Pinnacle Investment Management Group Limited · ASX:PNI
Pinnacle Investment Management — Investor Presentation (August 2019)
54 slides from Pinnacle Investment Management's investor presentation, Aug 6, 2019
Slide 1: FY2019 financial results announcement
6 August 2019 By Electronic Lodgement The Manager Company Announcements Office ASX Ltd 20 Bridge Street SYDNEY NSW 2000 Dear Sir/Madam Pinnacle Investment Management Group Limited (ASX: PNI) FY2019 financial results Pinnacle Investment Management Group Limited (PNI) is pleased to advise shareholders
Slide 2: Continued medium-term outperformance
Continued medium-term outperformance – 94% of 5-Year Affiliate strategies have outperformed at 30 June 2019 Cash and Principal Investments at 30 June 2019 of $51.2 million Pinnacle’s Chair, Alan Watson, commented: “Pinnacle continues to deliver on the medium-term mission described to shareholder
Slide 3: Composition of Group Results
Composition of Group Results The profit after tax from continuing operations attributable to shareholders for the 2019 financial year was $30.5 million, reflecting basic earnings per share of 18.3 cents compared with 14.3 cents per share in the 2018 financial year. The 2019 financial year again saw
Slide 4: FUM Update
FUM Update The FUM of PNI’s thirteen Affiliates as at 30 June 2019 was $54.3 billion (includes $6.8 billion ‘acquired’ in July 2018) reflecting: An increase in FUM of $7.6 billion or 16.3% during the six-month period from 31 December 2018 to 30 June 2019, comprising net fund inflows of $1.5 billio
Slide 5: Retail FUM Update
Retail FUM Update Retail FUM stood at $11.6 billion at 30 June 2019 (includes $0.7 billion ‘acquired’ in July 2018), compared with $9.4 billion at 31 December 2018 and $7.9 billion at 30 June 2018. The $3.7 billion growth for the financial year was attributable to $2.9 billion net inflows (of which
Slide 6: Dividend
Dividend The Board has resolved to pay a fully franked final dividend of 9.3 cents per share to shareholders recorded on the register on 21 September 2019 and payable on 4 October 2019. The Dividend Reinvestment Plan (DRP) is applicable to this dividend. Please contact our share registry, Computersh
Slide 7: Annual Results Discussion for the year ended 30 June 2019
Pinnacle Investment Management Group Limited (PNI) Annual Results Discussion for the year ended 30 June 2019 6 August 2019
Slide 8: Agenda
Agenda • FY19 Financial Highlights • FY19 Business Highlights • FY19 Results Discussion • Business Focus • Distribution Update • Pinnacle Outlook • Group Overview 1
Slide 9: 2019 Financial Highlights
2019 Financial Highlights • 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 Pinnacle Affiliates of $
Slide 10: Pinnacle Full Year Results
Pinnacle Full Year Results FY2019 ($m) FY2018 ($m) YoY change Pinnacle Affiliates (100% aggregate basis) 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 44.6% FY2019 ($m) FY2018
Slide 11: 2019 Business Highlights
2019 Business Highlights • Record FUM and Affiliate Revenues • FUM $54.3 billion 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 $9.5 billion (25%) excluding ‘acquired’ FUM) • Retail FUM
Slide 12: FY19 funds under management
FY19 funds under management Gross FUM growth ($bn)1 • FUM of $54.3bn as at 30 June 2019 Gross FUM growth ($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 2019 o $6.8bn acquired o
Slide 13: Funds under management by Affiliate
Funds under management by Affiliate Date Pinnacle Hyperion Plato Solaris RCL Palisade Antipodes Spheria Two Trees Firetrail Metrics Omega Longwave Riparian (total) ($m) ($m) ($m) ($m) ($m) ($m) ($m) ($m) ($m) ($m)* ($m)* ($m) ($m) ($m) 30 Jun 19 54,276 6,595 5,279 9,089 8,314 2,035 9,071 1,195 245 4
Slide 14: Pinnacle Affiliates financial highlights
Pinnacle Affiliates financial highlights 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 $17.2m (or 10.2%) in performance fees • Growth in base manageme
Slide 15: Group financial summary
Group financial summary FY2019 ($m) FY2018 ($m) YoY change Pinnacle Revenue 21.1 16.5 27.9% 1,2 1,2 Expenses (23.7) (18.3) 29.5% Share of Pinnacle Affiliates net profit after tax 33.1 24.9 32.9% Net profit before tax (NPBT) from continuing operations 30.5 23.1 32.0% Taxation - - NPAT from continuing
Slide 16: Group financial summary
Group financial summary • P&L 'investment' in support of Horizon 2 growth – adding resources to cater for growth (including ahead of forthcoming growth) • As we have consistently stated, we will continue to invest in activities which we believe will bring substantial benefits over the medium term, w
Slide 17: A strong and flexible balance sheet
A strong and flexible balance sheet FY2019 ($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 raising (10.9m shares) and
Slide 18: A strong and flexible balance sheet
A strong and flexible balance sheet • $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 equity purchased • Pinnac
Slide 19: Significant components of FY 2019 results
Significant components of FY 2019 results • Continuing growth in ‘Pinnacle Parent’ revenues and costs 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 investments of $2,715k,
Slide 20: Supporting information
Supporting information – slides 14 to 45 13
Slide 21: Strong growth track record
Strong growth track record 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 being pursued to cont
Slide 22: Strong growth track record
Strong growth track record Retail FUM evolution 30 Jun 13: $10.8bn 30 Jun 19: $54.3bn 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 in the last 5 years (~$1
Slide 23: 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 • 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 and listed markets) o In
Slide 24: 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 • 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 be set given short-te
Slide 25: Horizon 2 Progress Initiative Status
Horizon 2 Progress 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 Opportunities Developing $40
Slide 26: Recap on Horizon 3 Criteria
Recap on Horizon 3 Criteria – What could we acquire? 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 • Metrics Credit and Ome
Slide 27: Metrics Credit Partners > 11 months since acquisition
Metrics Credit Partners > 11 months since acquisition 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 raised in 18 months ‘A
Slide 28: Talent Driven Business Model
Talent Driven Business Model • 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, supported by both organic
Slide 29: Distribution Channels of Growth
Distribution Channels of Growth • 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, distribution force and
Slide 30: Institutional
Institutional • 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 capacity at attractive fees)
Slide 31: International
International • ~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, Canada, Middle East, Sw
Slide 32: Retail Flows – FY19 vs FY18
Retail Flows – FY19 vs FY18 • 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% Firetrail 12.0% Resoluti
Slide 33: Intermediated Retail
Intermediated Retail 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 26
Slide 34: Intermediated Retail
Intermediated Retail 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 27
Slide 35: Intermediated Retail
Intermediated Retail 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 28
Slide 36: Intermediated Retail
Intermediated Retail 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 29
Slide 37: Direct to Consumer – focus on reducing friction
Direct to Consumer – focus on reducing friction • Private managed funds – Self-Directed Individual Investors • Exchange traded funds – LICs/LITs • EQMFs/ETFs 30
Slide 38: Pinnacle and Affiliates – listed capabilities
Pinnacle and Affiliates – listed capabilities SEC AGX1 APL PL8 RETURN MOT SAVE MXT Z3RO Source: Pinnacle RISK 31
Slide 39: ETF Flows (Active and Passive)
ETF Flows (Active and Passive) 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 32
Slide 40: Progress to date – Platform and Reputation
Progress to date – Platform and Reputation • 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 facilitate substantial succ
Slide 41: Pinnacle Group Overview
Pinnacle Group Overview 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 represents Pinnacle’s to
Slide 42: Building a strong, diversified platform
Building a strong, diversified platform 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 working capital RE, complian
Slide 43: Pinnacle and the Affiliates continue to win major industry awards
Pinnacle and the Affiliates continue to win major industry awards 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 Management - Australian Equ
Slide 44: Overview of Pinnacle Affiliates
Overview of Pinnacle Affiliates 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 management have grown to
Slide 45: Overview of Pinnacle Affiliates (continued)
Overview of Pinnacle Affiliates (continued) 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 acquired a 35% interest in
Slide 46: Overview of Pinnacle Affiliates (continued)
Overview of Pinnacle Affiliates (continued) 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 Lonsec in February 201
Slide 47: Overview of Pinnacle Affiliates (continued)
Overview of Pinnacle Affiliates (continued) 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 • All strategies have ou
Slide 48: Continuing strong medium-term investment performance of Affiliates
Continuing strong medium-term investment performance of Affiliates 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 30 June 2019 Inception 5Y 10Y Inception date Pinnacle Investment Ma
Slide 49: Affiliates’ investment performance
Affiliates’ investment performance – all periods to 30 June 2019 Inception 1Y 3Y 5Y 10Y Inception date Hyperion Asset Management - Gross Performance Hyperion Australian Growth Companies Fund 6.96% 9.74% 10.50% 12.71% 12.44% 1/10/2002 Outperformance -4.46% -3.08% 1.62% 2.80% 2.94% Hyperion Small Grow
Slide 50: Affiliates’ investment performance
Affiliates’ investment performance – all periods to 30 June 2019 Inception 1Y 3Y 5Y 10Y Inception date Spheria Asset Management - Gross Performance Microcap Fund -3.20% 10.96% 16/05/2016 Outperformance -5.12% 0.73% Smaller Companies Fund 4.75% 11.65% 11/07/2016 Outperformance 2.83% 2.69% Opportuniti
Slide 51: Pinnacle Charitable Foundation
Pinnacle Charitable Foundation • 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 vision to help build a c
Slide 52: Pinnacle Charitable Foundation
Pinnacle Charitable Foundation • 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 / early intervention s
Slide 53: Summary and plans for FY20 and beyond
Summary and plans for FY20 and beyond • 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 retail consumer o ETF buil
Slide 54: Disclaimers
Disclaimers This presentation has been prepared by Pinnacle Investment Management Group Limited (PNI). The information in this presentation is current as at 6 August 2019. This presentation is not an offer or invitation for subscription or purchase of securities or a recommendation with respect to a
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