The Investment Column: Bull markets boost Perpetual

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Martyn Arbib, chairman of Perpetual, is a very wealthy man. Shares in his fund management group have grown over 10 times since 1992 and as owner of over half of them, he has been the chief beneficiary.

It is a remarkable performance for a company which spent the first five years of its existence struggling to stay above its 180p float price.

The question is whether it can continue. The signals from yesterday's results for the year to September pointed in different directions. On the positive side, the 46 per cent rise in pre-tax profits to pounds 37.2m was another storming result for a company which made much less than a tenth of that in the opening years of the decade. These sparkling figures came on the back of a 40 per cent increase in funds under management to pounds 6.6bn.

But there lies the rub. Perpetual's strong track record and well-honed marketing skills pulled in another pounds 1.1bn of funds over the past year, helping to cement its market leadership in unit trust-linked personal equity plans. The group also lifted its overall market share in the market for authorised unit trusts from 3.7 to 4.2 per cent.

Few could question such a performance, but without much effort, fund managers gain a double lift during a bull phase for the stock market, like now.

Rising markets tend to suck in new money and new punters, particularly the relatively unsophisticated sort who are attracted to unit trusts. Meanwhile, rising share values automatically boost funds under management, with Perpetual gaining another pounds 800m over the latest 12 months.

Mr Arbib's gentle warning yesterday over the heights at which shares round the world are trading left his own shares at pounds 22.25, down 102.5p. That is the main problem ahead for Perpetual and explains why profits could range between pounds 57m and pounds 65m this year, putting the shares on a forward price/earnings ratio of 17. Given the uncertainties, purchases should be deferred.

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