Pinnacle Investment Management Group Limited · ASX:PNI
Pinnacle Investment Management — Shareholder Meeting (October 2021)
81 slides from Pinnacle Investment Management's shareholder meeting presentation, Oct 25, 2021
Slide 1: 2021 Annual General Meeting
For personal use only PINNACLE INVESTMENT MANAGEMENT GROUP LIMITED (PNI) 2021 Annual General Meeting 26 October 2021
Slide 2: Disclaimer
For personal use only PINNACLE INVESTMENT MANAGEMENT GROUP LIMITED (PNI) 1 • 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 25 October 2021. • PNI has prepared this presentation based
Slide 3: Agenda
For personal use only Agenda • Ordinary Business • Managing Director’s address – Ian Macoun • Institutional investment themes – Andrew Chambers • Retail distribution update & outlook – Ramsin Jajoo • International expansion – Adrian Whittingham • Additional information • Q&A
Slide 4: Ordinary Business
For personal use only Ordinary Business
Slide 5: Ian Macoun, Managing Director
For personal use only Ian Macoun MANAGING DIRECTOR
Slide 6: Managing Director's address
For personal use only Managing Director’s address • FY21 Themes • Update – Q1 FY22 • FY21 Financial Results • Growth and Resilience • Clear evidence of strategy execution success • Our status as a high growth company remains intact • An excellent platform in place to move ahead with sustained growth
Slide 7: FY21 Themes
For personal use only FY21 Themes • Strong financial outcome, resumption of strong growth in profitability, FUM and net inflows • Continuing benefits of growing diversity of: • Asset class and investment strategies of Affiliates • Client type and domicile • Performance Fee exposure • Entering FY22:
Slide 8: Update – First Quarter of 2022 Financial Year
For personal use only Update – First Quarter of 2022 Financial Year 7 • Aggregate Affiliates’ FUM of $90.2 billion at 30 September 2021 (at 100%) • Up $0.8 billion or 0.9% from $89.4 billion at 30 June 2021 • Includes the $3.9 billion outflow of the Omega ‘passive' mandate on very modest fees during
Slide 9: FY21 Business Highlights – FUM
FY21 Business Highlights – FUM 8 • Aggregate Affiliates’ FUM of $89.4 billion at 30 June 2021 (at 100%)1,2 For personal use only • Up $18.9 billion or 27% from $70.5 billion at 31 December 2020 • Up $30.7 billion or 52% from $58.7 billion at 30 June 2020 • Aggregate Retail FUM (at 100%) now $20.3 bi
Slide 10: FY21 Business Highlights – Record Flows
For personal use only FY21 Business Highlights – Record Flows 9 • Net inflows for FY21 of $16.7 billion1 • $5.5 billion in the six months ended 31 December 2020 (1H FY21) • $11.2 billion in 2H FY212 • Retail net inflows for FY21 of $4.5 billion ($0.2 billion from LICs/LITs) • $1.9 billion 1H FY21 •
Slide 11: FY21 Financial Highlights
FY21 Financial Highlights 10 • Net profit after tax (NPAT) attributable to shareholders of $67.0 million for the financial year ended 30 June 2021 (FY21), up 108%1,2 from $32.2 million in the financial year ended 30 June 2020 (FY20) For personal use only • Basic earnings per share (EPS) attributable
Slide 12: Growth and Resilience
11 For personal use only GROWTH AND RESILIENCE
Slide 13: Growth & Resilience
For personal use only Growth & Resilience 12 • Clear evidence of strategy execution success • Growth and Resilience simultaneously delivered • Our status as a high growth company remains intact • Fully recovered from challenges of FY20 • We plan to maintain our strategy, aimed at delivering high gro
Slide 14: Growth, Resilience, and an exceptional Platform for further Growth
Growth, Resilience, and an exceptional Platform for further Growth 13 • For several years, we have been consistently implementing our strategy: For personal use only • A 'pure play' investment management firm comprising only the best investment professionals, focused on investment excellence • Highl
Slide 15: Strong growth in NPAT and EPS since 'pure play' listing
For personal use only Strong growth in NPAT and EPS since ‘pure play’ listed Pinnacle 14 CAGR (five years): 63.1% CAGR (five years): 47.7% • Fully franked dividends have grown at a CAGR of 54.1% over the same period (excluding the special dividend paid ahead of Pinnacle listing as a ‘pure play’ inve
Slide 16: Pinnacle continues to grow strongly
Pinnacle continues to grow strongly (notwithstanding the COVID-19 crisis) 15 • Whilst growth in FUM and profitability were suppressed in FY20 due to the impacts of the COVID-19 crisis on markets and our business, Pinnacle has grown strongly, on average, over the two-year period to 30 June 2021, For
Slide 17: Long-term track record of value generation for clients and shareholders
Long-term track record of value generation for clients and shareholders 16 Investment performance – For personal use only creating long-term value for clients, benefits of compounding for Centralized, multi- shareholders channel distribution turbo-charges growth Adding new Affiliates – adds diversif
Slide 18: Affiliates continuing to add new capabilities
Affiliates continuing to add new capabilities 17 Bringing the potential for additional earnings growth and diversity • Small Companies strategy launched in 2020 For personal use only • Direct Income Fund launched to retail investors in July 2020 • Developing sustainable finance strategies to support
Slide 19: Growth in Performance Fee FUM
Growth in Performance Fee FUM 18 Affiliates' FUM (at 100%) subject to performance fees 1 For personal use only Total FUM 30 June 16: $19.8bn Total FUM 30 June 2021: $89.4bn Subject to performance fees: $3.3bn Subject to performance fees: $28.7bn 17% Perf fees 32% Perf fees 83% No perf fees 68% No pe
Slide 20: Recap on Horizon Criteria – What could we acquire?
Recap on Horizon 3 Criteria – What could we acquire? 19 • Criteria Must not place the Company at risk For personal use only • • Only consider if low risk and high return on capital • Exercise great care and careful due diligence • Must be synergistic with existing core • Status • Res Cap acquisition
Slide 21: Three Horizons of Growth
Three Horizons of Growth 20 • Continue to build Pinnacle by taking a measured approach to growth For personal use only • Support the growth of our current Affiliates with increased investment in distribution channels (e.g., international and listed markets) • Invest in / seed new Affiliates where ma
Slide 22: Future Growth Drivers
Future Growth Drivers 21 • Investment in (and continuing to evolve and grow in size and sophistication) our distribution platform • Grow ahead of the Affiliates • Listen to clients and move quickly to meet their evolving needs • Do not become the market – be ahead of it For personal use only • Inves
Slide 23: Funds Under Management and Performance
22 For personal use only FUNDS UNDER MANAGEMENT AND PERFORMANCE
Slide 24: FY21 Funds Under Management
FY21 Funds Under Management 23 Gross FUM ($bn)1 • FUM of $89.4bn as at 30 June 20212 For personal use only • FUM has grown at a CAGR of 24.1% p.a. over the last ten years (22.6% excluding $6.8bn ‘acquired’ in July 2018 and 3.0 billion ‘acquired’ in December 2019) • Increase in FUM of $18.9bn in 2H F
Slide 25: FY21 Funds Under Management by Affiliate
FY21 Funds Under Management 24 Pinnacle Hyperion Plato Solaris RCL Palisade Antipodes Spheria Two Trees Firetrail Metrics 4 Omega Longwave Riparian Coolabah Reminiscent Aikya (total) ($m) ($m) ($m) ($m) ($m) ($m) ($m) ($m) ($m) ($m) ($m) 1 ($m) 1 ($m) ($m) ($m)2 ($m) ($m) For personal use only FUM H
Slide 26: Continuing strong investment performance of Affiliates
25 Continuing strong investment performance of Affiliates 5Y p.a. 10Y p.a. Inception p.a. Inception date Pinnacle Investment Management Hyperion Asset Management - Gross Performance 80% of Pinnacle Affiliated Hyperion Australian Growth Companies Fund 17.71% 18.32% 14.40% 1/10/2002 Investment Manager
Slide 27: Affiliates' investment performance – September 2021
26 Affiliates’ investment performance – 30 September 2021 Inception 1Y p.a. 3Y p.a. 5Y p.a. 10Y p.a. Inception p.a. date Pinnacle Investment Management Hyperion Asset Management - Gross Performance Hyperion Australian Growth Companies Fund 41.12% 23.29% 17.71% 18.32% 14.40% 1/10/2002 Outperformance
Slide 28: Affiliates' investment performance – September 2021
27 Affiliates’ investment performance – 30 September 2021 Inception 1Y p.a. 3Y p.a. 5Y p.a. 10Y p.a. Inception p.a. date Pinnacle Investment Management Firetrail Investments - Gross Performance Firetrail Australian High Conviction Fund 39.03% 8.84% 8.51% 14/03/2018 Outperformance 8.47% -0.80% -1.65%
Slide 29: Pinnacle Affiliates continue to win major industry awards
28 Pinnacle Affiliates continue to win major industry awards 2021 Zenith Fund Awards: 2019 Zenith Fund Awards: • Metrics – Listed Entities Category Winner • Pinnacle – Distributor of the Year Winner (fourth consecutive year) • Firetrail – Alternative Strategies Category Winner • Resolution Capital –
Slide 30: Corporate Sustainability
29 For personal use only CORPORATE SUSTAINABILITY
Slide 31: Pinnacle as a Responsible Firm
30 Pinnacle as a Responsible Firm We are focused on continuous improvement, striving to do better by building a long-term, sustainable firm that focuses on our people, customers and shareholders as well as the communities in which we engage For personal use only • Sustainability Strategy • Establish
Slide 32: Alignment with Sustainable Development Goals
Alignment with Sustainable Development Goals 31 Pinnacle recognises the need for strategies that foster economic development, reduce inequities and transition towards a more sustainable future. By aligning our sustainable initiatives with the UN SDGs and through the support of the Pinnacle Charitabl
Slide 33: Pinnacle Charitable Foundation
32 Pinnacle Charitable Foundation • Pinnacle is passionate about enabling better lives through investment excellence. This belief is strongly reflected in Pinnacle’s commitment – together with Affiliates – to the Pinnacle Charitable Foundation For personal use only • The Foundation’s focus is on gro
Slide 34: Pinnacle Charitable Foundation
33 Pinnacle Charitable Foundation • Key focus areas and partners for FY21 were as follows: Promotion of strong mental wellbeing, together with support for prevention and early intervention strategies aimed at reducing For personal use only • mental illness and driving down suicide rates. Long-term p
Slide 35: Institutional Investment Themes
For personal use only INSTITUTIONAL INVESTMENT THEMES Andrew Chambers, Executive Director
Slide 36: Institutional investment themes
35 Institutional investment themes 1. Zero rates and the threat of inflation • Base rates around the world are at historic lows For personal use only • The prospect of sustained inflation and rising rates is influencing asset pricing and institutional portfolio construction • Bonds – heightened risk
Slide 37: Institutional investment themes
36 Institutional investment themes 3. The rise of private markets • Decline in the number of public firms in the past two decades Private markets industry has grown from US$2.4 trillion to US$7.4 trillion since 2010 which matches the rapid growth of For personal use only • cheap, passive index funds
Slide 38: Pinnacle well positioned for major trends
37 Pinnacle well positioned for major trends Zero rates and the threat of inflation Sustainability, ESG and decarbonisation Alternative Credit Majority of the Affiliates have integrated ESG into their investment For personal use only • Metrics (private credit, floating rate) processes and are measur
Slide 39: Retail Distribution
For personal use only RETAIL DISTRIBUTION Ramsin Jajoo, Head of Retail
Slide 40: Retail
Retail 39 Record retail flows achieved on the back of strong investment performance, adaptation to the environment leading to a significant lift in sales activity levels and continued focus on high performance operating model For personal use only 1. Secular trends impacting intermediated advice cha
Slide 41: Retail
Retail 40 3. Strategic investments to enhance retail distribution capabilities, geographic footprint and overall services • Acquisition of Winston Capital Partners has expanded the retail senior leadership team, broadened our national footprint, and mitigated key person risks For personal use only •
Slide 42: Retail - Listed solutions update
Retail - Listed solutions update 41 • $3.5 billion1 of listed FUM as at 30 June 2021 across 8 active ETFs, LICs and LITs For personal use only • ETFs reached a tipping point in March 2020 as ETF adoption had a step change (as seen in monthly ETF value traded) Active ETFs • Active global equities and
Slide 43: Retail – Expanded footprint across intermediated market
For personal use only Retail – Expanded footprint across intermediated market 42 Advisers 21,300+ Researchers 1,050+ Consultants 150+ Brokers 1,000+ Source: Pinnacle, Salesforce (estimates as at 30 June 2021)
Slide 44: Sales stages – delivering next best action signals
For personal use only Sales stages – delivering “next best action” signals 43
Slide 45: Activities and initiatives driving opportunities across the sales process
For personal use only Activities and initiatives driving opportunities/retention across the sales process 44
Slide 46: Optimised Sales Process – Plan, Nurture, Protect, Retain and Grow
Optimised Sales Process – “Plan, Nurture, Protect, Retain and Grow” 45 Optimised Sales Process The Perfect Persona - What does a qualified lead look like to the sales team? Qualified Leads Type of practice & portfolio construct | FUA | Sales Stage | Affiliate | Engagement levels For personal use onl
Slide 47: Optimised Sales Process – Driving efficiency and productivity
For personal use only Optimised Sales Process – Driving efficiency and productivity 46 • Investors bucketed by the ‘stage’ in their investment cycle • ‘Gap to Goal’ used to prioritise activities and sales approach Source: Pinnacle, Salesforce
Slide 48: MarTech Stack | Accelerating the Distribution Process
For personal use only MarTech Stack | Accelerating the Distribution Process 47
Slide 49: Retail – Audience reach during FY21
For personal use only Retail – Audience reach of close to 1 million during FY21 48 Source: Pinnacle, Salesforce & Pardot
Slide 50: Total size and net flows in retail asset management industry
Total size and net flows in retail asset management industry – narrower range of winners! 49 $1,600Bn Total Funds Under Management - Retail Funds $1,400Bn $1,200Bn For personal use only $1,000Bn $800Bn $600Bn $400Bn $200Bn $0Bn $44Bn Annual Estimated Net Flows – Retail Funds $50Bn $31Bn $15Bn $25Bn
Slide 51: What Factors Drive Investment Flows? – A.I. and Machine Learning
‘What Factors Drive Investment Flows?’ – A.I. and Machine Learning 50 Australia Equity Factor Premia For personal use only Morningstar runs a monthly cross-sectional regression of the fund’s growth rate against their fund characteristics. • Positive factors: • Inflow momentum • 5 Star rated • Passiv
Slide 52: What Factors Drive Investment Flows? – A.I. and Machine Learning
‘What Factors Drive Investment Flows?’ – A.I. and Machine Learning 51 Factor Statistics - Persistence For personal use only The facto premia correlations are persisted through time. The fees and outflows are negative while five-star, positive growth rates and index funds are consistently positive. 3
Slide 53: What Factors Drive Investment Flows? – A.I. and Machine Learning
For personal use only ‘What Factors Drive Investment Flows?’ – A.I. and Machine Learning 52 Source: Morningstar Direct, data as at August 2021
Slide 54: International Expansion
For personal use only INTERNATIONAL EXPANSION Adrian Whittingham, Executive Director
Slide 55: Evolution to a global multi-affiliate
Evolution to a global multi-affiliate 54 • Seeking quality partnerships that meet the criteria of Horizon 2 (incubation) or Horizon 3 (transactions) For personal use only • Our expansion will not compromise the Pinnacle model and success will require us to act locally • Minority ownership, supported
Slide 56: Opportunity
Opportunity 55 • Global Asset Management FUM is USD$100 trillion* For personal use only • North America comprises USD$48.6 trillion* • The 20 largest managers in the Unites States manage more than USD$40 trillion. None of these are a multi- affiliate • USD$1.8 trillion of inflows in 2020 in North Am
Slide 57: Pipeline
Pipeline 56 • Opportunities being generated from: • Trusted industry experts For personal use only • Proactive screening of strategies/capabilities • Asset class focus combined with performance filtering • Nimbleness allowing us to pivot and engage quickly as opportunities arise • As we globalise, a
Slide 58: Additional Information
For personal use only ADDITIONAL INFORMATION
Slide 59: FY21 in Review
For personal use only FY21 IN REVIEW
Slide 60: FY21 Financial Results
FY21 Financial Results 59 FY21 ($M) FY20 ($M) % Change PINNACLE 1 Revenue 32.5 22.4 45% 1 For personal use only 2, 3 2,3 Expenses (31.9) (28.0) 14% 4 4 Share of Pinnacle Affiliates net profit after tax 66.4 38.0 75% Net profit before tax (NPBT) from continuing operations 67.0 32.4 107% Taxation - -
Slide 61: FY21 Business Highlights – Affiliates
FY21 Business Highlights – Affiliates 60 • Seven Affiliates earned performance fees totalling $86.2 million (at 100%; Pinnacle post-tax share $19.5 million) in FY21 (in FY20, five Affiliates earned performance fees totaling $26.7 million (at 100%; Pinnacle share $6.6 million)), demonstrating the For
Slide 62: Understanding FY21 financial outcome
Understanding FY21 financial outcome 61 • Total Affiliate revenues1 were $415.5 million during FY21, including $86.2 million (21%) in performance fees; in FY20, total Affiliate revenues were $291.1 million, which included $26.7 million (9%) in performance fees For personal use only • This represents
Slide 63: Performance Fees – FUM and Strategy Growth
Performance Fees – FUM and Strategy Growth 62 • The volume of FUM with performance fee potential has increased significantly For personal use only • FUM subject to performance fees entering FY22 is 28% higher than the average during FY21 • The number and diversity of strategies with significant perf
Slide 64: Performance fees delivered by a number of Affiliates each year
For personal use only Performance fees have been delivered by a number of Affiliates each year 63
Slide 65: Significant components of FY21 results – Pinnacle Parent
Significant components of FY21 results – Pinnacle Parent 64 • Significant revenue growth in Pinnacle Parent, costs controlled: For personal use only • Revenues have grown 45% compared with FY20, driven by strong inflows and revenue-sharing fees • ‘P&L investment’ in support of Horizon 2 initiatives
Slide 66: Significant components of FY21 results – Affiliates
For personal use only Significant components of FY21 results - Affiliates 65 • Significant growth ($28.4 million, or 75%) in Pinnacle’s share of Affiliate profits compared with FY201: • Performance fees (at 100%) of $86.2 million in FY21, across seven Affiliates (Pinnacle share post-tax of $19.5 mil
Slide 67: PNI Balance Sheet
PNI Balance Sheet 66 Cash and PI of $155.0 million 30 Jun 2021 ($M) 30 Jun 2020 ($M) Change • • Includes $56.4m invested in strategies managed by CURRENT ASSETS Pinnacle Affiliates For personal use only Cash and cash equivalents 96.1 16.1 497% • Excludes $9.6m of cash applied for Affiliate equity Fi
Slide 68: Growth, Resilience, and an exceptional Platform for further Growth
Growth, Resilience, and an exceptional Platform for further Growth 67 Resilience enhanced by progressive diversification of: For personal use only 1. Asset classes (including a greater range on offer overseas) 2. Client type 3. Client domicile (overseas as well as domestic) 4. Growth in Retail FUM 5
Slide 69: Growth of our Platform
Growth of our Platform 68 CON TI N U I N G TO I N V E ST I N A DI V E RSI FI E D PLATFO R M TO STRE N G TH E N FU TU RE GROWT H Executives of both Pinnacle and Pinnacle Affiliates For personal use only • have significant equity interests • Equity ownership enhances alignment with shareholders Seed F
Slide 70: Growth in Asset Classes
For personal use only Growth in Asset Classes 69 FUM by Asset Class FUM by Asset Class 30 Jun 2016 (%) 30 June 2021 (%) Australian Equities* 8 9 Global Equities* Australian Equities 7 3 Real Assets (Public 24 Global Equities 46 Markets) Real Assets (Private 2 Real Assets (Public Markets) 19 Markets)
Slide 71: Growth and Development of Client Base
Growth and Development of Client Base 70 Total FUM at 30 June 2016 (%) Total FUM at 30 June 2021(%) Industry Super Fund Industry Super Fund Public Pension Fund 13 16 Public Pension Fund For personal use only 23 20 1 Corporate Pension Fund 3 Corporate Pension Fund 4 Financial Institution 1 Financial
Slide 72: Growth in Retail FUM
Growth in Retail FUM 71 Retail FUM evolution 8.2x For personal use only 1 Total FUM 30 June 13: $10.9bn Total FUM 30 June 2021: $89.4bn Retail: $0.9bn Retail: $20.3bn 22.6x 8% Retail 23% Retail 92% institutional 77% Institutional • Pinnacle has invested significantly in retail distribution and has g
Slide 73: Growth by Affiliate
Growth by Affiliate 72 30 June 2016 30 June 2021 For personal use only 1 Total FUM $19.8bn Total FUM $89.4bn Hyperion 28.5% (largest affiliate) RCL 18.3% (largest affiliate) Hyperion 7.5 Solaris 13.3 Palisade 7.8 Plato Hyperion Resolution Capital 2.3 5.2 Antipodes Solaris 12.4 23.2 28.5 Spheria Pali
Slide 74: Affiliate Summaries
For personal use only AFFILIATE SUMMARIES
Slide 75: Pinnacle Affiliates
Pinnacle Affiliates 74 Global Emerging Market Equities • High quality • Absolute return For personal use only • Concentrated portfolio • Long term sustainable growth • Stewardship and Sustainability • Headquartered in London, United Kingdom Global, Asian and Emerging Markets equities • ‘Pragmatic va
Slide 76: Pinnacle Affiliates
Pinnacle Affiliates 75 Australian, Global, Small-Cap & Long/Short Equities • Deep fundamental research approach consistently applied for 15+ years For personal use only • Experts in high conviction investing • Focused on generating alpha from stock selection, whilst reducing exposure to unintended m
Slide 77: Pinnacle Affiliates
Pinnacle Affiliates 76 Australasian Private Credit • One of Australasia’s largest non-bank lenders • Participation across all loan market segments – leverage finance, project finance, commercial real estate, corporate For personal use only • Investment across the capital structure – investment grade
Slide 78: Pinnacle Affiliates
Pinnacle Affiliates 77 Australian Accumulation, Low Volatility and Tax-Exempt Equities, Global Income Equities and Global Long/Short Equities For personal use only • Customised alpha models and portfolio construction for accumulation, retirement and absolute return solutions • Launched Enhanced Low
Slide 79: Pinnacle Affiliates
Pinnacle Affiliates 78 Australasian Private Agriculture, Food & Water • Real asset backed investments across the food and agriculture sector For personal use only • Participation throughout the value chain investing in assets that are critical to the production of essential goods; water, farmland, a
Slide 80: Pinnacle Affiliates
Pinnacle Affiliates 79 Systematic Global Macro • Former GMO SGM team For personal use only • Competitive edge is the novel way in which the firm fuses together a deep philosophical understanding of financial economics with rigorous scientific techniques for forecasting returns, volatility and correl
Slide 81: Q&A
For personal use only Q&A
Pinnacle Investment Management Group — Shareholder Meeting (October 2021) on 6ix