Perpetual has forecasted a 10 per cent lift in the first half of its operating profits despite the fallout of the US sub-prime market, which adversely affected the performance of its cash funds.

The year to date performance has been affected by the crisis in the global credit markets, Perpetual's chief executive David Deverall said.

According to Morningstar data, Perpetual's enhanced cash fund and income funds have performed below benchmark since July following the meltdown in the global credit markets.

Perpetual's Credit Enhanced Cash Fund delivered a 5.65 per cent return compared to the 90 Bank Bill Cash benchmark of 6.64 per cent for the 12 months to September 2007.

Perpetual's income business has also been affected by the credit fallout.

During the same period Perpetual's Wholesale Diversified Income Fund returned 4.56 per cent.

Perpetual's chair Robert Savage said the below benchmark performance of the funds were due to small unrealised losses following the revaluation of its credit securities.

Morningstar consultant Sallyanne Cook said the funds will continue to struggle to perform.

"Both the funds have had a couple of nasty months of performance in July and August, which is going to see the fund struggle to outperform its cash benchmark," she said.
 
"These funds endeavour to add alpha from taking on board additional credit risk to enhance returns, which obviously backfires when the credit markets suffer from illiquidity and credit spread widening," Cook said.

Perpetual chief executive David Deverall said the business was still poised to deliver a good result for shareholders in 2008.