Pinnacle Investment Management Group Limited · ASX:PNI
Pinnacle Investment Management — Wilsons Advisory Rapid Insights Conference 2018
58 slides from Pinnacle Investment Management's conference presentation, Nov 16, 2018
Slide 1: ASX lodgement cover letter
For personal use only 16 November 2018 By electronic lodgement The Manager Company Announcements Office ASX Ltd 20 Bridge Street SYDNEY NSW 2000 Pinnacle Investment Management Group Limited – Presentation Pinnacle Investment Management Group Limited is pleased to attach a copy of a presentation that
Slide 2: Pinnacle Investment Management Group Limited (PNI)
For personal use only Pinnacle Investment Management Group Limited (PNI) Wilsons Advisory – Rapid Insights Conference – Sydney 20 November 2018
Slide 3: Agenda
Agenda For personal use only • Latest Update • Introduction to PNI • Business Focus • Metrics Credit Partners • Longwave Capital Partners • FY18 Financial Highlights • FY18 Business Highlights • FY18 Results Discussion • Distribution Update • Pinnacle Outlook • Group Overview 1
Slide 4: Latest Update
Latest Update For personal use only • Funds under management (FUM) of $47.2 billion* as at 31 October 2018 o Down $0.6 billion from 30 September 2018 and up $9.2 billion (including $6.8 billion ‘acquired’ in July) on 30 June 2018 o Includes $3.4 billion invested with Firetrail as at 31 October 2018
Slide 5: Introduction to PNI
Introduction to PNI For personal use only • What we do o A ‘pure play’ investment management firm providing affiliated investment managers with the distribution, infrastructure and other support services they need o Founded in 2006, Pinnacle currently holds an equity interest in 12 specialist invest
Slide 6: Building a strong diversified platform
Building a strong diversified platform Continuing to invest in a diversified platform to strengthen future growth For personal use only • Executives of both Pinnacle and Pinnacle Affiliates have significant equity interests • Equity ownership enhances alignment with shareholders Seed FUM and working
Slide 7: Pinnacle business philosophy and approach
Pinnacle business philosophy and approach For personal use only The formula for investment success involves experienced, dedicated, passionate money-makers, free from distractions, spending most of their time on investing Equity ownership for key investment professionals attracts a higher calibre in
Slide 8: Pinnacle differentiation
Pinnacle differentiation For personal use only Australia’s leading “multi-affiliate” investment firm Distinguished from competitors by comprising the highest quality investment management firms High quality, experienced, dedicated, passionate investment professionals – strongly focused on performanc
Slide 9: PNI Continues to Grow
PNI Continues to Grow For personal use only • Three Horizons of Growth • See subsequent slides for Historical Growth • Analyst Research – projections of ‘Horizon 1’ growth in FUM, Profitability, Capacity, and Performance Fee Upside 7
Slide 10: Three Horizons of Growth
Three Horizons of Growth For personal use only Continue to build Pinnacle by taking a measured approach to growth - Support the growth of our current affiliates with increased investment in distribution channels (e.g. international and listed markets) - Invest in / seed new affiliates where manage
Slide 11: Metrics Credit Partners acquisition
For personal use only Metrics Credit Partners acquisition 9
Slide 12: Transaction overview
Transaction overview For personal use only Building on Pinnacle’s existing distribution partnership with MCP, Pinnacle acquired a 35% interest in MCP - Remaining MCP equity retained by management Investment of $46m of equity capital - Post the transaction Pinnacle own 35% of MCP which has approx
Slide 13: Strategic rationale
Strategic rationale For personal use only Four partners with over 100 years of combined credit experience and 18 employees High quality MCP has lent $4.6bn across 172 transactions since June 2013 management All MCP strategies have exceeded their investment objectives since inception Pinnacle
Slide 14: MCP overview
MCP overview For personal use only FUM growth (FY13–FY18)(1) 2.5 MCP is a Sydney-based alternative asset manager specialising in private debt, fixed income and capital markets 5-yr CAGR: +101% 0.8 Assets under management (“AUM”) of $3.0bn as at 30 June 2018 of which FUM is $2.5bn(1) 1.8 1.7 FU
Slide 15: Market opportunity: private debt
Market opportunity: private debt For personal use only Australian corporate loan market is large (+$700bn)(1) Large Market Large volume of annual issuance (+$100bn)(1) Banks have historically funded corporate Australia on their own balance sheets Regulatory Change Changes in the regulatory e
Slide 16: MCP growth outlook
MCP growth outlook For personal use only • MCP continue to see significant opportunity for FUM growth in the private debt market • MCP intends to continue to grow its FUM in its existing strategies (i.e. Australian senior loans, secured private debt and real estate debt) and to expand into adjacent
Slide 17: Longwave Capital Partners
Longwave Capital Partners For personal use only • Business established in September 2018 • Multi-asset and Australian equities • Led by David Wanis • Expected launch Q1 2019 • Terms o Pinnacle holds 40% of the total shareholding in Longwave and has full economic rights in respect of its holding. The
Slide 18: Focus on managing the business to maximise profits and value
Focus on managing the business to maximise profits and Company value over the medium term For personal use only • How does ‘Horizon 2’ add value in the Medium Term? o Investment in growth initiatives that don’t require additional capital to be raised - ETF initiative commenced o Reasonable limits to
Slide 19: Recap on Horizon Criteria – What could we acquire?
Recap on Horizon 3 Criteria – What could we acquire? For personal use only 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 •
Slide 20: Enhancing the platform – strength, stability and reputation
Enhancing the platform– strength, stability and reputation For personal use only • Stable & diversified platform o Continuing investment excellence o Widespread industry recognition and support o ‘Article of faith’ reputation • Further investment in distribution capability o Direct to retail o Inter
Slide 21: Pinnacle Full Year Results
Pinnacle Full Year Results FY2018 FY2017 YoY change For personal use only Pinnacle Affiliates (100% aggregate basis) FUM ($billion) 38.0 26.5 43.4% Revenue ($million) 168.4 128.3 31.3% Net profit before tax 88.9 62.7 41.8% Tax expense (27.3) (19.1) 42.9% Net profit after tax 61.6 43.6 41.3% FY2018 F
Slide 22: 2018 Financial Highlights
2018 Financial Highlights For personal use only • NPAT from continuing operations attributable to shareholders of $23.1 million, up 92.5% from $12.0 million in the prior year • Earnings per share from continuing operations of 14.3 cents, up 76.5% from 8.1 cents in the prior year • NPAT attributable
Slide 23: Group financial summary
Group financial summary For personal use only Strong growth in Pinnacle earnings FY2018 FY2017 YoY change Pinnacle Revenue 16.5 10.9 51.4% Significant growth in ‘Pinnacle Expenses (18.3) (16.4) 11.6% Share of Pinnacle Affiliat es net profit aft er t ax Net profit before tax (NPBT) from continuin
Slide 24: Significant components of FY 2018 results
Significant components of FY 2018 results For personal use only Significant growth in ‘Pinnacle Parent’ revenues and costs Strong growth in distribution revenue from Affiliates, including ‘opening new channels’ Continuing ‘P&L investment’ in ‘Horizon 2’ activities (for example, Offshore Distri
Slide 25: PNI balance sheet
PNI balance sheet For personal use only FY2018 FY2017 YoY change Current Assets Cash and Principal Investments of $31.4 million Cash and cash equivalents 9.3 10.9 (14.7%) Financial assets 22.1 31.6 (30.1%) Includes $21.1 million in strategies managed by Total cash and financial assets 31.4 42.5
Slide 26: Building balance sheet strength for future opportunities
Building balance sheet strength for future opportunities For personal use only $31.4m of cash* and principal investments Includes $21.1m invested in strategies managed by Pinnacle Affiliates Excludes nearly $12m of cash applied for Affiliate equity recycling loans and Affiliate equity purchase
Slide 27: Pinnacle Affiliates financial highlights
Pinnacle Affiliates financial highlights For personal use only FY2018 FY2017 YoY change Strong FUM and revenue growth in Pinnacle Affiliates (100% aggregate basis) FUM ($billion) 38.0 26.5 43.4% Pinnacle Affiliates: Revenue ($million) 168.4 128.3 31.3% Net profit before tax 88.9 62.7 41.8% Tax expen
Slide 28: Pinnacle Affiliates continue to win major industry awards
Pinnacle Affiliates continue to win major industry awards 2016 Morningstar Fund Manager of the Year Awards: For personal use only Hyperion – Australian Fund Manager of the Year Hyperion – Domestic Equities Category Winner, Australia Hyperion – Domestic Equities Small Caps Category Winner, Aust
Slide 29: Continuing strong investment performance of Affiliates
Continuing strong investment performance of Affiliates 93% of Pinnacle Affiliated Investment Manager strategies and products (with a track record exceeding 5 years) have out For personal use only performed their benchmarks over the 5 years to 31 October 2018 5Y 10Y Inception Inception date Hyperion
Slide 30: Pinnacle Affiliates – FY18 review
Pinnacle Affiliates – FY18 review For personal use only » Funds under management grew to $7.5 billion from $3.8 billion at 30 June 2018 » Out-performance across all strategies since inception in 2015 » Addition of the Global fund across most retail platforms » Long-term performance remains excellent
Slide 31: Pinnacle Affiliates – FY18 review
Pinnacle Affiliates – FY18 review For personal use only » Funds under management increased to over $4.9 billion (2017: 4.0 billion) » All of Plato’s domestic strategies have outperformed their benchmarks over five years and since inception, while income strategies have delivered on their strong inco
Slide 32: Pinnacle Affiliates – FY18 review
Pinnacle Affiliates – FY18 review For personal use only » Microcap and Small Caps strategies continued to outperform their benchmarks since inception » Funds under management $702 million at 30 June 2018 up from $211 million at 30 June 2017 » Additions of Olivier Coulon (Senior Analyst) & Al Doeke (
Slide 33: Funds under management by Affiliate
Funds under management by Affiliate For personal use only Gross FUM by affiliate ($m) Pinnacle Hyperion Plato Solaris Resolution Palisade Antipodes Spheria Two Trees Firetrail Date (total) Capital 30 Jun 18 38,032 6,507 4,918 8,319 8,038 1,847 7,554 702 71 74 31 Dec 17 32,338 6,056 4,644 6,618 6,552
Slide 34: FY18 funds under management
FY18 funds under management For personal use only Gross FUM growth ($bn)(1) 40 38.0* 5-yr CAGR: +28.4% FUM of $38.0bn* as at 30 June 2018 (increased to $47.2bn* at 35 10-yr CAGR: +27.0% 31 October 2018) including Metrics Credit ($2.5bn) and Omega 7.9 ($4.3bn) 30 FUM has grown at a CAGR of 27.0%
Slide 35: FY18 revenues
FY18 revenues For personal use only Aggregate affiliate revenues ($m)(1) 180 168.4 Affiliate performance fees - 100% 160 Affiliate revenues - 100% (excl. performance fees) 17.2 - Group NPAT from continuing operations of $23.1m, compared to $12m in FY17, an increase of 92.5% 140 - Revenue from affili
Slide 36: Demonstrated growth track record
Demonstrated growth track record For personal use only Gross FUM ($bn)(1) Affiliate revenues ($m)(2) 168.4 FY15-FY18 CAGR: +33% 38.0 FY15-FY18 CAGR: +33% 128.3 26.5 92.8 19.8 72.0 16.0 FY15 FY16 FY17 FY18 FY15 FY16 FY17 FY18 Pinnacle share of affiliates’ NPAT ($m)(3) Pinnacle NPAT from continued ope
Slide 37: Demonstrated growth track record
Demonstrated growth track record Affiliate gross FUM evolution For personal use only 30 Jun 13: $10.8bn 30 Jun 18: $38.0bn* Spheria Firetrail Two Trees 1.8% 0.2% 0.2% Addition of a number of new affiliates including Palisade 6.7% Hyperion Antipodes, Spheria, Two Trees and Firetrail Antipodes 17.1%
Slide 38: 2018 Business Highlights
2018 Business Highlights For personal use only Record FUM, FUM inflows and Affiliate Revenues FUM $38.0 billion* at 30 June 2018 - up $5.7 billion (17.6%) from 31 December 2017; - up $11.5 billion (43.4%) from 30 June 2017 - up $14.7 billion (62.9%) from 31 December 2016; and - up $18.2 billion
Slide 39: Talent Driven Business Model
Talent Driven Business Model For personal use only • Proven track record of identifying and supporting world class investment teams and anticipating market demand Talented Investors • All established affiliates have delivered strong long term outperformance • CAGR in FUM 27.0% over the last ten year
Slide 40: Distribution Environment
Distribution Environment For personal use only •Industry consolidation, internalisation, margin pressure and higher ODD hurdles, however … Institutional •Demand for high quality boutique active managers remains strong, particularly where capacity is scarce •Globalise investment solutions, distributi
Slide 41: Evolution of Pinnacle's Distribution capability
Evolution of Pinnacle’s Distribution capability For personal use only • Adapt o Grow ahead of our boutiques o Listen to clients and move quickly to meet their evolving needs o Do not become the market – be ahead of it • Resource o Growing adviser engagement – 15+ in retail o Direct (non advised & of
Slide 42: Evolution of Pinnacle's Distribution capability
Evolution of Pinnacle’s Distribution capability For personal use only • Traditional `intermediated retail’ distribution expertise expanded over time to include `direct and exchange traded’ o Intermediated (Financial Advisers) Private managed funds – Platform & Direct Exchange traded funds o Dire
Slide 43: Omnibus Incentive Plan
Omnibus Incentive Plan For personal use only • Our people have elected to work within our business model and culture which is fundamental to our recent growth. To sustain an environment that promotes the continuation of the success of the business, and attract and retain a consistently high quality
Slide 44: Board succession
Board succession For personal use only • Lorraine Berends appointed to the PNI Board, with effect from 1st September 2018 • Long-serving director Steve Wilson retired from the Board at the AGM • Takes the number of female directors to two, in line with our stated target • Increases the number of ind
Slide 45: Pinnacle Charitable Foundation
Pinnacle Charitable Foundation For personal use only • Pinnacle has a strong belief in corporate Australia’s responsibility to give back to the communities which sustain and inspire businesses both large and small • In partnership with Affiliates, Pinnacle primarily supports the community through th
Slide 46: Pinnacle outlook
Pinnacle outlook For personal use only Strong momentum going into FY19 - Acquisition of MCP equity interest, expected to grow strongly - Acquisition of Omega equity interest, ETF initiative being pursued - Launch of Longwave Capital Partners Existing Affiliates continuing to grow (including the
Slide 47: Pinnacle Group Overview
Pinnacle Group Overview For personal use only The diagram above shows the Pinnacle Affiliates and Pinnacle’s effective ownership stake and economic rights in each as at the date of this presentation. In respect of Firetrail Investments, Omega Global Investors and Spheria, the percentage represents P
Slide 48: FY18 - Overview of Pinnacle Affiliates
FY18 - Overview of Pinnacle Affiliates For personal use only Antipodes Partners – a pragmatic value manager of global equities (long only and long-short) - Funds under management have grown to in excess of $7.5bn in under 3 years Firetrail Investments – high conviction investment manager of Aust
Slide 49: FY18 - Overview of Pinnacle Affiliates
FY18 - Overview of Pinnacle Affiliates For personal use only Plato Investment Management – a specialist manager of Australian and Global equities following a quantitative style - Funds under management increased to over $4.9bn Resolution Capital – a specialist manager of Australian and Global li
Slide 50: Affiliates' investment performance – October 2018
Affiliates’ investment performance – 31 October 2018 1Y 3Y 5Y 10Y Inception Inception date For personal use only Hyperion Asset Management - Gross Performance Hyperion Australian Growth Companies Fund 6.31% 8.22% 8.50% 12.45% 11.97% 1/10/2002 Outperformance 3.43% -0.02% 2.50% 3.99% 3.12% Hyperion Sm
Slide 51: Affiliates' investment performance – October 2018
Affiliates’ investment performance – 31 October 2018 For personal use only 1Y 3Y 5Y 10Y Inception Inception date Spheria Asset Management - Gross Performance Microcap Fund 5.71% 14.74% 16/05/2016 Outperformance 3.12% 6.50% Smaller Companies Fund 11.65% 11.75% 11/07/2016 Outperformance 9.06% 5.25% Op
Slide 52: Ingredients / character of such firms
Ingredients / character of such firms For personal use only » Investment professionals need a distraction-free environment and ‘all else catered’ » Alignment of interests with clients » Sustainability / longevity is highly valued by the market » An expert ‘link’ between investment professionals and
Slide 53: 'Operations' services provided
‘Operations’ services provided For personal use only 1 Legal, compliance, and risk 2 Group corporate services, including company secretarial 3 Portfolio administration and client reporting 4 Finance, including account payments, statutory and ASIC financial reporting, audit, GS007 etc. 5 IT (Informat
Slide 54: The Changing Landscape for Investment Management Distribution
For personal use only The Changing Landscape for Investment Management Distribution 52
Slide 55: Australian Institutional Landscape
Australian Institutional Landscape For personal use only Large market underwritten by structural market growth 100+ Australian institutional funds with Super is the largest channel by AUM Institutional market $1.4+ trillion AUM >$1 billion ($2.7 trillion, $100+ billion net inflows) 20 years of Struc
Slide 56: Australian Retail Landscape
Australian Retail Landscape For personal use only Reversal of a 20 year super-cycle of consolidation `Big 6’ consolidated Progressive reduction in pricing FOFA, Royal Commission now Retail $1.3 trillion Manufacturing, Administration power and market access triggering `fragmentation’ & Distribution `
Slide 57: International Landscape
International Landscape For personal use only International Market Opportunity North America Europe Asia/Middle East ~US$38 trillion market ~US$22 trillion market ~US$16 trillion market Potential to Improve Business Yield & Lower Risk Profile Extremely diverse universe of Potentially stronger operat
Slide 58: Disclaimer
Disclaimer For personal use only • This presentation has been prepared by Pinnacle Investment Management Group Limited (PNI). The information in this presentation is current as at 15 November 2018. • This presentation is not an offer or invitation for subscription or purchase of securities or a reco
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