Pinnacle Investment Management Group Limited · ASX:PNI
Pinnacle Investment Management — FY2022 Earnings Presentation
67 slides from Pinnacle Investment Management's earnings presentation, Aug 2, 2022
Slide 1: FY22 Results Presentation
PINNACLE INVESTMENT MANAGEMENT GROUP LIMITED (PNI) FY22 RESULTS PRESENTATION 2 nd August 2022
Slide 2: Important notice and disclaimer
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 2 August 2022. PNI has prepared this presentation based on information available to i
Slide 3: Agenda
Agenda 01 Introduction and Highlights Ian Macoun 4 02 Financial Performance Dan Longan 16 Market Update – Institutional 03 and International Andrew Chambers 20 04 Market Update - Retail Ramsin Jajoo 26 05 Growth Agenda Ian Macoun 37 06 Corporate Responsibility Ian Macoun 45 07 Conclusion Ian Macoun
Slide 4: Introduction and Highlights
01 Introduction and Highlights Ian Macoun, Managing Director
Slide 5: FY22 Themes
FY22 Themes • Continued profit growth on record FY21 • Diversification delivering resilience • Ongoing investment for future growth
Slide 6: FY22 – Continued profit growth on record FY21
FY22 – Continued profit growth on record FY21; Diversification delivering resilience; ongoing investment for future growth 1. NPAT, EPS and dividends up 14%, 8% and 22% respectively 2. Continuing increase in base fees despite lower headline net inflows • Industry-wide pressures have had an impact on
Slide 7: FY22 financial highlights
FY22 financial highlights 7 Continuing revenue and earnings growth despite market dislocation; Pinnacle is not immune to market factors, but diversified platform provides resilience and growth throughout the cycle Affiliate FUM / Revenue (100%) NPAT / EPS DPS Aggregate Affiliate $83.7bn -6% NPAT1 $7
Slide 8: Pinnacle has a diversified Affiliate platform
Pinnacle has a diversified Affiliate platform 8 Track record of investing to deliver medium-term growth Executives of both Pinnacle and Pinnacle Affiliates have significant equity interests. Equity ownership enhances alignment with shareholders. Seed FUM and Middle office and Technology and other fi
Slide 9: Continued track record of earnings growth
Continued track record of earnings growth 9 The strength of our platform and award-winning brands generates material earnings growth for our shareholders NPAT growth: 2016 - 2022 Diluted EPS growth: 2016 - 2022 CAGR (five years): 44.8% CAGR (five years): 39.0% Fully franked dividends have grown at a
Slide 10: Continued track record of earnings growth
Continued track record of earnings growth 10 • Since listing as a ‘pure play’ funds management business in 2016, Pinnacle has delivered profit growth each year • Pinnacle Affiliate revenues are linked, in part, to movements in equity markets • Pinnacle has pursued a deliberate strategy of diversific
Slide 11: Investment performance
Investment performance 11 Our industry leading portfolio of high performing Affiliates continues to outperform benchmarks and provides an engine for continued FUM growth and performance fee generation Affiliate fund outperformance over benchmarks (alpha) – over 5-year period, p.a. • 83% of funds hav
Slide 12: Funds under management
Funds under management 12 Gross FUM ($bn) 1 • FUM has grown at a CAGR of 23.7% p.a. over the last ten years (22.0% excluding $6.8bn ‘acquired’ in July 2018, $3.0bn ‘acquired’ in December 2019 and $1.1bn ‘acquired’ in December 2021) • Equities markets were down in FY22: • S&P/ASX 300 index down 10.4%
Slide 13: Performance fees
Performance fees 13 Now 22 strategies (18 in FY21) with the potential to deliver performance fees – driving uncorrelated opportunities, resulting in a diverse base of growth Closing FUM & number of strategies subject to performance fees • The volume of FUM with performance fee potential continues to
Slide 14: Diversification increased resilience
Diversification increased resilience 14 A broadly diversified platform in place to move ahead with sustained growth FY22 FUM by Asset Class (%) 30 Jun 22 FY22 FUM by Affiliate (%) 11 30 Jun 16 1.0 8 1.7 1.6 0.4 Resolution Capital 7 41 3.8 Hyperion 4 24 Plato 7.7 2 67 Metrics 19 18.3 Antipodes Sola
Slide 15: Major industry awards
Major industry awards 15 2022 Financial 2022 Financial Standard 2021 SuperRatings and 2021 Zenith Fund Newswire/SQM Research Investment Leadership Lonsec Fund of the Year Awards: Fund Manager Awards: Awards 2022: Awards: • Spheria – Australian Equities – • Plato - Australian Equities - • Hyperion –
Slide 16: Financial Performance
02 Financial Performance Dan Longan
Slide 17: FY22 financial results
FY22 financial results 17 FY22 ($M) FY21 ($M) % Change PINNACLE • NPAT attributable to shareholders of $76.4m (+14% on FY21) Revenue 1 46.0 32.5 42% • Performance fees earned by Pinnacle Affiliates, post-tax, Expenses 2,3 (43.5) (31.9) 36% contributed $16.6m of Pinnacle’s NPAT in FY22 ($19.5m in FY2
Slide 18: Revenue and margin performance and key drivers
Revenue and margin performance and key drivers 18 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 19: Balance sheet
Balance sheet 19 • Cash and PI of $178.2m 30 Jun 2022 ($M) 30 Jun 2021 ($M) Change • Includes $134.2m invested in strategies managed by Pinnacle CURRENT ASSETS Affiliates Cash and cash equivalents 38.3 96.1 (60%) • Excludes $25.1m of cash applied for Affiliate equity recycling Financial assets 139.9
Slide 20: Market Update – Institutional and International
03 Market Update – Institutional and International Andrew Chambers
Slide 21: FY22 Institutional and International Review
FY22 Institutional and International Review 21 • FY22 was characterized by improved institutional margins • Outflows were skewed towards lower margin domestic business and inflows into higher margin asset classes from local and international investors, such that the contained annual revenue impact o
Slide 22: Key themes - Institutional and International
Key themes - Institutional and International 22 • Market conditions have provided valuation headwinds for public equities and fixed income inflows throughout FY22 • Investors sold into equity market strength in 1H but have not been buying into equity market weakness in 2H (markets still not regarded
Slide 23: Key themes - Institutional and International
Key themes - Institutional and International 23 • Concurrent growth of domestic fund insourcing and global fiduciary outsourcing creates risks and opportunities for growth • Internalisation remains an ongoing risk to mandate retention • The largest and most progressed funds are targeting 50% interna
Slide 24: Key themes - Institutional and International
Key themes - Institutional and International 24 • Sustained pursuit of uncorrelated returns driving demand for infrastructure, real estate, real assets, private credit, private equity, venture capital, agriculture and water • Five V Fund IV oversubscribed in their $550m fundraise in November 2021 •
Slide 25: FY23 Outlook - Institutional and International
FY23 Outlook - Institutional and International 25 • Expansion of our distribution force, investor networks and preferential investment consultant ratings will underpin Australian and international growth • We remain attuned to the challenges in the domestic institutional market and are leaning harde
Slide 26: Market Update – Retail
04 Market Update – Retail Ramsin Jajoo
Slide 27: Retail update
Retail update 27 Record 1H retail net inflows achieved on the back of a high-performance operating model. Much lower, albeit still positive, 2H net inflows recorded amid volatile investing conditions and weak investor confidence • Strong retail net inflows of $3.6bn achieved in FY22 (vs $4.2bn PCP)
Slide 28: Retail update
Retail update 28 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 29: Retail - listed solutions update
Retail - listed solutions update 29 • $3.7bn1 of exchange listed FUM in eight listed vehicles spanning most asset classes across > 80,000 underlying investors • Continuing to successfully expand listed offering with new products and additional resources • Broader adoption of active ETFs by brokers,
Slide 30: Retail FUM evolution
Growth in retail FUM 30 Retail FUM evolution 7.7x Total FUM 30 June 13: $10.9bn Total FUM 30 June 2022: $83.7bn Retail: $0.9bn Retail: $21.1bn 23.4x 8% Retail 25% Retail 92% institutional 75% Institutional • Pinnacle has invested significantly in retail distribution and has generated substantial ret
Slide 31: Top contributions from multiple Affiliates and Strategies
Top 5 contributions from multiple Affiliates and Strategies 31 $5Bn $4Bn $3Bn $2Bn $1Bn $0Bn FY2020 FY2021 FY2022 Source: Salesforce, Pinnacle Retail
Slide 32: CYTD - Volatile markets, weak confidence & narrower range of winners
CYTD - Volatile markets, weak confidence & narrower range of winners! 32 Total Funds Under Mangement - Retail Funds CYTD $2,000Bn $1,800Bn $1,600Bn $1,400Bn $1,200Bn $1,000Bn $800Bn $600Bn $400Bn $200Bn Annualised Estimated Net Flows - Retail Funds $69.8Bn $43.3Bn $30.3Bn $13.0Bn $14.9Bn $9.3Bn $8.0
Slide 33: Sales activity has remained high
Sales activity has remained high – this should drive flows over time Source: Salesforce, Pinnacle Retail
Slide 34: Large and diversified footprint across the intermediated channel
Large and diversified footprint across the intermediated (wealth management) channel 34 82% of net flows sourced outside Top 20 clients $562 m 18% of net flows sourced from Net flows from Top 20 Wealth Top 20 clients Mgt Clients $3.1bn Net flows across retail funds in FY22 Source: Salesforce, Pinnac
Slide 35: Research ratings and consultants' support drive future flows
Research ratings and consultants’ support are key factors that drive future flows1 35 Lonsec Research Morningstar • Antipodes Global Fund – Long - Recommended • Resolution Capital Global Property Securities Fund – Gold • Firetrail Absolute Return Fund - Highly Recommended • Solaris Core Australian E
Slide 36: Retail platform enabling high performance business development
36 Retail platform continuing to enable high performance business development management 21,300+ 1,050+ 150+ 1,000+ Advisers Researchers Consultants Brokers Source: Pinnacle, Salesforce & Pardot
Slide 37: Growth Agenda
05 Growth Agenda Ian Macoun, Managing Director
Slide 38: Three Horizons of growth
Three Horizons of growth 38 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’ • Continue to build Pinnacle by taking a measured approach to growth Horizon
Slide 39: Future growth drivers
Future growth drivers 39 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 40: Horizon – Update
40 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 41: Horizon – Update
41 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 42: Horizon – Update
42 Horizon 2 – Update • The aggregate annual net cost to Pinnacle of these initiatives, within Pinnacle and Affiliates, is approximately $12m (Pinnacle share, after tax) • Each initiative is only entered into after careful consideration of the longer-term benefits and with reasonable limits set on b
Slide 43: Horizon – International
43 Horizon 2 – International Incubations remain a highly attractive investment proposition for Pinnacle. We are looking 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 • Highly rega
Slide 44: Horizon
44 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 45: Corporate Responsibility
06 Corporate Responsibility Ian Macoun, Managing Director
Slide 46: FY22 Highlights
FY22 Highlights 46 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 standards Pinnacle and Affiliates’ shared commitment to ensuring that sustainable princ
Slide 47: Our contribution to the United Nation's 2030 Agenda
Our contribution to the United Nation’s 2030 Agenda 47 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 48: Pinnacle Charitable Foundation
48 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 49: Pinnacle Charitable Foundation
49 Pinnacle Charitable Foundation • Total donations by the Foundation in FY2022 were over $900,000 (an increase of almost 70% from 2021), primarily directed towards 14 not for profit partners. Support was also provided for initiatives aligned with employee volunteering and fundraising • Affiliates p
Slide 50: Pinnacle Charitable Foundation
50 Pinnacle Charitable Foundation • A total of 14 not for profit partners - operating across six core focus areas - are delivering long term impact through sustainable change, including 5 new partnerships initiated in FY22: MENTAL WELLBEING Together with illness prevention and early intervention SEX
Slide 51: Conclusion
07 Conclusion Ian Macoun, Managing Director
Slide 52: Pinnacle differentiation
Pinnacle differentiation 52 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 quality dedicated, passionate superior conditions of a investment management firms investmen
Slide 53: Summary
Summary 53 Pinnacle’s diverse Affiliate portfolio and extensive distribution channels provide stability whilst fostering growth opportunities Fundamentals in place • Highly regarded Affiliates with strong local and international investment consultant and research house ratings for organic sales grow
Slide 54: Q&A
Q&A
Slide 55: Appendix
Appendix
Slide 56: Continuing strong investment performance of Affiliates to 30 June 2022
56 Continuing strong investment performance of Affiliates to 30 June 2022 83% of Pinnacle Affiliates’ strategies and products (with a track record exceeding 5 years) have out- performed their benchmarks over the 5 years to 30 June 2022 The investment returns for each fund or strategy shown are for i
Slide 57: Affiliates' investment performance June 2022
57 Affiliates’ investment performance 30 June 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 applicable
Slide 58: Affiliates' investment performance June 2022
58 Affiliates’ investment performance 30 June 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 applicable
Slide 59: FY22 funds under management
FY22 funds under management 59
Slide 60: Pinnacle Affiliates continue to win major industry awards
60 Pinnacle Affiliates continue to win major industry awards 2022 Financial Newswire/SQM Research Fund Manager of the Year Awards 2020 Zenith Fund Awards: Resolution Capital – Global REIT Category Winner (seventh consecutive year) Spheria – Australian Equities – Small/Mid Cap Finalist • Metrics – Li
Slide 61: Affiliate commitment to ESG
Affiliate commitment to ESG 61 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 62: Pinnacle Affiliates
Pinnacle Affiliates 62 Global Emerging Market Equities • High quality • Absolute return • Concentrated portfolio • Long term sustainable growth • Stewardship and Sustainability • Headquartered in London, United Kingdom Global and Emerging Markets Value Equities (Long Only and Long-Short) • ‘Pragmati
Slide 63: Pinnacle Affiliates
Pinnacle Affiliates 63 Australian, Global, Small Cap & Long-Short Equities • Deep fundamental research approach consistently applied for 15+ years • Experts in high conviction investing • No enduring style bias. Building concentrated portfolios of our best growth and value ideas • Focused on generat
Slide 64: Pinnacle Affiliates
Pinnacle Affiliates 64 Global and Canadian Small Cap Equities • Active and Engaged owners of world class smaller companies • Quality/Growth at a Reasonable Price (Q-GARP) • Seek to identify and evaluate businesses that can compound intrinsic value at high rates over the long term • Headquartered in
Slide 65: Pinnacle Affiliates
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 66: Pinnacle Affiliates
Pinnacle Affiliates 66 Australian and New Zealand 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, agricultu
Slide 67: 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 — FY2022 Earnings Presentation on 6ix