Pinnacle Investment Management Group Limited · ASX:PNI
Pinnacle Investment Management — Investor Presentation (February 2023)
73 slides from Pinnacle Investment Management's investor presentation, Feb 1, 2023
Slide 1: Pinnacle FY2023 interim financial results (ASX announcement)
1st February, 2023 By Electronic Lodgement Market Announcements Office ASX Ltd 20 Bridge Street SYDNEY NSW 2000 Dear Sir/Madam Pinnacle Investment Management Group Limited (ASX: PNI) FY2023 interim financial results Pinnacle Investment Management Group Limited (PNI) is pleased to advise shareholders
Slide 2: Composition of Group Results
Continued Affiliate medium-term outperformance – 85% of 5-Year Affiliate strategies have outperformed their respective benchmarks as at 31 December 2022 Cash and Principal Investments (PI) of $179.1 million at 31 December 2022. CBA facility of $120m fully- drawn and deployed into liquid funds ma
Slide 3: Notes
1. Includes dividends and distributions received on PI. These were $2.9m in 1H FY23, compared with $1.9m in 1H FY22 2. Includes interest cost on the CBA facility of $2.7m in 1H FY23 ($1.0m in 1H FY22) and amortization of the PL8 offer costs of $0.2m in 1H FY23 ($0.4m in 1H FY22) 3. Includes mark-to-
Slide 4: FUM Update
FUM Update The FUM of the fifteen Pinnacle Affiliates as at 31 December 2022 was $83.2 billion, at 100%, reflecting: a decrease in FUM of $0.5 billion or 1% during 1H FY23, comprising net outflows of $1.5 billion and increases due to market movements/investment performance of $1.0 billion a comp
Slide 5: Retail FUM Update
Retail FUM Update Retail FUM stood at $20.8 billion at 31 December 2022, reflecting a decrease in FUM of $0.3 billion or 1% during 1H FY23, comprising net inflows of $0.3 billion and decreases due to market movements/investment performance of $0.6 billion. Pinnacle Affiliates – Financial Highlights1
Slide 6: Dividend
Dividend The Board has resolved to pay a fully franked interim dividend of 15.6 cents per share to shareholders recorded on the register on 3 March 2023 and payable on 17 March 2023, which represents a payout ratio of 100% of diluted EPS. The Dividend Reinvestment Plan (DRP) is applicable to this di
Slide 7: 1H FY23 Results Presentation
PINNACLE INVESTMENT MANAGEMENT GROUP LIMITED (PNI) 1H FY23 RESULTS PRESENTATION 1 st February 2023
Slide 8: Pinnacle Investment Management Group Limited (PNI)
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 1 February 2023. PNI has prepared this presentation based on information available to
Slide 9: Agenda
Agenda 01 Introduction and Highlights Ian Macoun 4 02 Financial Performance Dan Longan 17 Market Update – Institutional 03 and International Andrew Chambers 21 04 Market Update - Retail Ramsin Jajoo 25 05 Growth Agenda Ian Macoun 32 06 Corporate Responsibility Ian Macoun 40 07 Conclusion Ian Macoun
Slide 10: Introduction and Highlights
01 Introduction and Highlights Ian Macoun, Managing Director
Slide 11: 1H FY23 Themes
1H FY23 Themes • Core revenues (ex-performance fees) resilient • Earnings impacted by cost of Horizon 2 investment in both Pinnacle and Affiliates as investment for future growth continues • During 1H FY23, market and style shifts significantly impacted Funds Under Management (FUM) in certain areas
Slide 12: 1H FY23 – difficult conditions; diversification delivering resilience
1H FY23 – difficult conditions; diversification delivering resilience; ongoing investment for future growth 1. Core revenues (ex-performance fees) resilient • Cycling to higher rate business still evident – revenues (excluding performance fees) were 0.6% lower than the PCP despite average FUM being
Slide 13: 1H FY23 – difficult conditions (continued)
1H FY23 – difficult conditions; diversification delivering resilience; ongoing investment for future growth (continued) 4. Quality and diversity of FUM has mitigated downside from volatile markets and dynamic fund flows • Affiliate quality, asset class diversity, style diversity and continuous produ
Slide 14: 1H FY23 financial highlights
1H FY23 financial highlights 8 Pinnacle is not immune to market factors, but diversified platform provides resilience and will drive growth throughout the cycle Affiliate FUM / Revenue (100%) NPAT / EPS Affiliate FUM (100%) 31 Dec 22 30 Jun 22 Change 1H FY23 1H FY22 Change Aggregate Affiliate FUM (a
Slide 15: Pinnacle has a diversified Affiliate platform
Pinnacle has a diversified Affiliate platform 9 Track record of investing to deliver medium-term growth Executives of both Pinnacle and Pinnacle Affiliates have significant equity interests. Equity ownership enhances alignment with shareholders. Seed FUM and Middle office and Technology and other fi
Slide 16: Track record of earnings growth throughout market cycles
Track record of earnings growth throughout market cycles 10 The strength of our platform and award-winning brands generates material earnings growth for our shareholders over the long-term NPAT growth: 2016 - 2022 Diluted EPS growth: 2016 - 2022 CAGR (five years to CAGR (five years to 44.8% 39.0% 30
Slide 17: Track record of earnings growth throughout market cycles
Track record of earnings growth throughout market cycles 11 • Pinnacle Affiliate revenues are linked, in part, to movements in equity markets. During the half, market and style shift have significantly impacted Funds Under Management, and therefore revenues, in certain areas • Pinnacle has pursued a
Slide 18: Investment performance
Investment performance 12 Our industry leading portfolio of high performing Affiliates continues to outperform benchmarks and provides an engine for continued FUM growth and performance fee generation Affiliate fund outperformance over benchmarks (alpha) – over 5-year period, p.a. Spheria Australian
Slide 19: Funds under management
Funds under management 13 Gross FUM ($bn) 1 • FUM has grown at a CAGR of 22.4% p.a. over the last ten years (20.7% excluding $6.8bn ‘acquired’ in July 2018, $3.0bn ‘acquired’ in December 2019 and $1.1bn ‘acquired’ in December 2021) • Markets were mixed over 1H FY23: • S&P/ASX 300 index up 7.0% • MSC
Slide 20: Performance fees
Performance fees 14 22 strategies with the potential to deliver performance fees – surprisingly low this half, but future potential remains Closing FUM & number of strategies subject to performance fees • The volume of FUM with performance fee potential has increased substantially in recent years 5
Slide 21: Diversification → resilience of core earnings
Diversification resilience of core earnings 15 A broadly diversified platform in place to move ahead with sustained growth Change in FUM by Asset Class (%) 31 Dec 22 1H23 FUM by Affiliate (%) 13% 30 Jun 16 0.9 Resolution Capital 8% 1.4 1.4 0.4 7 41% 3.0 Hyperion 24 4% Plato 2 67 6.8 Metrics 17% 13
Slide 22: Continued industry awards
16 Continued industry awards 2022 Lonsec and 2022 Zenith Fund 2022 Financial 2022 Financial Standard SuperRatings Fund of the Awards: Newswire/SQM Research Investment Leadership Year Awards: Fund Manager Awards: Awards 2022: • Longwave - Emerging Manager of • Spheria – Australian Equities – • Plato
Slide 23: Financial Performance
02 Financial Performance Dan Longan
Slide 24: 1H FY23 financial results
1H FY23 financial results 18 1H23 ($M) 1H22 ($M) % Change • NPAT attributable to shareholders of $30.5m (-24% on 1H FY22) PINNACLE • Performance fees earned by Pinnacle Affiliates, post-tax, Revenue 1 22.8 21.6 6% contributed only $0.9m of Pinnacle’s NPAT in 1H FY23 ($6.4m Expenses 2,3 (20.7) (19.0)
Slide 25: Revenue and margin performance and key drivers
Revenue and margin performance and key drivers 19 Continuing improvement in average base rate fees and client diversity; ‘Horizon 2’ investment in growth initiatives moderates profits in the short term, but will drive strategic growth through the cycle Revenue (Pinnacle and Affiliates) 1 • Total Aff
Slide 26: Balance sheet
Balance sheet 20 31 Dec 2022 ($M) 30 Jun 2022 ($M) Change • Cash and PI of $179.1m CURRENT ASSETS Cash and cash equivalents 15.0 38.3 (61%) • Includes $140.2m invested in strategies managed by Financial assets 164.1 139.9 17% Pinnacle Affiliates Total cash and financial assets 179.1 178.2 1% • CBA f
Slide 27: Market Update – Institutional and International
03 Market Update – Institutional and International Andrew Chambers
Slide 28: 1H FY23 Review - Institutional investors remain defensively positioned
1H FY23 Review - Institutional investors remain defensively positioned 22 • Institutions accumulated higher cash holdings in the absence of compelling expected returns for risk assets and in response to the denominator effect • Institutions continuing to rebalance away from public equities, both Aus
Slide 29: 1H FY23 Review - Institutional and International
1H FY23 Review - Institutional and International 23 • International flows positive, domestic flows negative but margin mix improving • International net flows • $650m net flows from 17 countries outside of Australia • 5 largest net flow contributors were Japan, New Zealand, South Africa, South Korea
Slide 30: Outlook - Institutional and International
Outlook - Institutional and International 24 • Solid pipeline across Australian and International channels with notable searches in: • Australian equities • Global value equities • Global emerging markets • Private credit • Private real assets and natural capital • Sustainability and impact • Affili
Slide 31: Market Update – Retail
04 Market Update – Retail Ramsin Jajoo
Slide 32: Retail update
Retail update 26 Positive 1H FY23 retail net inflows achieved amid volatile investing conditions and weak investor confidence • Retail net inflows of $0.3bn achieved in 1H FY23 (vs $2.9bn PCP) in extremely weak retail market conditions • Unfavourable economic conditions, heightened geopolitical risk
Slide 33: Retail update
Retail update 27 Continued investment in retail distribution, high activity levels and innovative engagement initiatives provide the platform for growth as investor confidence returns • Strategic hires have been made across mid-level sales roles to grow and expand our footprint across newer client s
Slide 34: The Australian managed funds industry hit a new low in 2022
The Australian managed funds industry hit a new low in 2022 28 “The drop in the net inflow was driven much more by a dearth of buyers (orders fell by 15%) than an increase in selling (orders rose only 7%). Turnover, the value of all buy orders and all sell orders added together, was very similar in
Slide 35: Retail update
Retail update 29 Market-leading engagement and communications initiatives have helped drive business resilience through recent market volatility. Now primed for further growth in the ‘return to normal’ • COVID-19 has seen rapid acceleration in the development of multimedia communication capabilities
Slide 36: Client engagement with marketing activity continues to grow
Client engagement with marketing activity continues to grow 30 Year-on-Year engagement growth across marketing platforms: Email Clicks LinkedIn Followers Event Attendance Rate Website Sessions 62.0% 25.5% 9.4% 2.5% • More clients are consuming Pinnacle & Affiliate content: • Mix of content and ongoi
Slide 37: Retail - listed solutions update
Retail - listed solutions update 31 • $3.9bn1 of exchange listed FUM in nine listed vehicles spanning most asset classes, one of the broadest ranges of listed funds on the ASX Dec 22 FUM by Listed Fund ( $ m i n l i s t ed f u n d o n l y ) • ~60 Active ETFs in Australia (of the 260 total ETFs), mak
Slide 38: Growth Agenda
05 Growth Agenda Ian Macoun, Managing Director
Slide 39: Three Horizons of growth
Three Horizons of growth 33 Prepared for, and seeking, further expansion opportunities – committed to taking advantage of the significant offshore opportunity to evolve into a global multi-affiliate by ‘exporting our model’ – but maintaining discipline on quality and valuation • Continue to build Pi
Slide 40: Future growth drivers
Future growth drivers 34 An excellent platform in place to move ahead with sustained growth Distribution Platform Robust, Flexible, Start-Up Affiliate Existing Affiliate Acquisitive Expansion Operating Platform Enablement Expansion Growth • Investment in (and • Stable / robust, • Develop investment
Slide 41: Horizon 2 – Update
35 Horizon 2 – Update Pinnacle and Affiliates continue to actively pursue growth initiatives, recognizing that these will moderate profits in the short term but provide extremely lucrative growth opportunities over the medium term Examples of previous Horizon 2 initiatives, within Pinnacle, include:
Slide 42: Horizon 2 – Update
36 Horizon 2 – Update Examples of previous Horizon 2 initiatives, within Affiliates, include: • Hyperion Global, Palisade Renewables, Plato Australian Income, Resolution Capital Global REITS, Solaris Long/Short Current initiatives, within Affiliates, include: Affiliate Initiative Firetrail Global S3
Slide 43: Horizon 2 – Update
37 Horizon 2 – Update • The aggregate net cost to Pinnacle of these initiatives, within Pinnacle and Affiliates, was approximately $6.5m in 1H FY23 (Pinnacle share, after tax) • Each initiative is only entered into after careful consideration of the longer-term benefits and with reasonable limits se
Slide 44: Horizon 2 – International
38 Horizon 2 – International Incubations remain a highly attractive investment proposition for Pinnacle. We are continuing to look to incubate more outside of Australia and leverage off the operational infrastructure we have developed in the UK/Europe and in Canada Aikya (London) • Commenced 2020 •
Slide 45: Horizon 3
39 Horizon 3 • We have explored many Horizon 3 opportunities with the following characteristics: • Strategically attractive and diversifying relative to current Affiliate composition • Internationally-based, plus select opportunities in Australia • High demand asset classes including Infrastructure,
Slide 46: Corporate Responsibility
06 Corporate Responsibility Ian Macoun, Managing Director
Slide 47: Sustainability Highlights
Sustainability Highlights 41 Pinnacle Group ESG Working Group ESG Charter We established a cross-affiliate ESG Working Group to share We developed the Pinnacle Group ESG Charter to reflect knowledge and promote industry best practice ESG Pinnacle and Affiliates’ shared commitment to ensuring that st
Slide 48: Our contribution to the United Nation's 2030 Agenda
Our contribution to the United Nation’s 2030 Agenda 42 The United Nations Sustainable Development Goals (SDGs) aim to address the biggest problems human beings face on this planet. We recognise the need for strategies that foster economic development, reduce gender inequalities and transition toward
Slide 49: Pinnacle Charitable Foundation
43 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 • The Foundation’s focus is on growing the reach, sustai
Slide 50: Pinnacle Charitable Foundation
44 Pinnacle Charitable Foundation • Total donations by the Foundation in calendar 2022 were over $550,000, primarily directed towards 14 not for profit (NFP) partners. Support was also provided for initiatives aligned with employee volunteering and fundraising. • Affiliates provided a further $285,0
Slide 51: Pinnacle Charitable Foundation
Pinnacle Charitable Foundation • Multiple partnerships with 14 NFPs are driving long term sustainable impact across six core categories: Mental wellbeing – supporting positive mental health together with illness prevention and early intervention Sexual, domestic and family violence – facilitating le
Slide 52: Conclusion
07 Conclusion Ian Macoun, Managing Director
Slide 53: Pinnacle differentiation
Pinnacle differentiation 47 Australia’s leading ‘multi-affiliate’ investment firm 1. Distinguished from competitors 2. High quality, experienced, 3. All the advantages, benefits and by comprising the highest dedicated, passionate superior conditions of a quality investment management investment prof
Slide 54: Summary
Summary 48 Pinnacle’s diverse Affiliate portfolio and extensive distribution channels provide robustness whilst fostering growth opportunities Fundamentals in place • Highly regarded Affiliates with strong local and international investment consultant and research house ratings for organic sales gro
Slide 55: Q&A
Q&A
Slide 56: Appendix
Appendix
Slide 57: Continuing strong investment performance of Affiliates to 31 December 2022
51 Continuing strong investment performance of Affiliates to 31 December 2022 85% of Pinnacle Affiliates’ strategies and products (with a track record exceeding 5 years) have out- performed their benchmarks over the 5 years to 31 December 2022 The investment returns for each fund or strategy shown a
Slide 58: Affiliates' investment performance December 2022
52 Affiliates’ investment performance 31 December 2022 The investment returns for each fund or strategy shown are for information purposes only. Unless otherwise stated, the investment returns have been calculated for the relevant period in AUD (with distributions reinvested) and are gross of applic
Slide 59: Affiliates' investment performance December 2022
53 Affiliates’ investment performance 31 December 2022 The investment returns for each fund or strategy shown are for information purposes only. Unless otherwise stated, the investment returns have been calculated for the relevant period in AUD (with distributions reinvested) and are gross of applic
Slide 60: 1H FY23 funds under management
1H FY23 funds under management 54
Slide 61: Pinnacle Affiliates continue to win major industry awards
Pinnacle Affiliates continue to win major industry awards 55 2022 Financial Newswire/SQM Research Fund Manager of the Year Awards 2021 Money Management Fund Manager of the Year: • Hyperion – Fund Manager Of The Year Winner • Spheria – Australian Equities – Small/Mid Cap Finalist • Hyperion – Austral
Slide 62: Affiliate commitment to ESG
Affiliate commitment to ESG 56 All Pinnacle Affiliates embed ESG into their investment decision making process: Incorporate ESG into Affiliate Signatory to PRI Have an ESG policy Investment process Aikya Yes Yes Yes Antipodes Yes Yes Yes Coolabah Yes Yes Yes Firetrail Yes Yes Yes Five V (B Corporati
Slide 63: Growth in retail FUM
Growth in retail FUM 57 Retail FUM evolution 7.6x Total FUM 30 June 13: $10.9bn Total FUM 31 December 2022: $83.2bn Retail: $0.9bn Retail: $20.8bn 23.1x 8% Retail 25% Retail 92% institutional 75% Institutional • Pinnacle has invested significantly in retail distribution and has generated substantial
Slide 64: Top 5 contributions from multiple Affiliates and Strategies
Top 5 contributions from multiple Affiliates and Strategies 58 $4Bn $3Bn $2Bn $1Bn $0Bn 1H FY23 1H FY22 1H FY21 Source: Salesforce, Pinnacle Retail
Slide 65: Sales activity has remained high – this should drive flows over time
Sales activity has remained high – this should drive flows over time Source: Salesforce, Pinnacle Retail
Slide 66: Research ratings and consultants' support are key factors that drive future flows
Research ratings and consultants’ support are key factors that drive future flows1 60 Lonsec Morningstar • Firetrail Absolute Return Fund - Highly Recommended • Resolution Capital Global Property Securities Fund - Gold • Firetrail Australian High Conviction Fund - Highly Recommended • Solaris Core A
Slide 67: Retail platform continuing to enable high performance business development management
Retail platform continuing to enable high performance business development management 61 21,300+ 1,050+ 150+ 1,000+ Advisers Researchers Consultants Brokers Source: Pinnacle, Salesforce & Pardot
Slide 68: Pinnacle Affiliates Global Emerging Market Equities
Pinnacle Affiliates 62 Global Emerging Market Equities • High quality • Absolute return with downside protection • Concentrated portfolio • Long term sustainable growth • Stewardship and Sustainability • Headquartered in London, United Kingdom Global and Emerging Markets Equities (Long Only and Long
Slide 69: Pinnacle Affiliates High conviction Australian and Global Equities
Pinnacle Affiliates 63 High conviction Australian and Global Equities • Deep fundamental research approach consistently applied for 15+ years • Australian, Global, Small Companies and Long-Short equities • No enduring style bias. Building concentrated portfolios of our best growth and value ideas •
Slide 70: Pinnacle Affiliates Global and Canadian Small Cap Equities
Pinnacle Affiliates 64 Global and Canadian Small Cap Equities • Active and Engaged owners of world class smaller companies • Blue Chip small cap, focusing on cash flow growth • Seek to identify and evaluate businesses that can compound intrinsic value at high rates over the long term • Headquartered
Slide 71: Pinnacle Affiliates Private Infrastructure, Impact & Real Assets
Pinnacle Affiliates 65 Private Infrastructure, Impact & Real Assets • Mid-Market focus results in better acquisition multiples and portfolio yield • Actively involved in operational management and governance of assets; unlocks embedded value • Owns airports, seaports, portside bulk liquid storage, g
Slide 72: Pinnacle Affiliates Private Agriculture, Food & Water
Pinnacle Affiliates 66 Private Agriculture, Food & Water • Real asset backed investments across the food and agriculture sector • Participation throughout the value chain investing in assets that are critical to the production of essential goods; water, farmland, agricultural infrastructure and agri
Slide 73: Disclaimer
Disclaimer 67 Lonsec Research The Lonsec Ratings presented in this document are published by Lonsec Research Pty Ltd ABN 11 151 658 561 AFSL 421445. The Ratings are limited to "General Advice" (as defined in the Corporations Act 2001 (Cth)) and based solely on consideration of the investment merits
Pinnacle Investment Management Group — Investor Presentation (February 2023) on 6ix