Pinnacle Investment Management Group Limited · ASX:PNI
Pinnacle Investment Management — Investor Presentation (February 2020)
47 slides from Pinnacle Investment Management's investor presentation, Feb 6, 2020
Slide 1: 2020 interim financial results
6 February 2020 By Electronic Lodgement The Manager Company Announcements Office ASX Ltd 20 Bridge Street SYDNEY NSW 2000 Dear Sir/Madam Pinnacle Investment Management Group Limited (ASX: PNI) 2020 interim financial results Pinnacle Investment Management Group Limited (PNI) is pleased to advise shar
Slide 2: Composition of Group Results
Composition of Group Results Pinnacle reminds shareholders that NPAT during the first half of each financial year is typically a smaller proportion of full year NPAT than NPAT during the second half. NPAT for 1HFY19 was 33% of FY19 full year NPAT, while NPAT for 1HFY18 was 35% of FY18 full year NPAT
Slide 3: FUM Update
FUM Update The FUM of PNI’s 15 Affiliates as at 31 December 2019 was $61.6 billion (includes $3.0 billion ‘acquired’ in December 2019) reflecting an increase in FUM of $7.3 billion or 13.4% during the six-month period ended 31 December 2019, comprising net fund inflows of $2.0 billion, market moveme
Slide 4: Retail FUM Update
Retail FUM Update Retail FUM stood at $14.9 billion at 31 December 2019 (includes $2.2 billion ‘acquired’ in December 2019), compared with $11.6 billion at 30 June 2019. The $3.3 billion growth for the six-month period to 31 December 2019 was attributable to $0.9 billion net inflows (of which $0.2 b
Slide 5: Dividend
Dividend The Board has resolved to pay a fully franked interim dividend of 6.9 cents per share to shareholders recorded on the register on 6 March 2020 and payable on 20 March 2020, which represents a payout ratio of 90% of diluted EPS, consistent with the FY19 payout ratio. The Dividend Reinvestmen
Slide 6: Interim Results – 1H FY20
PINNACLE INVESTMENT MANAGEMENT GROUP LIMITED (PNI) Interim Results – 1H FY20 6th February
Slide 7: Disclaimer
1 PINNACLE INVESTMENT MANAGEMENT GROUP LIMITED (PNI) • This presentation has been prepared by Pinnacle Investment Management Group Limited ABN 22 100 325 184 (PNI). The information in this presentation is current as at 6 February 2020. • PNI has prepared this presentation based on information availa
Slide 8: Agenda
2 Agenda • First half FY20 Financial Highlights • First half FY20 Business Highlights • FUM and Flows • Other Business Highlights • First half FY20 Results Discussion • Australian Institutional Funds Market • Retail Funds Market • Additional material
Slide 9: First half FY20 Financial Highlights
3 First half FY20 Financial Highlights • Net profit after tax (NPAT) from continuing operations of $13.8 million, up 37%1 from $10.1 million in the prior corresponding period (PCP). • Basic earnings per share (EPS) from continuing operations of 8.1 cents, up 33% from 6.1 cents in the PCP • Diluted e
Slide 10: First half FY20 Business Highlights – FUM and Flows
4 First half FY20 Business Highlights – FUM and Flows • Aggregate Affiliates’ FUM at 31 December 2019 (at 100%) $61.6 billion1 • Up $7.3 billion or 13% from $54.3 billion at 30 June 2019 • Aggregate Retail FUM (at 100%) now $14.9 billion2, up 28% from $11.6 billion at 30 June 2019 • Net inflows for
Slide 11: First half FY20 Business Highlights – Affiliates
5 First half FY20 Business Highlights – Affiliates • 2 new Affiliates (one Horizon 3 and one Horizon 2), 2 UCITS Liquid Alts Fund launches • Acquisition of a 25% interest in Coolabah Capital Investments Pty Ltd (Public Markets Credit) for an initial $29.1 million in December 2019, with a further $5m
Slide 12: Understanding First Half FY20 financial outcome
6 Understanding First Half FY20 financial outcome • We remind shareholders of the ‘skew’ (H1/H2 split) in our results, with the impact of annual performance fees and success fees only being recognized in the second half of each financial year - H1 FY19 NPAT was 33% of FY19 full year NPAT; H1 FY18 NP
Slide 13: Group financial summary
Group financial summary 77 1H2020 ($M) 1H2019 ($M) YoY change PINNACLE Revenue 11.41 8.61 32.6% Expenses (15.3)2,3 (12.8)2,3 19.5% Share of Pinnacle Affiliates net profit after tax 17.7 14.3 23.8% Net profit before tax (NPBT) from continuing operations 13.8 10.1 36.6% Taxation - - NPAT from continui
Slide 14: Strong FUM and revenue growth in Pinnacle Affiliates
Understanding First Half FY20 financial outcome 8 Strong FUM and revenue growth in Pinnacle Affiliates: Aggregate Affiliate revenues ($m)1 • Total Affiliate revenues1 were $132.5m during 1H2020, including $0.5m (0.4%) in performance fees; in 1H2019, total Affiliate revenues were $103.1m, which inclu
Slide 15: Significant components of First Half FY20 results
9 Significant components of First Half FY20 results • Continuing growth in ‘Pinnacle Parent’ revenues and capabilities • Continuing ‘P&L’ investment in support of Horizon 2 initiatives (including Offshore distribution, ETF, Direct to retail consumers, cost of Pinnacle servicing new Affiliates) • Net
Slide 16: Cash and Principal Investments of $44.7m
10 PNI balance sheet 31 Dec 2019 30 Jun 2019 YoY change ($M) ($M) • Cash and Principal Investments of $44.7m CURRENT ASSETS Includes $35.3m invested in strategies managed by Cash and cash equivalents 7.9 26.7 (70.4%) • Financial assets 36.8 24.5 50.2% Pinnacle Affiliates Total cash and financial ass
Slide 17: Funds under management
11 Funds under management Affiliate FUM growth ($bn)1 • Aggregate Affiliates' FUM (at 100%) of $61.6bn as at 31 December 20191 • Aggregate Affiliates' FUM has grown at a CAGR of 23.3% p.a. over the last ten years (21.2% excluding $6.8bn ‘acquired’ in July 2018 and $3.0bn ‘acquired’ in December 2019)
Slide 18: Aggregate Affiliates’ Funds Under Management - by Affiliate
Aggregate Affiliates’ Funds Under Management (at 100%) - by Affiliate 12 Pinnacle Hyperion Plato Solaris RCL Palisade Antipodes Spheria Two Trees Firetrail Metrics Omega Longwave Riparian Coolabah Reminiscent (total) ($m) ($m) ($m) ($m) ($m) ($m) ($m) ($m) ($m) ($m) ($m)1 ($m) 1 ($m) ($m) ($m)2 ($m)
Slide 19: Building a resilient, diversified business
13 Building a resilient, diversified business Resilience has been enhanced by: 1. Diversity of asset classes 2. Diversity of client FUM by investor type and domicile 3. Growth in Global distribution platform 4. Increased weighting to Fixed Income and Alternative Asset Classes 5. Percentage of funds
Slide 20: Continuing to invest in a diversified platform to strengthen future growth
14 Diversity of Asset Classes under management C O N T IN U IN G T O IN V E S T IN A D IV E R S IF IE D P L A T F O R M T O S T R E N GT H EN F U T UR E GR O W T H • Executives of both Pinnacle and Pinnacle Affiliates have significant equity interests • Equity ownership enhances alignment with share
Slide 21: Diversity of Asset Classes under management
15 Diversity of Asset Classes under management • Less than half of total FUM (at 100%) was in Australian equities at 31 December 2019 • Investment in new affiliates adds to diversification • Increasing exposure to global equities, private capital, fixed interest and credit, and liquid alternatives
Slide 22: Diversity of Sources of Funds Under Management
16 Diversity of Sources of Funds Under Management Institutional – Domestic International Retail – Intermediated Retail – Direct
Slide 23: Institutional - Domestic
17 Institutional - Domestic • Industry fund consolidation continues • Speed and magnitude of ‘Insourcing’ varies widely • These do impact Pinnacle to some degree, but keep in perspective (without being complacent) • Pinnacle will continue to evolve in response to (and in anticipation). We note: • We
Slide 24: Increasingly diversified client base
Increasingly diversified client base 18 • 170+ individual institutional clients at 31 December 2019, compared with ~60 at 30 June 2016 • Growth in Retail FUM as a proportion of total FUM (at 100%) and as a proportion of total revenues (at 100%) 18 • Increasingly diversified client base
Slide 25: International
19 International • ~A$4bn+ of aggregate FUM from international investors and invested in international pooled funds • FUM sourced from 15 individual countries across the Americas, EMEA and Asia-Pacific regions • Over A$1bn+ in global funds: UCITS, Cayman & US CITs • New business won in FY20 from a d
Slide 26: Retail market developments
20 Retail market developments • Royal Commission flow on effects • Dismantling of vertical integration (~1,600 AFSL closures past 2 years) • Education standards lifted with FASEA • Geopolitical concerns • US-China Trade Conflict • Brexit • Hong Kong • Coronavirus • Continued rise of the non-aligned
Slide 27: Growth in Retail FUM
21 Growth in Retail FUM Retail FUM evolution 5.7x Total FUM 30 Jun 13: $10.8bn Total FUM 31 Dec 19: $61.6bn Retail: $0.9bn Retail: $14.9bn 16.6x 8% Retail 24% Retail 92% institutional 76% Institutional • Pinnacle has invested significantly in retail distribution and has generated substantial retail
Slide 28: Growth in Performance Fee FUM
22 Growth in Performance Fee FUM Affiliates' FUM (at 100%) subject to performance fees Total FUM 30 Jun 16: $19.8bn Total FUM 31 Dec 19: $61.6bn Subject to performance fees: $3.3bn Subject to performance fees: $19.1bn 17% Perf fees 31% Perf fees 83% No perf fees 69% No perf fees • Significant growth
Slide 29: Pinnacle Affiliates continue to win major industry awards
23 Pinnacle Affiliates continue to win major industry awards 2019 Zenith Fund Awards: 2019 Australian Alternative Investment Awards: • Pinnacle – Distributor of the Year (fourth consecutive year) • Metrics – Best Private Debt Fund Category Winner • Resolution Capital – Global REIT Category Winner (s
Slide 30: Summary and plans for the remainder of FY20
24 Summary and plans for the remainder of FY20 • ‘A ‘steady as she goes’ period, with groundwork laid for further growth, diversity and resilience • Continue to deliver growth within existing Affiliates (Horizon 1) • Continue investment to deliver medium term growth (Horizon 2) • A range of Horizon
Slide 31: Additional Material
25 Additional Material • 26 – Pinnacle as a Responsible Firm • 27 – Pinnacle Affiliates as the forefront as responsible investors • 28-30 – Adding high quality, diversifying Affiliates • 31-33 – Continuing strong investment performance of Affiliates • 34 – Listed Products • 35 – Alternative Credit &
Slide 32: Pinnacle as a Responsible Firm
26 Pinnacle as a Responsible Firm • Pinnacle achieved carbon neutrality for the 2019 financial year • Tracking and measuring carbon footprint for air travel, travel via cars to client meetings as well as staff travel to and from work • Seeking to avoid travel in favour of video conferencing where po
Slide 33: Pinnacle Affiliates at the forefront as responsible investors
27 Pinnacle Affiliates at the forefront as responsible investors • Principles for Responsible Investment (PRI) signatory since 2010 • Principles for Responsible Investment (PRI) signatory since 2011 • UN Global Compact signatory (2019) • Member of the Climate Action 100+ investor group • Member of G
Slide 34: Coolabah Capital Investments acquisition
28 Coolabah Capital Investments acquisition • Pinnacle acquired a 25% equity interest in Coolabah Capital Investments Pty Ltd (CCI) in December 2019, for $29.1m, together with a further $5m payable upon the business achieving certain milestones over the next 18 month to 4.5 year period • Funded by a
Slide 35: CCI's Edge
29 CCI's Edge 1. Large team focussed exclusively on Australian investment-grade fixed-income ($3bn FUM, $4bn AUM) • 4x portfolio managers, 9x analysts, and 21x staff in total • CCI’s staff own 75% of business – remaining 25% held by Pinnacle • Chaired by Melda Donnelly (ex-CEO QIC, VFMC Deputy Chair
Slide 36: Reminiscent Capital: Asia Macro
30 Reminiscent Capital: Asia Macro • Discretionary Asian Macro investment firm with three investment professionals led by David Adams (ex-Brevan Howard Asia and Morgan Stanley Australia) • Reminiscent aims to deliver attractive, uncorrelated absolute returns through a concentrated, directional and d
Slide 37: Continuing strong investment performance of Affiliates
31 Continuing strong investment performance of Affiliates INCEPTION 5Y (p.a.) 10Y (p.a.) INCEPTION DATE (p.a.) 94% of Pinnacle Affiliated (p.a.) PINNACLE INVESTMENT MANAGEMENT Investment Manager Hyperion Asset Management - Gross Performance Hyperion Australian Growth Companies Fund 12.07% 10.84% 12.
Slide 38: Affiliates’ investment performance – December 2019
32 Affiliates’ investment performance – 31 December 2019 INCEPTION 1Y (p.a.) 3Y (p.a.) 5Y (p.a.) 10Y (p.a.) INCEPTION DATE (p.a.) (p.a.) PINNACLE INVESTMENT MANAGEMENT Hyperion Asset Management - Gross Performance Hyperion Australian Growth Companies Fund 31.78% 13.60% 12.07% 10.84% 12.82% 1/10/2002
Slide 39: Affiliates’ investment performance – December 2019
33 Affiliates’ investment performance – 31 December 2019 INCEPTION 1Y (p.a.) 3Y (p.a.) 5Y (p.a.) 10Y (p.a.) INCEPTION DATE (p.a.) (p.a.) PINNACLE INVESTMENT MANAGEMENT Two Trees Investment Management - Gross Performance Global Macro Fund 2.67% -2.03% 1/11/2017 Outperformance 1.17% -3.74% Firetrail I
Slide 40: Listed products
34 Listed products • The recent decision by ASIC to re-open the active ETF market encourages us that this will be a bigger industry in the future – Pinnacle intends to be a significant player, with additional product planned • Pinnacle believes the trend to growth in listed vehicles will be strong a
Slide 41: Alternative Credit & Fixed Income
35 Alternative Credit & Fixed Income • Ageing population in OECD markets creating significant demand for capital stable, income producing assets • Commercial and investment bank regulatory change around the globe creating opportunity for alternative credit managers to fill the `funding gap' • Altern
Slide 42: Horizon Progress
36 Horizon 2 Progress Initiative Status Inception $m 31 Dec 19 Direct to Retail Developing 2017 $697 Listed Developing 2017 $2,832 Plato Global (Income & MN) Early Stage 2017 $118 Two Trees Developing 2018 $323 Hyperion Global Developing 2018 $736 Spheria Opportunities Developing 2018 $570 Solaris L
Slide 43: Historic dividend yield and earnings growth
37 Historic dividend yield and earnings growth • 15.4 cents per share fully franked dividends FY19 • Up 67% p.a. from 3.3 cents in FY16 • Fully franked interim dividend of 6.9 cents per share payable in March 2020 • Ample franking credits ($27.0m at 31 December 2019) • Earnings have grown in excess
Slide 44: Future Growth – Measured
38 Future Growth – Measured • Investment in distribution platform • Grow ahead of our Affiliates • Listen to clients and move quickly to meet their evolving needs • Do not become the market – be ahead of it • Investment in new affiliates adds diversification • Global equities (developed & emerging m
Slide 45: Enhancing the platform - strength, stability and reputation
39 Enhancing the platform - strength, stability and reputation • Stable and diversified platform • Continuing investment excellence • Widespread industry recognition and support • ‘Article of faith’ reputation • Further investment in distribution capability • Direct to retail consumer • Internationa
Slide 46: Pinnacle Charitable Foundation
40 Pinnacle Charitable Foundation • Pinnacle is passionate about enabling better lives through investment excellence. This belief is strongly demonstrated through Pinnacle’s commitment - together with the Affiliates - to the Pinnacle Charitable Foundation • The Foundation’s focus is on backing the g
Slide 47: Recap on Horizon Criteria – What could we acquire?
41 Recap on Horizon 3 Criteria – What could we acquire? Criteria • Must not place the Company at risk • Only consider if low risk and high return on capital • Exercise great care and careful due diligence • Must be synergistic with existing core • Few will meet this test Status • Metrics and Omega a
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