Pinnacle Investment Management Group Limited · ASX:PNI
Pinnacle Investment Management — Macquarie Securities Investor Presentation (September 2019)
49 slides from Pinnacle Investment Management's conference presentation, Sep 17, 2019
Slide 1: Investor Presentation – Macquarie Securities
For personal use only Pinnacle Investment Management Group Limited (PNI) Investor Presentation – Macquarie Securities Ian Macoun – Managing Director Ramsin Jajoo –Retail Director 4.30pm, 18 September 2019
Slide 2: Latest Update
Latest Update For personal use only • FUM at 31 August 2019 of $55.6 billion, compared with $54.3 billion at 30 June 2019 • S&P/ASX 300 index down 0.1% in the two months to 31 August; MSCI World index down 2.4% in the two months to 31 August • Plato Income Maximiser (ASX: PL8) raised $144m in an ent
Slide 3: Agenda
Agenda For personal use only • FY19 Financial Highlights • FY19 Business Highlights • FY19 Results Discussion • Business Focus • Distribution Update • Pinnacle Outlook • Group Overview 2
Slide 4: 2019 Financial Highlights
2019 Financial Highlights For personal use only • NPAT from continuing operations attributable to shareholders of $30.5 million, up 32% from $23.1 million in the prior year • Earnings per share from continuing operations of 18.3 cents, up 28% from 14.3 cents in the prior year • Share of NPAT from Pi
Slide 5: Pinnacle Full Year Results
Pinnacle Full Year Results For personal use only FY2019 ($m) FY2018 ($m) YoY change Pinnacle Affiliates (100% aggregate basis) 1 FUM ($billion) 54.3 38.0 42.9% Revenue ($million) 236.8 168.4 40.6% Net profit before tax 123.1 88.9 38.5% Tax expense (34.0) (27.3) 24.5% Net profit after tax 89.1 61.6 4
Slide 6: 2019 Business Highlights
2019 Business Highlights For personal use only • Record FUM and Affiliate Revenues • FUM $54.3 billion1 at 30 June 2019 (includes $6.8 billion ‘acquired’ in July 2018) o up $7.6 billion (16.3%) from 31 December 2018; o up $16.3 billion (42.9%) from 30 June 2018 (up $9.5 billion (25%) excluding ‘acqu
Slide 7: FY19 funds under management
FY19 funds under management For personal use only Gross FUM growth ($bn)1 • FUM of $54.3bn2 as at 30 June 2019 Gross FUM growth ($bn) • FUM has grown at a CAGR of 34.6% p.a. over the last ten years (31.0% excluding $6.8bn ‘acquired’ in July 2018) • Increase in FUM of $16.3bn in the year to 30 June 2
Slide 8: Funds under management by Affiliate
Funds under management by Affiliate For personal use only Date Pinnacle Hyperion Plato Solaris RCL Palisade Antipodes Spheria Two Trees Firetrail Metrics Omega Longwave Riparian (total) ($m) ($m) ($m) ($m) ($m) ($m) ($m) ($m) ($m) ($m)* ($m)* ($m) ($m) ($m) 1 30 Jun 19 54,276 6,595 5,279 9,089 8,314
Slide 9: Pinnacle Affiliates financial highlights
Pinnacle Affiliates financial highlights For personal use only Strong FUM and revenue growth in Pinnacle Affiliates: • Total Affiliates’ Revenues of $236.8m, including $15.3m (6.5%) in performance fees. In FY18, total Affiliates’ Revenues of $168.4m included $17.2m (or 10.2%) in performance fees • G
Slide 10: Group financial summary
Group financial summary For personal use only FY2019 ($m) FY2018 ($m) YoY change Pinnacle Revenue 21.1 16.5 27.9% 1,2 1,2 Expenses (23.7) (18.3) 29.5% Share of Pinnacle Affiliates net profit after tax 33.1 24.9 32.9% Net profit before tax (NPBT) from continuing operations 30.5 23.1 32.0% Taxation -
Slide 11: Group financial summary
Group financial summary For personal use only • P&L 'investment' in support of Horizon 2 growth – adding resources to cater for growth (including ahead of forthcoming growth) • As we have consistently stated, we will continue to invest in activities which we believe will bring substantial benefits o
Slide 12: A strong and flexible balance sheet
A strong and flexible balance sheet For personal use only FY2019 ($m) FY2018 ($m) YoY change • Cash and Principal Investments of $51.2 Current assets million Cash and cash equivalents 26.7 9.3 187.1% Financial assets 24.5 22.1 10.7% Total cash and financial assets 51.2 31.4 62.9% • $60m capital rais
Slide 13: A strong and flexible balance sheet
A strong and flexible balance sheet For personal use only • $51.2m of cash and principal investments • Includes $23.2m invested in strategies managed by Pinnacle Affiliates • Excludes nearly $6m of cash applied for Affiliate equity recycling loans, working capital loans (Two Trees) and Affiliate equ
Slide 14: Significant components of FY 2019 results
Significant components of FY 2019 results • Continuing growth in ‘Pinnacle Parent’ revenues and costs For personal use only o Significant ‘P&L’ investment in support of Horizon 2 initiatives (including Offshore distribution, ETF, Direct to retail consumers, new Affiliates) o Net gains on principal i
Slide 15: Supporting information – slides to 45
For personal use only Supporting information – slides 14 to 45 14
Slide 16: Strong growth track record
Strong growth track record For personal use only Affiliate gross FUM evolution 30 Jun 13: $10.8bn 30 Jun 19: $54.3bn 5 Affiliates 13 Affiliates • Addition of a number of new affiliates including Antipodes, Spheria, Two Trees, Metrics, Omega, Riparian, Longwave and Firetrail • A number of initiatives
Slide 17: Strong growth track record
Strong growth track record For personal use only Retail FUM evolution 30 Jun 13: $10.8bn 30 Jun 19: $54.3bn1 Retail: $0.9bn Retail: $11.6bn Retail Retail 8% 21% Institutional 92% Institutional 79% • Pinnacle has invested significantly in retail distribution and has generated substantial retail FUM i
Slide 18: Focus on managing the business to maximize profits and Company value
Focus on managing the business to maximize profits and Company value over the medium term For personal use only • We continue to build Pinnacle by taking a measured approach to growth o Support growth of our current affiliates with increased investment in distribution channels (e.g. international an
Slide 19: How does Horizon 2 add value in the Medium Term?
Focus on managing the business to maximize 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 20: Horizon Progress
Horizon 2 Progress For personal use only Initiative Status $m Launched to market 30 Jun 19 Direct to Retail Developing $642 2017 Capital Markets (LIC, LIT, ETF) Developing $2,668 2017 Plato Global Early Stage $67 2017 Two Trees Developing $245 2018 Hyperion Global Developing $547 2018 Spheria Opport
Slide 21: 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 22: Metrics Credit Partners – months since acquisition
Metrics Credit Partners > 11 months since acquisition For personal use only Substantial FUM • $3.8bn FUM ($4.4bn AUM) Vs $2.5bn FUM ($3bn AUM) • ~$1.1bn raised in 11 months growth since acquisition • $ 845m of new closed-end capital via IPO, Entitlement Offer & Placement Largest manager of • $1.6bn
Slide 23: 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 Talented market demand Investors • All established affiliates have delivered strong long term outperformance • CAGR 28.5% over the last ten years, supp
Slide 24: Distribution Channels of Growth
Distribution Channels of Growth For personal use only • Industry consolidation, internalisation, margin pressure and higher ODD hurdles, however … • Demand for high quality boutique active managers remains strong, particularly where Institutional capacity is scarce • Globalise investment solutions,
Slide 25: Institutional
Institutional For personal use only • 78 institutional separate account clients • 95 institutional separate accounts across our affiliates • Local institutional fund consolidation expected to continue • Consolidating environment provides significant scope for ‘incubation' (appetite for large capacit
Slide 26: International
International For personal use only • ~A$3bn+ of aggregate global FUM • A$1bn+ in UCITS and Cayman funds • Global manufacturing, fund services and distribution is a necessity, not a choice... o Greater investor diversification o Higher average fee margins • Mandate activity is ramping up o UK, US, C
Slide 27: Retail Flows – FY19 vs FY18
Retail Flows – FY19 vs FY18 For personal use only • Greater contributions across a range of managers • Significant contribution by Metrics Credit • Development of listed capabilities adding to Retail FUM FY19 FY18 Firetrail 2.1% Hyperion 1.8% Hyperion (3.9%) Resolution Capital 5.8% Two Trees 1.2% Fi
Slide 28: Intermediated Retail
Intermediated Retail For personal use only Fragmentation of the Australian Market $250 Bn $700 Bn $1 Tr $747 Bn Accountants Direct Investors Advisors Institutional Source: Australian Bureau of Statistics & APRA as at 31 March 2019 27
Slide 29: Intermediated Retail
Intermediated Retail For personal use only Intermediated (Advice) and DIY $750 Bn Advisors Engaged 44% $1.2 Trillion 187 Superfunds $450 Bn Individual (DIY) Source: Australian Bureau of Statistics & APRA as at 31 March 2019 28
Slide 30: Intermediated Retail
Intermediated Retail For personal use only Fragmentation of the Australian Market $250 Bn Accountants Self-directed 28% $249 Bn $749 Billion Individual (DIY) 600,206 SMSFs $250 Bn Advisers Source: Australian Bureau of Statistics & APRA as at 31 March 2019 29
Slide 31: Intermediated Retail
Intermediated Retail For personal use only Fragmentation of the Australian Market 750,000 500,000 250,000 Self Managed Superfunds 0 1996 2001 2006 2011 2016 Source: Australian Bureau of Statistics & APRA as at 31 March 2019 30
Slide 32: Direct to Consumer – focus on reducing friction
Direct to Consumer – focus on reducing friction For personal use only • Private managed funds – Self-Directed Individual Investors • Exchange traded funds – LICs/LITs • EQMFs/ETFs 31
Slide 33: Pinnacle and Affiliates – listed capabilities
Pinnacle and Affiliates – listed capabilities For personal use only SEC AGX1 APL PL8 RETURN MOT SAVE MXT Z3RO Source: Pinnacle RISK 32
Slide 34: ETF Flows (Active and Passive)
ETF Flows (Active and Passive) For personal use only ETF Industry FUM roughly $47 Bn of which $4.2Bn is active ETFs TOTAL ETF MARKET FUM & FLOWS $M Inflow/Outflow $m FUM Source: ASX Investment Products (Listed Managed Investments, mFunds and ETPs) Monthly Update Report – May 2019 33
Slide 35: Progress to date – Platform and Reputation
Progress to date – Platform and Reputation For personal use only • A platform for GROWTH o Continuing investment excellence o Widespread industry recognition and support o ‘Article of faith’ reputation • Increasing diversification • Proven ability to build high quality investment managers, and facil
Slide 36: 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, Longwave and Spheria, the percentage re
Slide 37: Building a strong, diversified platform
Building a strong, diversified platform For personal use only Continuing to invest in a diversified platform to strengthen future growth • Executives of both Pinnacle and Pinnacle Affiliates have significant equity interests • Equity ownership enhances alignment with shareholders Seed FUM and workin
Slide 38: Pinnacle and the Affiliates continue to win major industry awards
Pinnacle and the Affiliates continue to win major industry awards For personal use only 2018 Professional Planner | Zenith Fund Awards: • Pinnacle – Distributor of the Year (third consecutive year) • Resolution Capital – Global REIT Category Winner (fifth consecutive year) • Solaris Investment Manag
Slide 39: Overview of Pinnacle Affiliates
Overview of Pinnacle Affiliates For personal use only Pragmatic value manager of global equities (long only and long-short) • During the year, Antipodes established additional pooled vehicles domiciled in NZ, Cayman and Dublin (UCITS), as well as an ASX-listed active ETF (ASX: AGX1) • Funds under ma
Slide 40: Overview of Pinnacle Affiliates (continued)
Overview of Pinnacle Affiliates (continued) For personal use only Quantamental Australian equities and multi-asset • Longwave Australian Small Companies Fund launched 1 February 2019 Sydney-based alternative asset manager specializing in private debt, fixed income and capital markets • Pinnacle acqu
Slide 41: Overview of Pinnacle Affiliates (continued)
Overview of Pinnacle Affiliates (continued) For personal use only Specialist manager in objective-based Global and Australian equity investment solutions for wholesale and retail investors • Funds under management $5.3bn at 30 June 2019 • Plato Global Shares Income Fund upgraded to ‘Recommended’ by
Slide 42: Overview of Pinnacle Affiliates (continued)
Overview of Pinnacle Affiliates (continued) For personal use only Specialist manager of Australian equities following a style-neutral approach to investing • Successful launch of the long/short strategy – good performance, gaining traction in retail • Funds under management $9.1bn at 30 June 2019 •
Slide 43: Continuing strong medium-term investment performance of Affiliates
Continuing strong medium-term investment performance of Affiliates For personal use only 94% of Pinnacle Affiliated Investment Manager strategies and products (with a track record exceeding 5 years) have out performed their benchmarks over the 5 years to 31 August 2019 Inception (per Inception 5Y 10
Slide 44: Affiliates' investment performance – all periods to August 2019
Affiliates’ investment performance – all periods to 31 August 2019 Inception (per Inception 1Y 3Y 5Y 10Y For personal use only annum) date Hyperion Asset Management - Gross Performance Hyperion Australian Growth Companies Fund 3.59% 8.62% 10.43% 11.28% 12.58% 1/10/2002 Outperformance -5.56% -2.72% 2
Slide 45: Affiliates' investment performance – all periods to August 2019
Affiliates’ investment performance – all periods to 31 August 2019 Inception (per Inception 1Y 3Y 5Y 10Y For personal use only annum) date Spheria Asset Management - Gross Performance Microcap Fund -2.19% 11.74% 16/05/2016 Outperformance -3.14% 1.91% Smaller Companies Fund -1.05% 9.98% 11/07/2016 Ou
Slide 46: Pinnacle Charitable Foundation
Pinnacle Charitable Foundation For personal use only • 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 has a vi
Slide 47: Pinnacle Charitable Foundation
Pinnacle Charitable Foundation For personal use only • The Foundation currently has a focus on five designated areas which resonate strongly with Pinnacle, Affiliates, their employees, clients and commitment to ESG principles: o promotion of strong mental health awareness and support for prevention
Slide 48: Summary and plans for FY20 and beyond
Summary and plans for FY20 and beyond For personal use only • Continue to deliver growth within existing affiliates (Horizon 1) • Maintain current levels of investment to deliver medium term growth (Horizon 2) • A range of Horizon 2 initiatives are under way o New affiliate ‘builds’ o Direct to reta
Slide 49: Disclaimers
Disclaimers 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 18 September 2019. This presentation is not an offer or invitation for subscription or purchase of securities or a recomm