About: Perpetual provides wealth management services including funds management, corporate trust, financial planning, superannuation and registry services to clients throughout Australia.

Why it’s in the portfolio: Perpetual is one of the stronger names within the Australian funds management sector, with the company traditionally being strong in Australian equities but successfully branching out to other asset classes over time. The bulk of Perpetuals revenue comes from the funds management division of the business which focuses on active Australian equity strategies which typically generate higher margins for the business. The Australian wealth management as a whole is benefited by mandated superannuation contributions from employers which are only expected to grow over time.

Fundamentals: PPT has a market cap of around $1.7b, a P/E ratio of roughly 13 and a P/B of around 3. PPT has a trailing EPS of 3 and pays 3 DPS, giving the company around a 92% dividend payout ratio.

What could go wrong: Perpetual is susceptible to volatility in investment markets, which may impact investor confidence and slow down net flows. Potential acquisitions which are entered in to on poor metrics may also prove a detriment to PPT, but also provide decent potential upside. Change to regulations, particularly following the Hayne Royal Commission could impact margins and detract form the companies wealth management value proposition.