rangers style thing where they, you know, they make it all like Voltron, where they turn into a thing and then they get their own tides. But until then, they're just so that's how we conceptualise the industry. So we got 20 minutes to hit Perpetual before we speak to Rob, and we've spent two minutes talking about those. No, but when we conceptualise the industry, there are these big pockets of money out there. The sovereign wealth funds, the endowments, the family offices, the big pension funds. So superannuation in Australia, billions, hundreds of billions, trillions of assets under management sitting out there in the world that need to find a home and are looking for a return. And so there are thousands in Australia alone of fund managers looking to manage that money, probably tens of thousands, maybe even hundreds of thousands around the world who are who are basically marketing themselves to these big pockets of money and saying, Look at us, we'll manage your money. We've got this strategy will get you a particular return. And so you think about some of the big names in the fund management space, you know, platinum has twenty five billion assets under management. Magellan has 100 billion. Perpetual, who are talking about today, has 100 billion. Janice Henderson four hundred and twenty billion half trillion. And then even like the Vanguard's seven trillion or BlackRock nine point five trillion, these big asset managers, these big fund managers get that money from their customer. The. Who they're trying to service, which are the the big pockets of money, the sovereign wealth funds, the family offices, the endowments, the pension funds, the superannuation funds. So that's how the industry works. Basically, all these fund managers set themselves up to try and attract that money. Mm-Hmm. And there are a number of different sort of options offered to these big pockets of money in terms of how the money is invested. So you have the venture capital funds, the Andreessen Horowitz is the Sequoia, the blackbirds, the air trees. They're all fund managers in a sense, and they're all saying, Hey, big pockets of money. We have a venture capital strategy. Allocate your money with us and we'll invest it in venture style investing. Then there's private equity. Blackstone, KKR, Carlyle. Same thing. They're marketing themselves to the big pockets of money, saying how you allocated over here. Then there's indexing and passive strategies. Vanguard, BlackRock, State Street. Same thing. They're like, Send it away. Well, we've got the lowest cost indexes that we can manage for you property. You know, there's Texas and other property managers, there's bonds, there's fund managers like PIMCO. The list goes on and on and on. There's all these different strategies where Perpetual play is the same place that the Platinum's and the Magellan's play in Australia, which is a public equities strategy. You know, sometimes there's other strategies as well, but mainly here we're talking public equities. They're saying to the pension funds, the sovereign wealth funds, the family offices, the endowments. Send your billions of dollars over here and we'll manage it in our funds on your behalf. 

Bryce: [00:06:52] Yeah. So that's how we can conceptual conceptualise the industry. So and we're going to spend the next 15 minutes or so unpacking where Perpetual sits within that broader landscape. So Perpetual ticker PPT if you want to follow along. Check it out. It is one of Australia's oldest companies, and one of Australia's largest wealth managers started back in 1986 after a committee of businessmen and professionals, including future Prime Minister Sir Edmund Barton. They gathered in Sydney for the purpose of forming a trustee company and Perpetual Trustee Company Ltd was formed in 1886, and they've since grown to provide a number of different services in wealth management. They're obviously a leading provider in the trustees space, but they have four separate business divisions. The first is their Perpetual asset management, so they're an active manager for all the funds that Ren is just spoken about their Perpetual asset management international. So they have a, you know, multi boutique asset managers all around the world, the United States, UK, Europe, Asia, they've made a number of acquisitions in that space. The third arm is Perpetual private, so they have a dedicated team for family office. Really interesting space, the family office stuff. We should do more content around that. And then the fourth is the corporate trust. So that's the fourth leg of the business so that deep in wealth management. 

Alec: [00:08:22] Yeah, I'm just laughing at you saying we should do more content on family offices. We often get called a tease when we profile companies that aren't listed because they're inaccessible. We started doing a whole thing on family offices just like you're never going to get you made billions of dollars of fam intergenerational. 

Bryce: [00:08:44] Well, what I mean is just understand how they go about

Alec: [00:08:46] yeah, it is fascinating. And some of the best investors in the world sit in these family office types, and they are true long term, multi-generational investors. Yeah, yeah, yeah. But let's talk. Perpetual so Perpetual was predominantly domestically focussed, Australian focussed equities. They had about $28 billion in assets under management, but they really transformed their business to being a diverse global fund manager. And now they have about $100 billion in assets under management. So not small.

Bryce: [00:09:19] No, not small at all. You would take

Alec: [00:09:22] that. So before we get to the competitors in the space and how they're trying to take that 100 billion to 200 billion and beyond, let's just talk about how fund managers make money because this often can get confusing. But very simply, they invest like other people's money and they take a management fee and a performance fee, and that fee is their revenue. And then then they have a whole bunch of costs in terms of running those funds. And then, you know, they're generally quite profitable, Perpetual. Also, some of those other businesses would have other fees for services and stuff like that. But the the gaming funds management is that management fee and the performance fee. And Magellan has obviously been smashed this year because the performance their performance fee dropped Perpetual operates quite a similar model. It's all about. There's two ways that you make money, then as a fund manager, you get more assets under management or you outperform the benchmark by more. Yeah, yeah. 

Bryce: [00:10:25] And we hate fees 

Alec: [00:10:30] we hate fees, but we don't blindly go for no fees. Well, no, we might unless 

Bryce: [00:10:36] says if there's a place for fees. Yeah, yes. So now that we understand the industry, what Perpetual offer within the industry and how they make money. Let's have a look at some of the competitors in the industry with a focus on here in Australia because Perpetual is domiciled here in Australia. So the funds management industry in Australia, and this is according to a asecond and Deloitte report, there are more than 3700 funds on offer, huge amount and I mean, Ren we've we've seen even just a small percentage of that through the equity builder that we're looking at just online, that there are so many options, so much overlap. It seems like everyone's providing the same Australian mid-cap Australian large cap like it's just everyone out there. And to me, it's just a marketing game who can? Well, obviously performance is important as well, but you know, you've just got to market yourselves to these big funds. Yeah, to get the money. 

Alec: [00:11:35] And it feels like there's not really any switching costs. I mean, some do have like break fees and exit fees or they lock your money in and stuff like that for a certain period of time. They may not be switching costs, but it's there's a lot of friction, like once you with a fund manager and you just, you know, dollar cost averaging in all this money there and you're not thinking about it, you don't really move because there's a lot of paperwork to fill out and stuff like that. So it's like once you get this money, once you get someone's stream of super or whatever, it's pretty sticky. And so you're right, it's a marketing game. It's about getting them at the start. Mm-Hmm. Which then makes me think, why funds so boringly titles? 

Bryce: [00:12:13] I'm not sure I know and why they yeah. Anyway, there's a whole other business 

Alec: [00:12:17] helping the ETF providers like BetaShares and ETF Securities are doing a sort of like clue to that. But active management, like there's some of the of the 3700 funds on offer in Australia, at least a thousand would be like Australian large cap equities fund. Yeah, yeah. 

Bryce: [00:12:37] The Australian fund management industry has $2.5 billion in assets under management as of March 2021, and to put that in perspective, that is seven per cent larger than the entire domestic equity market. And it's it's an enormous amount of money. It's the fifth largest fund's managed funds industry in the world, and there are more than 300 competitors in this space. So three and a half thousand funds, 300 competitors. Perpetual is playing in a space that is hotly contested, but 300 competitors Ren. However, the 10 largest fund managers hold more than 50 per cent of those funds. So huge, huge concentration towards the top end, and then everyone else is competing for the for the scraps. 

Alec: [00:13:28] There's a power law in a lot of parts of life. There's a power law in podcasting. There's definitely a power law in the funds management. And basically what that means is that more of the share of new and like new customers or new funds or new listeners or whatever it is, goes to the top. And that's because they're the names that people accountable. Yeah, the Magellan's, the Macquarie's, the Platinum's, the, you know, those big names that have a brand associated with them who probably have managed money for your parents and your friends and your superannuation, they just are in the 

Bryce: [00:14:07] front of mind. Yeah, yeah, absolutely. Luckily, Perpetual well, if you're a shareholder, Perpetual, they're certainly up there. Now, he spoke about being flies at the top of the show, and the retail share of investment shows that retail investors account for only five per cent of the total market for funds management. So we're a little a little part of the funds management market.

Alec: [00:14:28] Five percent, actually. Okay, our part of me felt like we would be less because if you say superannuation, the superannuation count, that's institutions. So it's really just money that we're putting in on top of super. 

Bryce: [00:14:43] Yeah. But I wonder if you were to map out the definition of a retail investor, there's probably some high net worth in there that make up a lot of the five percent aren't. 

Alec: [00:14:51] Don't they become sophisticated investors at some point or sophisticated investors? They're still retail. 

Bryce: [00:14:56] I think if you're just going through, I don't know. I don't know. We should. We should clarify 

Alec: [00:14:59] that. Yeah, yeah, no. I think you're right. So there's this sophisticated is for certain things, but it's right. They're still retail. Yeah, those retail and institutional. Yeah, okay. That makes sense. So like. Chris Hemsworth buying BlackRock in assets. Yeah, it's still using superheroes to do it. Yeah, he's still retail. Yeah, that makes sense. 

Bryce: [00:15:20] Yeah. Now an interesting fact. BlackRock owned twelve and a half percent as of 2009 of Perpetual, so 2019 19 got their fingers in many pies. But look big industry. Many players concentrated towards the top end with the with the top 10 sort of largest players and plenty of money swishing around from these big endowments and institutions. 

Alec: [00:15:45] Yeah, I think the other thing to note, though, is while it's concentrated, it doesn't always stay stable at the top. The top ten fund managers buy assets under management in Australia from 1999 to 2019, and some of the names do change. For example, AMP was number one in 2004. It was number 10 in 2019. 

Bryce: [00:16:11] Vanguard wasn't even in the top 10 in 1999. Yeah, and now it's number two number 

Alec: [00:16:17] two, the vanguard wasn't even in the top 10 in 2009. 

Bryce: [00:16:21] True big push, well, 2009. And then ETFs from I feel from around there. Hold on, hold on. 

Alec: [00:16:27] Vanguard wasn't even in the top 10 into 2014. 

Bryce: [00:16:31] What the. 

Alec: [00:16:32] So Vanguard shot up Vanguard's first listing on this ranking in 2019. 

Bryce: [00:16:38] They go well, this is from the asset report will include it in a report in our write up on this on Perpetual and included on our website. So if you want to have a look at what we're talking about, head across to our website. But yeah, I think the key takeaway Ren is the top 10. Don't stay the top 10 forever. 

Alec: [00:16:54] You know who's been in the top 10? Every one of those five year intervals? Macquarie Quarry Yeah. 

Bryce: [00:16:58] Yeah, kings and queens.

Alec: [00:17:02] All right. So look, that's the funds management industry. There's a lot of competitors, but there's a real distribution, the big in the top 10 at 50 percent of the funds, and there's constantly more funds flowing into the sector because of pent like superannuation and the like. And so Perpetual's game is to attract as many of those funds as possible so they can maximise their management fee and then build the best team possible to outperform their benchmarks so they can collect the biggest performance. Five possible funds management and it is not the most complex business. But constantly, there's a war for talent because they're all trying to poach the best investors. All of these big names are trying to get the best. And there's a war for Dollars because investors can switch their money at any time. Well, most generally, they can switch their money at any time. So that's the game.

Bryce: [00:18:00] That's the game. Let's have a look at their financials. So market cap of just over $2 billion. Compound annual growth rate for revenue is five percent from 2016 through to 2021. 2021 they made revenue of about six hundred fifty two million. They are profitable. They made a profit of just shy of 75 million in 2000 and 2001. However, that is almost down 50 percent from their profit in 2016 of 132 million. Look, with potentially underperformance or, you know, given how hot the market's been in the benchmarks that they're having to compete against. It could be from underperformance. It could be from margin squeeze. There are a number of factors that could lead to a fall in revenue, a fall in profitability. But it is a profitable company. 

Alec: [00:18:53] It's, you know, like if you bought it pre GFC, you're still down. I think is the thing to note and you're still down a fair bit probably would've paid you a fair bit of dividend in that time. 

Bryce: [00:19:02] Yeah, that's kind of what the industry is. It's a really interesting industry, the dynamics between all the competitors and there's huge amounts of money trying to find a home. And I think what I really enjoy about this industry, Ren is the changing nature between, you know, venture capital private equity index. Yeah, like that's the interesting part and how over time all of that is changing and we're doing our best to kind of keep up with that. 

Alec: [00:19:28] So I think that's a really important thing to note that it is constantly changing. In about 1980 to about 2000 or the mid 90s, it was the era of the hedge fund and the hedge fund manager just had they they just minted billionaires, you know, the Ray Dalio's and so many of them and then hedge funds have underperformed, you know, like Ackman and who's the guy that got sent short shorts by I, Einhorn? They've really struggled sort of in the 2000s. But venture capital had a real moment, and because of that, you know, endowments and endowments and superannuation and pension, and all of that allocated more money from hedge funds to venture capital. And the Andreessen Horowitz is in the Sequoia's of the world. Indexing has also then had a moment and you know, these big pools of money allocating more towards indexes and again away from hedge funds, away from active management. And then recently, in the 2010s, private equity has had a real moment. And so again, money, these big these big money pools are then reallocating and putting more towards private equity and maybe pulling some out of venture capital or some out of index or some out of hedge funds. So basically, if you're thinking about the shifting winds of, I guess, where returns are coming from, that then changes how these big pools of money construct their portfolio and what percentage of their money that they put two different strategies. And then that then effects, which of those fund managers are saying inflows and outflows? 

Bryce: [00:21:04] Yeah, yeah, fascinating. 

Alec: [00:21:06] One thing I also want to mention about the future of Perpetual is they, like everyone else, are starting to hear the flies buzzing around and they're trying to go harder into a director retail strategy. And they, like so many other fund managers in Australia, are embracing not what I was going to say is are embracing the idea of an active ETF classic. 

Bryce: [00:21:35] Yeah. I think 2022 is going to be more. We've we've seen it this year. We've seen we've seen Magellan. We've seen fidelity. 

Alec: [00:21:44] We've seen heaps, Templeton. 

Bryce: [00:21:47] Hyperion. Yeah, there's been some of the big names and I only and I think that next year it's just going to be a flood. Yeah. Of these of these guys bringing active ETFs to the market, it's great to see it gives us as retail investors more access to the market, more access to their funds. But you've got to keep in mind it is still active management at the end of the day. It's not the same as index tracking, so keep that in mind.

Alec: [00:22:13] The big concern for me and it's the same with index funds, is these funds are set up to be long term vehicles. You know, five, seven, 10 year performance is what matters. And just having them listed every day and having to report AUM every day is it's just going to be an interesting thing to watch. 

Bryce: [00:22:33] Yeah, yeah. All right. Well before we jump into our interview with Rob Adams, who is the CEO and managing director. Of Perpetual to get his thoughts on his business and all things funds management, we're just going to take a quick break to hear from our sponsors and then we're going to jump right into it. Rob Adams is the CEO and managing director of Perpetual, and prior to being appointed CEO of Perpetual in 2018, Rob built a successful career in finance in Europe and Australia, spanning Colonial First State, First State Investments, Challenge Financial and Janus Henderson. So Rob, Welcome to Equity Mates. 

Rob Adams: [00:23:13] Thanks, guys. It's great to be here. Thanks for having me along. 

Bryce: [00:23:16] Now we're really looking forward to this one because the funds management industry is not one that we've done a Deep Dive on before and having you as one of the CEO of one of the largest fund managers here in Australia, there's a lot to unpack. But as we start all of these interviews, we love to hear about the company from the mouth of the CEO. So how would you describe Perpetual? 

Rob Adams: [00:23:38] Yeah, sure, it's a good starting point. Perpetual has been looking after people's money in one shape or form for thirty six years, which in an Aussie context is a pretty long period of time. Way back then, we started out life as a trustee company where basically our role was to protect people's assets, particularly when they were away. Today, one hundred thirty six years later, we are what in the market people would describe as a diversified financial services company. And what does that mean? That means that we are looking after people's money like we have done for thirty six years and we just do it in different ways. So we still perform that trustee role in protecting assets. We provide financial advice for people. We also run a range of managed funds, both here in Australia and now after some acquisitions over the last 18 months or so internationally as well. So our basic job is to look after people's money. As I said, we've been doing a long period of time and that really that history is really important because it shows that the way that we look after people's money. The approach that we take to investing other people's capital works over time. Yeah, we've been through two world wars. We've been through the Great Depression. We've been through the crash and 87 we've been through the tick tick, which in 2000 we've been through the global financial crisis. So think that long history is important to us. And it's also meant that that we've built up a really good trust from our customers, our clients in what we do. 

Alec: [00:25:15] yeah, it is a fascinating story. One hundred and thirty six years old, you don't find too many companies in Australia with that kind of history. If we turn to the asset management industry, it can often be a confusing one for people who aren't in the industry and are sort of on the outside looking in. I know when I started investing a lot of the names you get familiar with, but you don't really understand how the whole industry fits together. So can you help us conceptualise it? Where does Perpetual sit in the industry? Who are your key customers and who are your major competitors? 

Rob Adams: [00:25:47] Yeah, it's a really good question because you're investing is hard. It's not something that people do naturally. People tend to have other jobs outside of finance and financial services. And I think when you start to think about the world of finance and investing, you know, your eyes spin. So, you know, it's important that we try and ensure that when we're talking to people about what we do, we can. We can talk in a clear way so that it makes sense. So if you think think about the fact that around the world there are tens of thousands of companies and across those tens of thousands of companies, most of them are listed on stock markets where the equity or the value of those companies are traded every day by buyers and sellers. The job of an asset management management company or fund management company is to use expertise that we have to analyse those thousands of companies and to put together a portfolio. Sometimes it's as few as 20, typically around 70 or 80 of the very best companies that we know and based on our analysis, know we think the company is going to do better over the next three, five, seven years and Company B. And so we have teams of experts that to focus only on doing that, looking at those thousands of companies and trying to work out which ones are the best companies and investing people's money on their behalf through a fund structure to make it easy to try and extract a really good return for people over time. So would you say the role of asset management? The role of fund managers is to try and make that difficult concept of investing easier where we can explain really simply what our approaches to analysing companies we can. We can show you very regularly the companies that we've invested in on your behalf and we can show you what returns you that we're generating through those investments. And it's really important to note the way that Perpetual does. It, unlike many other fund managers, is that we're an active fund manager. So unlike a lot of investor investors and particularly in the last. Ten years have been investing what's called index funds, which just the mathematically driven solutions to try and match an indices like the Australian All Ordinaries index, they just match the holdings of the index. They're not making a decision about the good, the bad and the ugly. Whereas active fund managers like Perpetual, we know that in those indices across all those companies isn't good, good companies. There's some great companies, but there's also some really poor companies and we want to avoid those. So we, as an active fund manager, make an active decision to try and allocate people's money that they invest with us to those good companies. So that's that's the basic principle of what what we do. And generally, our customers are either individuals like you and me, like the people listening to this podcast or the big institutions like superannuation funds or pension funds in other parts of the world. But we basically take the same approach to managing people's money, whether they're individuals or whether they're big investors. 

Bryce: [00:28:49] So, Rob, we're recording this on the 29th of November, and I think it was only this morning that Perpetual announced the launch of an active ETF. The ASX ticker is GIVE it what's the strategy behind active ETFs we've seen so many? Well, we've seen an increase in the number of active ETFs coming to market of late. So can you talk us through Perpetual's plans here and why are active ETFs are becoming more and more of a thing? 

Rob Adams: [00:29:17] Yeah, the basic principle around it is that we're just wanting to make the whole process of the process of investing just a bit easier, you know, to invest in a traditional managed fund structure. There's an application process that can be fiddly, can be a bit cumbersome, but investing. And then if you decide you want to pull your money out is, you know, it's a relatively straightforward process. But I think by today's digital definition, it is slightly clunky. So we want to give people choice about about the way they can access investing into our investment capabilities and by listing one of our important funds on the ASX. We just made it that much easier so people can just buy and sell units in a fund, which is exactly the same as the non-listed fund, you know, as they see fit, you know, through their broker, through whether CommSec account or whatever it might be. It's just an easier way for people to gain access. And you know, and as I said, that's both investing and when they decide to pull out their money. I think a second point, too, is by putting our funds on the ASX, and this will be the first, I think of many for Perpetual. Yeah, we're just we're potentially opening up a new audience of investors because quite a few investors haven't used managed funds before. You know, they tend to just rely on investing directly into companies via the stock exchange. And if that's what they choose to do. Then they now can can make an easy decision to access some of the Perpetual's investment capabilities in the same way they would invest in any company. So, yeah, as I mentioned, this is the first of many. This particular fund is a fund that's been in operation for it's in its 20th year, invests in Aussie equities with a an ethical overlay. We're running a version of ESG, focussed on environmental, social and governance factors. In this fund. We've been running up to 20 years. It's been a good performer and we know that particularly these days, you know, having a strong focus on ESG factors is really important. So I guess it's those combination of factors that lead us to kick off today with the ASX Ticker Fund GIVE, and we expect to launch a second one pretty soon the next week or so and then 2022 and beyond. We expect to do it to launch further funds on the ASX. Yeah, it is

Alec: [00:31:42] a it's an exciting trend that we're watching in the Australian funds management space more and more. Previously, private funds are becoming listed products and I think at last count that is about 250 ETFs in Australia at the moment. But, you know, even if we zoom out and look at the fund management industry as a whole, there's, according to Asik, almost 4000 funds managed by different companies in Australia. That's a lot of choice available for Australian investors. Mm-Hmm. How do you think about Perpetual's competitive advantage? What what's Perpetual's edge over all of the other options that we as Australian investors have?

Rob Adams: [00:32:24] You're right, it's it is a super competitive landscape, and I think in terms of listed funds, exchange traded funds or ETFs, the first big wave was in, as I've previously previously described, passive funds that just match an index. More recently, we've seen managers like Perpetual and some of our high quality competitors launching Active 18 MFS. So these are funds that, as I said, they mirror that active investment style that I described. Earlier, you know, cut through, I think Catherine probably comes in a couple of ways, you know, for us, it's that it is the strength of our brand in history. Having said that, you know, I'm very cognisant that particularly young, younger, the younger demographic, you know, many people might not have heard of Perpetual. So you know, we need to make sure that we are not assuming that people know who petrol is not assuming they know and 136 year history. Most importantly, not assume that they know our investment performance history, which is ultimately the most important thing. People are coming to us because they, you know, we would hope they have an expectation that we're going to deliver strong investment returns for them over time. So we've got a job to do to ensure that the profile of the company, how we operate, that long history as strong performance history are all things that are well known. So we're supporting the launch of this product with an advertising campaign, which has a super heavy digital focus. We're starting to really use social media more and more as a phone because, you know, we know the way that the young younger people can communicate. I've got four kids aged between 18 and 25, and they're helping to advise me on how we can start to ensure that the younger generations of Australians grow to understand and trust the Perpetual brand, just like older generations have generation after generation, in fact. So it's one thing to launch the fund on the ASX. But then we've got to give it a profile around that in order to cut through so people can understand that history, both from a company history perspective and an investment performance history perspective. 

Bryce: [00:34:27] So Rob, with such a large range of funds and, you know, 100 billion assets under management, there's no doubt that you're going to have a pretty good view on the changing nature of funds management. And you sort of discussed there, you know, speaking to the younger generation a little bit more. So what are the sort of customer preferences are you seeing change in? And are there any sort of particular growth areas within the industry that are really starting to come through? 

Rob Adams: [00:34:55] I think the big one, which I would describe as being a global megatrends that will be Perpetual let small be Perpetual is the trend, as it touched on earlier towards investing for good investing focussed on environmental, social and governance factors. ESG investing. There's been thoughts about thoughts of different versions of ESG investing in and around markets through at least 20 years, where there's been some green filtering. To be frank, there's been greenwashing to fund managers. Some fund managers have said that they're investing with with with an approach of trying to do good, but not not really doing that. And I think investors are smart, right? You know, people know what's happening with climate change. People say the impact of yeah, on communities and the ways in the way social media operates and people have seen with bad governance looks like and they don't want to. And yeah, and I think this confluence of events has meant that ESG investing investing for good is actually just going to be table stakes, right? You know, I think if people are allocating their capital, you know, to make an investment decision, they want to know where that capital is going. They want to know that they're investing in companies that are doing positive things for the environment that are doing positive things in a social and community sense, and that people are playing by the rules from a governance perspective. So, yeah, I reckon that's the number one trend. And to be frank, I think it's it's probably daylight second. And yeah, I reckon there'll be a time in the future, probably not too far away when every fund manager on the planet will be having to demonstrate really, really clearly how they're allocating capital and how their investment decisions are doing good in each of those three categories. And I guess reflecting that we I mentioned earlier that we had a couple of acquisitions offshore acquisitions last year and Perpetual up until the last couple of years has been very much an Aussie centric business. And last year, we acquired two firms in the US. One of them is a company called Trillium Asset Management, and Trillium Asset Management has been managing ESG into fully integrating ESG principles into the way they run money for 40 years, the regarded by many as the founders of ACE2 investing in the US. So it's a Perpetual now owns Trillium, and we're just privileged to have them as part of the framework of our firm because they really set the bar super high in terms of investing for good. Importantly, at the same time, demonstrating through their investment performance that you can invest for good and you can expect, at the same time, a superior return. There's been plenty of people in the past who said, Yeah, investing for good is one thing, but how much longer am I going to have to sacrifice my returns? If you run money in the right way, as Trillium was proven over 40 years, you can do both. You can save the world and you can make money doing it. 

Alec: [00:38:00] I'm glad you mentioned sustainability because we've been asking every CEO that we've spoken to for this summer series about sustainability. It's definitely the biggest focus in the Equity Mates community. Well, maybe a cool first with cryptocurrency, but it's definitely front of mind for retail investors, and you've spoken about the role that fund managers have to play in driving sustainability. I'd love to unpack that a little bit more and maybe touch on some of the key learnings that you've taken from Trillium. Is there anything that since that acquisition or in, you know, in researching the industry to make that acquisition, you've learnt about sustainable investing that you think the broader funds management industry and you know, any listeners to this podcast should be aware of any things, anything we should be looking out for. I guess separate the greenwash from the um, from the truly green funds. Yeah. What have you learnt about that part of the market from from this acquisition in that research? 

Rob Adams: [00:39:04] Yeah, we've now owned Trillium for about 15 months. That's still pretty fresh for us. But yeah, we certainly learnt a bit. I'd say. Actually, we learnt a bit before we actually finalised the transaction because, you know, when you're doing an acquisition, you is the acquirer, do your own due diligence on the targets. But then we would always want the target firm to do their due diligence on us. You know, what's Perpetual going to be like as a new owner of our company? And we're independently owned for four years, and so that's a big, big issue for them. So there were this due diligence that they did on Perpetual was really interesting. So yeah, it was pre-COVID, just pre-COVID, and a team of people from Trillium came kind of in the city, spent time in our head office in Sydney and really put us through the wringer as a corporate to the point where I distinctly remember a time when the chief operating officer of Trillium was late to a meeting, and when she finally turned up, she said, Sorry, I've just been checking a few things out. So what are you? What do you mean? She was in our kitchen checking to see if we had plastic straws. 

Alec: [00:40:07] No way. Yeah. Did you have plastic straws?

Rob Adams: [00:40:11] Thank God, we didn't know that was pretty revealing, right? Because it just shows how seriously trillium it. You know, they were ducking and diving in and out of our offices as you have questioning different people about our approach to, yeah, to all sorts of things. And that just showed you how deep their approach is in terms of analysing whether companies are really trying to do the right thing in a bunch of different ways. So that was one thing. The second thing I would say is the one thing that sets Trillium apart from many of the Johnny come lately competitors. For 40 years, Trillium have had what's called an advocacy unit. So a team of people working in the business who all they do is work on positive advocacy with listed companies, and sometimes they do that when they are an owner of the stock of a company. And sometimes they'll just do it because it's a really important purpose. And so we won't actually have anything directly to do with the funds. But this advocacy unit will work with company with the management of a company to try and try and highlight where they need to improve in either ESG and to help them establish a plan to improve in a synergy and a really, really good. So that almost non-investment related story was was when they, after 10 years of effort, finally convinced the the football team, US gridiron team, formerly known as the Washington Redskins to drop Redskins in their title. It happened. It happened about a year ago because of the negative implications the use of that word. So now it's known as the Washington football team. That was 10 years of advocacy, 10 years of talking to two sponsors of the company, ten years of social activity to try and enact a positive change. And it's that sort of work that this advocacy unit does to try and enact positive change in terms of the way companies operate. So that's been a big learning the importance of advocacy, particularly when you're a shareholder on behalf of your investors. Yeah, realising what a privilege it is to be managing money on behalf of people, but utilising that privilege to ensure that companies behave in a more responsible way. And you know, now that we, you know, we as a firm have had a sizeable amount of assets that we manage on behalf of retail and institutional investors, there's power in that weight of money, right? That's really the purpose that drives truly. And that was the reason they came to Perpetual because they saw us as a really good partner to help them grow their assets under management. Because the more money they can influence positively, the bigger the impact. 

Bryce: [00:42:44] Well, Rob, one of the one of the, I guess most common things we hear from an expert fund managers. Is the importance of understanding management when making an investment decision into a business, and that's part of the reason why we do these calls with CEOs is to give our community direct access. So I'm interested to understand how you think about leadership. You know, what are some of the key characteristics of leadership that are important to you, but also given that Perpetual, you know, have a team of fund managers managing people's money? What are some of the key characteristics you look for in these in these fund managers? 

Rob Adams: [00:43:21] From personal perspective, in terms of things that you know, I think about regularly from a leadership perspective. Number one for me is leadership by example. I think it's so important that leadership, you know, sets the tone in an organisation that sets the pace, sets the style, the shape, the form of things that people do. It's something that I was totally young age and something it's certainly drives me as a as a, as a leader. Every day is just noting that leadership casts a big shadow and you need to be really, really cognisant of that shadow and note that you are setting the tone for the organisation and everything you do. We have the thing that I constantly think about as a business leader. Is it treating other people, whether it be you people, whether they be customers, prospective customers, regulators, whoever is treating other people exactly is the way you would want to be treated yourself. And so standing in other people's booths as you're talking to them or as you're dealing with them, they're to sort of personal leadership things that are, in my mind, pretty constantly in terms of terms of fund managers, are you making as we hire some managers, what are we looking for? Yeah. 

Bryce: [00:44:34] Well, I mean, yeah, yeah, just sort of what's that edge that you look for, you know, amongst all the other fund managers that could be. 

Alec: [00:44:41] And I guess because as retail investors, when we put our money with fund managers, we are in in essence, hiring them to manage our money. 

Rob Adams: [00:44:48] Absolutely. Absolutely. It's a really good question. And actually, my number one thing that I'll state is actually something that, you know, similarly, I would apply to general leadership to your first, the first part of the question. But in fund managers, what I want to see is passion. I want to see a real excitement for the task that they do. It's it's a terrific thing to be passionate about anything related to your passion. There's a wonderful, wonderful quality, but that's something that I always look for, whether we're looking at acquiring a business that has fund managers in it or whether we're hiring fund managers ourselves to manage people's money. So I've got to say that passion, that's got to be obvious. Secondly, they've got to be able to talk in every man's language, every person's language to be able to convert the complex into the simple, to demonstrate that they have the knowledge that's required to make informed, fully informed investment decisions that they can translate it to anybody who's not from an investment background in a way that's meaningful and can make sense. And then thirdly, I really want people to truly believe that it is indeed a privilege to manage other people's money and to respect that privilege and demonstrate that respect in their dealing with customers and clients. 

Alec: [00:46:01] I love that. I love that you started with passion as well. I think Bryce and I really feel that some of the best fund managers already spoken to, both in Australia and overseas, that passion just radiates from them, and they get so excited when they're talking about, you know, companies that they're investing in or just investing in general. So I think that's a great place to start. 

Rob Adams: [00:46:23] Well, you know, I would say as a personal investor myself, you know, whenever whenever I see that passion, I want to invest with people, you know, if you want to back them. And I think generally, I think about my thirty five years in the industry. Yeah. Whenever I've seen that passion come through and then the combination of the other features I touched on, generally, the individuals are exceptional fund managers and they tend to deliver.

Alec: [00:46:47] Now, Rob, we have almost come to the end of our time and we normally like to finish by asking the CEO if they think about their company in 10 years. What would success look like? But given the Perpetual has been around for a hundred and thirty six years, I think we might need to zoom out and extend the timeline a little bit because you know, you're one hundred and thirty six years old but still constantly changing under your leadership in the last few years. Perpetual has gone from a, you know, 28 billion dollar Australian focussed fund manager to a $100 billion globally focussed fund manager. And I imagine it's only going to keep changing with things like the the new active ETF that you've launched recently. So if you think about Perpetual in 10 years, 50 years and 100 years, what would success look like? 

Rob Adams: [00:47:35] Well, you know, one thing that I think about probably less three or four times a day is is the word Perpetual. Perpetual was chosen as the company name by the founders of the company back in 1895 because, you know, they said that the company given its trust. A responsibilities has to last into perpetuity, so I don't want to be the bloke that buggers that up. Point one. So that's that's certainly something that's in my mind. But yeah, I think I think the last few years have been exciting for Perpetual, as you as you described. I just want us to continue that journey in a meaningful way. You know where we are taking this? You know what, I think in previous generations has been regarded as a pretty iconic Australian brands in financial services and globalising its impact. And I used the word impact very deliberately there, you know, touching on ESG principles. Yeah, I'd love it at some point in time in the future. People who comment on on this sort of stuff would say Perpetual is a truly global company that's thinking about the planet and making the right decisions on behalf of the planet and the people in it. And if we have climbed back into the ASX 100 to market capitalisation perspective, then if we're thinking 10 years, we're in the top 50. If we're thinking beyond that, you know, we've grown to the point where we're amongst Australia's largest companies and one of our most successful export stories operating the way that I described that would be that that'd be kind of nice. 

Bryce: [00:49:07] Well, Rob, we have reached the end of our time, so we thank you so much for sharing your time with us and the Equity Mates community. As I said at the top, it's not often we Deep Dive on funds management industry, despite talking to plenty of fund managers over the last few years. So it's been really interesting to get your thoughts on on the industry and Perpetual's place within it going forward. So yeah, have a great have a great Christmas and we look forward to catching up again at some time next year. 

Rob Adams: [00:49:33] Yeah, I look forward to it. Guys really appreciate your time this morning and I hope that you guys have a safe and happy Christmas as well. 

Bryce: [00:49:40] Well, it was great to hear from, Rob. Always good to chat, to CEOs, to get their thoughts on on their business and industry, really enjoying chatting to to the CEOs as part of this summer series. A reminder that you can still win a thousand bucks off the back of this episode to go into a superhero wallet. All you need to do is hit us up with one of your favourite facts about Perpetual or the funds management industry on the corresponding post for this episode on our Instagram page at Equity Mates. Head on over and drop in the comment section to this post what your favourite fact was, and we'll choose out a winner to win a thousand bucks. That's all you need to do. You can win $1000 for every episode of the summer series if you're lucky enough. A reminder that summer series is brought to you by superhero a massive thanks to them. Superhero allow you to buy Aussie and US shares and ETFs with no monthly account fees, and you can now earn Qantas points with superhero, so make sure you go and visit superhero dot com useless Candace to learn more. Eligibility criteria, terms and conditions and fees and charges apply and Ren. We're really pumped because next episode we are turning to one of Australia's greatest success stories and that is Atlassian, known as the a boring software company by the New York Times. But there are plenty of reasons why it is not boring. So stick around, stay with us as we continue the summer series and to dive into some of these amazing companies here in Australia and over in the US. It would have been great to hear from the CEOs of Atlassian, but we're going to save that for next year. So Ren will pick it up next episode. Nice one.