Pinnacle Investment Management Group Limited · ASX:PNI
Pinnacle Investment Management — Macquarie Investor Conference 2020
63 slides from Pinnacle Investment Management's conference presentation, Oct 28, 2020
Slide 1: Macquarie Investor Presentation ASX cover letter
28 October 2020 For personal use only By Electronic Lodgement Market Announcements Office ASX Ltd 20 Bridge Street SYDNEY NSW 2000 Macquarie Investor Presentation Pinnacle Investment Management Group Limited is pleased to attach a copy of a presentation that will be given to investors and analysts a
Slide 2: Macquarie Investor Presentation
For personal use only PINNACLE INVESTMENT MANAGEMENT GROUP LIMITED (PNI) Macquarie Investor Presentation 29 October 2020
Slide 3: For personal use only
PINNACLE INVESTMENT MANAGEMENT GROUP LIMITED (PNI) 1 For personal use only • 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 29 October 2020. • PNI has prepared this presentation based
Slide 4: Agenda
Agenda For personal use only • Business update ⒝ Ian Macoun • Institutional & International distribution update & outlook ⒝ Andrew Chambers • Retail distribution update & outlook ⒝ Ramsin Jajoo • Q&A
Slide 5: Ian Macoun, Managing Director
For personal use only Ian Macoun MANAGING DIRECTOR
Slide 6: Business update
Business update For personal use only • FY20 Themes • Update ⒝ Q1 FY21 • FY20 Financial Results • Increasing resilience - diversity of: • Asset classes and investment strategies of Affiliates • Client type and domicile • Performance fee potential • Resuming growth, able to respond to possible furthe
Slide 7: FY20 Themes
FY20 Themes For personal use only • Solid financial outcome in prevailing circumstances, although below expectations at start of year • Early evidence of benefits of increasing diversity of: • Asset class and investment strategies of Affiliates • Client type and domicile • Performance fee potential
Slide 8: Update – First Quarter of 2021 Financial Year
Update – First Quarter of 2021 Financial Year 6 For personal use only • Aggregate Affiliates⒢ FUM of $61.7 billion at 30 September 2020 (at 100%) • Up $3.0 billion or 5% from $58.7 billion at 30 June 2020 • Aggregate Retail FUM (at 100%) at 30 September 2020 $13.8 billion; up 5% from $13.1 billion a
Slide 9: Update – First Quarter FY21 – FUM & Flows
Update – First Quarter of 2021 Financial Year – FUM & Flows 7 • In aggregate, the retail market has remained challenging for active managers, especially in equities • We are taking market share to achieve significant inflows • 6 months of positive net inflows (since outflows Feb ⒝ April) For persona
Slide 10: FY20 Business Highlights – FUM and Flows
FY20 Business Highlights – FUM and Flows 8 • Aggregate Affiliates⒢ FUM of $58.7 billion at 30 June 2020 (at 100%) 1 • Up $4.4 billion or 8% from $54.3 billion at 30 June 2019 For personal use only • Down $2.9 billion or 5% from $61.6 billion at 31 December 2019 • Aggregate Retail FUM (at 100%) at 30
Slide 11: FY20 Financial Highlights
FY20 Financial Highlights 9 • Net profit after tax (NPAT) attributable to shareholders of $32.2 million, up 5.6%1 from $30.5 million in FY19 For personal use only • Basic earnings per share (EPS) attributable to shareholders of 18.8 cents, up 2.7% from 18.3 cents in FY19 • Diluted earnings per share
Slide 12: Building a resilient, diversified business
Building a resilient, diversified business 10 For personal use only Resilience has been enhanced by progressive diversification of: 1. Asset classes 2. Client type 3. Client domicile 4. Percentage of funds exposed to performance fees
Slide 13: Diversity of our Platform
Diversity of our Platform 11 CONTINUING TO INVEST I N 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 capital
Slide 14: Diversity by Affiliate June 2020
Diversity by Affiliate 12 30 June 2020 For personal use only 30 June 2016 Total FUM $19.8bn Total FUM $58.7bn Hyperion 28.5% (largest affiliate) RCL 15.3% (largest affiliate) Hyperion 6.4 0.2 Solaris 13.4 7.6 Palisade Hyperion 2.3 Plato Solaris 7.3 23.2 28.5 Resolution Capital 14.6 Palisade Antipode
Slide 15: Diversity by Asset Class
Diversity by Asset Class 13 For personal use only FUM by Asset Class FUM by Asset Class 30 Jun 2016 (%) 30 June 2020 (%) 8 Australian Equities* Australian Equities 9 Global Equities* 7 4 24 Global Equities Real Assets (Public 46 Markets) Real Assets (Private 2 Real Assets (Public 16 Markets) 67 Mark
Slide 16: Diversity by Client Type
Diversity by Client Type 14 For personal use only Institutional ⒝ Domestic International Retail ⒝ Intermediated Retail ⒝ Direct
Slide 17: Diversity by Client Type
Diversity by Client Type 15 Total FUM at 30 June 2016 (%) Total FUM at 30 June 2020 (%) Industry Super Fund Industry Super Fund 13 16 Public Pension Fund 18 Public Pension Fund For personal use only 1 24 3 Corporate Pension Fund Corporate Pension Fund 4 Financial Institution Financial Institution 1
Slide 18: Growth in Retail FUM
Growth in Retail FUM 16 Retail FUM evolution For personal use only 5.4x Total FUM 30 Jun 13: $10.9bn Total FUM 30 Jun 20: $58.7bn Retail: $0.9bn Retail: $13.1bn 14.6x 8% Retail 23% Retail 92% institutional 77% Institutional • Pinnacle has invested significantly in retail distribution and has generat
Slide 19: Growth in Performance Fee FUM
Growth in Performance Fee FUM 17 Affiliates' FUM (at 100%) subject to performance fees For personal use only Total FUM 30 June 16: $19.8bn Total FUM 30 June 20: $58.7bn Subject to performance fees: $3.3bn Subject to performance fees: $18.9bn 17% Perf fees 32% Perf fees 83% No perf fees 68% No perf f
Slide 20: FY20 Funds Under Management
FY20 Funds Under Management 18 Gross FUM growth ($bn)1 • FUM of $58.7bn as at 30 June 2020 For personal use only • FUM has grown at a CAGR of 22.2% p.a. over the last ten years (20.0% excluding $6.8bn ⒡acquired⒢ 70.0 in July 2018 and 3.0 billion ⒡acquired⒢ in 58.7 December 2019) 60.0 • Increase in F
Slide 21: FY20 Funds Under Management
FY20 Funds Under Management 19 Pinnacle Hyperion Plato Solaris RCL Palisade Antipodes Spheria Two Trees Firetrail Metrics Omega Longwave Riparian Coolabah Reminiscent Aikya (total) For personal use only ($m) ($m) ($m) ($m) ($m) ($m) ($m) ($m) ($m) ($m) ($m)1 ($m)1 ($m) ($m) ($m)2 ($m) ($m) FUM Histo
Slide 22: Continuing strong investment performance of Affiliates
Continuing strong investment performance of Affiliates 20 Inception Inception 5Y (p.a.) 10Y (p.a.) (p.a.) date Pinnacle Investment Management Hyperion Asset Management - Gross Performance 90% of Pinnacle Affiliated Hyperion Australian Growth Companies Fund 14.96% 12.63% 13.07% 10/1/2002 Investment M
Slide 23: Affiliates’ investment performance – September 2020
Affiliates’ investment performance – 30 September 2020 21 Inception Inception 1Y 3Y (p.a.) 5Y (p.a.) 10Y (p.a.) (p.a.) date Pinnacle Investment Management Hyperion Asset Management - Gross Performance Hyperion Australian Growth Companies Fund 21.96% 18.24% 14.96% 12.63% 13.07% 10/1/2002 Outperforman
Slide 24: Affiliates’ investment performance – September 2020
Affiliates’ investment performance – 30 September 2020 22 Inception Inception 1Y 3Y (p.a.) 5Y (p.a.) 10Y (p.a.) (p.a.) date Pinnacle Investment Management Two Trees Investment Management - Gross Performance For personal use only Global Macro Fund -11.91% -4.86% 11/1/2017 Outperformance -14.49% -6.24
Slide 25: Pinnacle Affiliates continue to win major industry awards
Pinnacle Affiliates continue to win major industry awards 23 2020 Zenith Fund Awards (to be announced on 30 October 2020): 2018 Professional Planner | Zenith Fund Awards: • Pinnacle ‒ Distributor of the Year Finalist (fifth consecutive year) • Pinnacle ‒ Distributor of the Year Winner (third consecu
Slide 26: Pinnacle Charitable Foundation
Pinnacle Charitable Foundation For personal use only 24 • 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 foc
Slide 27: Pinnacle Charitable Foundation
Pinnacle Charitable Foundation 25 • Combined donations of over $450,000 were predominantly directed to 10 not-for-profit partners across the following five identified priority areas. They included a new partnership with The Kindness Factory, developed in response to the For personal use only pressur
Slide 28: Institutional and International Distribution
For personal use only INSTITUTIONAL AND INTERNATIONAL DISTRIBUTION Andrew Chambers, Executive Director
Slide 29: FY21 - The Story So Far…
FY21 - The Story So Far… 27 1. Steady Origination and Crystallization of Sales Pipeline • Conversion of deferred allocations For personal use only • Resumption of suspended search processes • Origination of new search activity • Meaningful contribution from international channels 2. Active Portfolio
Slide 30: Australian Themes
Australian Themes 28 • Sustained Pursuit of Scale Benefits • Consolidation occurring across all major investor segments For personal use only • Profit-To-Member Funds • Wealth Management Funds • Public Sector Funds • Regulatory pressure to demonstrate scale benefits • ⒡Do more for less⒢ ⒝ deliver la
Slide 31: Global Themes
Global Themes 29 • Lower for Longer ⒝ But How Much Longer? • Bidding up long duration assets and compressing yields For personal use only • Encouraging greater risk-taking to meet liabilities • Driving asset class and style performance • Growth outperforming • Value underperforming • Private Markets
Slide 32: Global Themes - Fiduciary Consolidation
Global Themes - Fiduciary Consolidation 30 • Asset Management • 80% of M&A occurring in North America and Europe For personal use only • Highlights the inorganic growth in these markets • Middle sized managers struggling to distinguish themselves from the large-scale players and boutique sharp-shoot
Slide 33: Conclusion
Conclusion 31 • Pinnacle competitively positioned to partner with talented teams disrupted by global asset management M&A For personal use only • Pinnacle well placed to partner with winners in the consolidation race • ⒡Supported⒢ start-ups can offer the capacity, fees, viability and alpha potential
Slide 34: Retail Distribution
For personal use only RETAIL DISTRIBUTION Ramsin Jajoo, Head of Retail
Slide 35: Retail Market Trends
Retail Market Trends 33 • Secular headwinds impacting intermediated advice channel have accelerated under COVID-19 conditions: For personal use only • Adviser exodus continues (15% decline in FY20)1 • Regulatory reforms and increased compliance affecting productivity and profitability • Rise in corp
Slide 36: What Factors Drive Investment Flows? – A.I. and Machine Learning
‘What Factors Drive Investment Flows?’ – A.I. and Machine Learning 34 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 37: Factor Statistics – Persistence
‘What Factors Drive Investment Flows?’ – A.I. and Machine Learning 35 Factor Statistics ⒝ Persistence For personal use only The factor premia correlations are persistent through time. The fees and outflows are negative while five-star, positive growth rates and index funds are consistently positive
Slide 38: What Factors Drive Investment Flows? – A.I. and Machine Learning
"What Factors Drive Investment Flows?“ – A.I. and Machine Learning 36 For personal use only Source: Morningstar Direct. Data as of October 2020
Slide 39: Additional Information
For personal use only ADDITIONAL INFORMATION
Slide 40: FY20 in Review
For personal use only FY20 IN REVIEW
Slide 41: Our Response to the COVID-19 crisis
Our Response to the COVID–19 crisis 39 We believe that the reputations and future success or otherwise of investment management companies are often For personal use only determined by their behaviour and performance during periods of crisis and their capacity to resume growth depends on the strength
Slide 42: FY20 Financial Results
FY20 Financial Results 40 FY2020 ($M) FY2019 ($M) YoY Change PINNACLE 1 Revenue 22.4 21.1 6.2% For personal use only 2, 3 Expenses (28.0) (23.7) 18.1% 4 Share of Pinnacle Affiliates net profit after tax 38.0 33.1 14.8% Net profit before tax (NPBT) from continuing operations 32.4 30.5 6.2% Taxation -
Slide 43: FY20 Business Highlights – Affiliates
FY20 Business Highlights – Affiliates 41 For personal use only • Three new Affiliates (one Horizon 3 and two Horizon 2) • Acquisition of a 25% interest in CCI (Public Markets Credit) for an initial $29.1 million in December 2019, with a further $5m payable upon the business achieving certain milesto
Slide 44: Understanding FY20 financial outcome
Understanding FY20 financial outcome 42 • Total Affiliate revenues1 were $291.1m during FY20, including $26.7m (9.1%) in performance fees; in FY19, total For personal use only Affiliate revenues were $236.8m, which included $15.3m (6.5%) in performance fees • This represents 22.9% growth in total Af
Slide 45: Significant components of FY20 results
Significant components of FY20 results 43 • Consolidation in Pinnacle Parent in a challenging year: For personal use only • Success- and FUM-based distribution fee revenue restrained due to market dislocation in 2H2020 ⒝ deferrals in certain institutional allocations; lower retail net inflows • Staf
Slide 46: PNI Balance Sheet
PNI Balance Sheet 44 30 Jun 2020 30 Jun 2019 • Cash and Principal Investments of $50.1m YoY Change ($M) ($M) • Includes $32.4m invested in strategies managed by For personal use only CURRENT ASSETS Pinnacle Affiliates Cash and cash equivalents 16.1 26.7 -39.7% • Excludes over $10m of cash applied fo
Slide 47: Corporate Sustainability
For personal use only CORPORATE SUSTAINABILITY
Slide 48: Pinnacle as a Responsible Firm
Pinnacle as a Responsible Firm 46 We are focused on continuous improvement, striving to do better by building a long-term, sustainable firm that focuses For personal use only on our staff, customers and shareholders as well as the communities in which we engage. • Carbon Emissions • Pinnacle achieve
Slide 49: People, Diversity and Community
People, Diversity and Community 47 People • Fully supportive of initiatives to optimise the mental health of employees through access to the Employee Assistance For personal use only Program for employees and family members • Employees are encouraged to always act in Pinnacle⒢s best interests and ma
Slide 50: People, Diversity and Community
People, Diversity and Community 48 For personal use only Community • Through the Pinnacle Charitable Foundation and engaged Affiliates, we are supporting a number of key social priorities, including the following, by donating in excess of $400k per annum: • Human Rights: legal assistance for victims
Slide 51: Affiliate commitment to ESG
Affiliate commitment to ESG 49 Ten affiliates are signatories to the United Nations supported Principles of Responsible Investment (⒤PRI⒥): For personal use only Incorporate ESG into Affiliate Signatory to PRI Have an ESG policy Investment process Aikya Yes Yes Yes Antipodes Yes Yes Yes Coolabah No
Slide 52: Pinnacle Affiliates at the forefront as responsible investors
Pinnacle Affiliates at the forefront as responsible investors 50 For personal use only • Principles for Responsible Investment (PRI) • PRI signatory since 2010 signatory since 2011 • UN Global Compact signatory (2019) • Member of the Climate Action 100+ investor • Member of GRESB since 2017 group •
Slide 53: New Affiliates During the Year
For personal use only NEW AFFILIATES DURING THE YEAR
Slide 54: CCI acquisition
CCI acquisition 52 • Pinnacle acquired a 25% equity interest in CCI in December 2019, for $29.1m, together with a further $5m payable upon the business achieving certain milestones over the following 18 month to 4.5 year period For personal use only • Funded by a facility from the CBA • Established
Slide 55: CCI’s Edge
CCI’s Edge 53 1. Large team focussed exclusively on Australian investment-grade fixed-income • 6 portfolio managers, 11 analysts, and 26 staff in total For personal use only • CCI⒢s staff own 75% of business ⒝ remaining 25% held by Pinnacle • Chaired by Melda Donnelly (ex-CEO QIC, VFMC Deputy Chair)
Slide 56: Reminiscent Capital: Asia Macro
Reminiscent Capital: Asia Macro 54 • Discretionary Asia Macro investment firm with three investment professionals led by David Adams (ex-Brevan Howard Asia and Morgan Stanley Australia) For personal use only • Reminiscent aims to deliver attractive, uncorrelated absolute returns through a concentrat
Slide 57: Aikya: Global Emerging Market Equities
Aikya: Global Emerging Market Equities 55 • Global Emerging Market Equity Affiliate based in London, United Kingdom. 32.5% owned by Pinnacle, 67.5% by team members For personal use only • 7 investment professionals with 80+ years collective experience investing in Emerging Market Equities, led by: •
Slide 58: Affiliate Summaries
For personal use only AFFILIATE SUMMARIES
Slide 59: Update – Pinnacle Affiliates
Update – Pinnacle Affiliates • Focused on generating healthy long term returns with strong down‐side risk protection, by investing alongside high quality stewards of businesses in Emerging Markets For personal use only • Aikya Global Emerging Markets Fund (AUT) was launched in March 2020 • UCITS fun
Slide 60: Update – Pinnacle Affiliates
Update – Pinnacle Affiliates • Long‐term business owner mindset • Average holding period for the companies in their portfolios is 10 years • Hyperion Global Growth Companies Fund opened to retail investors in 2019. As at 30 For personal use only June 2020, the fund has outperformed its benchmark by
Slide 61: Update – Pinnacle Affiliates
Update – Pinnacle Affiliates • Manage investments in assets within the Transport, Energy, Utilities, Renewables, Agri‐ infrastructure and Social (PPP) sectors • As at 30 June 2020, funds under management and investor commitments totalled For personal use only approximately $2.9 billion across Palisa
Slide 62: Update – Pinnacle Affiliates
Update – Pinnacle Affiliates • Specialist water, agriculture and food investment firm, established in early 2019 • Riparian’s investment team has extensive experience in agriculture, finance and asset For personal use only management, predominantly in Australia but also covering the United States an
Slide 63: For personal use only
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