Pinnacle Investment Management Group Limited · ASX:PNI
Pinnacle Investment Management — Wilsons Rapid Insights Sydney 2021
76 slides from Pinnacle Investment Management's conference presentation, May 20, 2021
Slide 1: ASX cover letter: Rapid Insights Presentation
20 May 2021 For personal use only By electronic lodgement Market Announcements Office ASX Ltd 20 Bridge Street SYDNEY NSW 2000 Dear Sir/Madam Rapid Insights Presentation Pinnacle Investment Management Group Limited is pleased to attach a copy of a presentation that will be given to investors and ana
Slide 2: Wilsons Rapid Insights Sydney
For personal use only PINNACLE INVESTMENT MANAGEMENT GROUP LIMITED (PNI) Wilsons Rapid Insights Sydney Ian Macoun – CEO/Managing Director Andrew Chambers – Executive Director Ramsin Jajoo – Director, Head of Retail 26 May 2021
Slide 3: Important notice and disclaimer
For personal use only PINNACLE INVESTMENT MANAGEMENT GROUP LIMITED (PNI) 1 • 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 19 May 2021. • PNI has prepared this presentation based on
Slide 4: Agenda
Agenda 2 • Latest Update • Introduction to Pinnacle For personal use only • FUM and Flows • Diversity of Asset Classes under • Institutional Market update management • Retail Market update • Affiliate Diversity • Investment Performance • Client Diversity • Affiliate FUM growth • Growth and Resilienc
Slide 5: Latest Update
For personal use only LATEST UPDATE
Slide 6: Latest Update
Latest Update 4 • Total Affiliate FUM (at 100%) at 30 April 2021 of $84.9 billion, compared with $70.5 billion at 31 December 2020 (up 20.4%) and $58.7 billion at 30 June 2020 (up 44.6%). This includes retail FUM of $19.3 billion, compared with $16.7 billion at 31 For personal use only December 2020
Slide 7: Latest Update – Institutional & International
5 Latest Update – Institutional & International • Robust sales momentum continues Mandate crystallisation has accelerated throughout FY21 For personal use only • • Elevated activity in private credit, specialty fixed income (zero duration), Australian equities, global real estate and global value eq
Slide 8: Outlook – Institutional & International
6 Outlook – Institutional & International • Fundamentals in place for sustained sales growth • High performing Affiliates with strong local and international investment consultant ratings For personal use only • Diverse stable of Affiliates (asset class, style, strategy, maturity) ensures ‘all-weath
Slide 9: Latest Update – Retail
Latest Update – Retail 7 Continued momentum and record retail flows achieved on the back of strong investment performance, adaptation to the environment leading to a significant lift in sales activity levels and continued focus on high performance operating model For personal use only 1. Secular tre
Slide 10: Latest Update – Retail
Latest Update – Retail 8 3. Early pivot to ‘in-person’, high touch, hybrid engagement model • Sales team back to market with early adoption of travel and in person client engagement For personal use only • On track in delivering an optimised events program through a strategic mix of ‘digital’ and ‘i
Slide 11: Total size and net flows in retail asset management industry
Total size and net flows in retail asset management industry – narrower range of winners! 9 $1,600Bn Total Funds Under Management - Retail Funds $1,400Bn $1,200Bn For personal use only $1,000Bn $800Bn $600Bn $400Bn $200Bn $0Bn $44Bn Annual Estimated Net Flows – Retail Funds $50Bn $31Bn $15Bn $25Bn $
Slide 12: What Factors Drive Investment Flows? A.I. and Machine Learning
‘What Factors Drive Investment Flows?’ – A.I. and Machine Learning 10 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 13: What Factors Drive Investment Flows? Persistence
‘What Factors Drive Investment Flows?’ – A.I. and Machine Learning 11 Factor Statistics - Persistence For personal use only The facto premia correlations are persisted through time. The fees and outflows are negative while five-star, positive growth rates and index funds are consistently positive. 3
Slide 14: What Factors Drive Investment Flows? A.I. and Machine Learning
For personal use only ‘What Factors Drive Investment Flows?’ – A.I. and Machine Learning 12 Source: Morningstar Direct, data as at April 2021
Slide 15: Continuing strong investment performance of Affiliates
13 Continuing strong investment performance of Affiliates to 30 April 2020 5Y (p.a.) 10Y (p.a.) Inception (p.a.) Inception date Pinnacle Investment Management Hyperion Asset Management - Gross Performance 90% of Pinnacle Affiliates’ Hyperion Australian Growth Companies Fund Outperformance 16.37% 5.9
Slide 16: Affiliates' investment performance – April 2021
14 Affiliates’ investment performance – 30 April 2021 1Y 3Y (p.a.) 5Y (p.a.) 10Y (p.a.) Inception (p.a.) Inception date Pinnacle Investment Management Hyperion Asset Management - Gross Performance Hyperion Australian Growth Companies Fund 47.49% 22.78% 16.37% 14.31% 13.91% 1/10/2002 Outperformance 1
Slide 17: Affiliates' investment performance – April 2021
15 Affiliates’ investment performance – 30 April 2021 1Y 3Y (p.a.) 5Y (p.a.) 10Y (p.a.) Inception (p.a.) Inception date Pinnacle Investment Management Two Trees Investment Management - Gross Performance Global Macro Fund - USD Composite -2.88% -4.59% -2.72% 7/03/2018 Outperformance -2.97% -5.92% -4.
Slide 18: Pinnacle Affiliates continue to win major industry awards
16 Pinnacle Affiliates continue to win major industry awards 2021 Money Management Fund Manager of the Year (winners to be announced on 27 May 2021): 2019 Lonsec/Money Management Fund Manager of the Year: • Hyperion – Fund Manager Of The Year Finalist Nomination • Solaris – Equities (Long/Short) Cat
Slide 19: Growth and Resilience
For personal use only GROWTH AND RESILIENCE
Slide 20: Growth & Resilience
For personal use only Growth & Resilience 18 • Clear evidence of strategy execution success • Growth and Resilience simultaneously delivered • An exceptional platform in place to move ahead with sustained growth from a proven business model and philosophy
Slide 21: Growth, Resilience, and an exceptional Platform for further Growth
Growth, Resilience, and an exceptional Platform for further Growth 19 • For several years, we have been consistently implementing our strategy: • A 'pure play' investment management firm comprising only the best investment professionals, focused on investment excellence • Highly-regarded distributio
Slide 22: Three Horizons of Growth
Three Horizons of Growth 20 • Continue to build Pinnacle by taking a measured For personal use only approach to growth • Support the growth of our current affiliates with increased investment in distribution channels (e.g. international and listed markets) • Invest in / seed new affiliates where man
Slide 23: Recap on Horizon Criteria – What could we acquire?
Recap on Horizon 3 Criteria – What could we acquire? 21 Criteria For personal use only • • 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 • St
Slide 24: Future Growth Drivers
Future Growth Drivers 22 • Investment in (and continuing to evolve and grow in size and sophistication) our distribution platform • Grow ahead of our Affiliates • Listen to clients and move quickly to meet their evolving needs For personal use only • Do not become the market – be ahead of it • Inves
Slide 25: Growing a resilient, diversified business
Growing a resilient, diversified business 23 Resilience has been enhanced by progressive diversification of: For personal use only 1. Asset classes 2. Client type 3. Client domicile 4. Percentage of funds exposed to performance fees
Slide 26: Growth in Client Type and Breadth
Growth in Client Type and Breadth 24 Institutional – Domestic For personal use only International Retail – Intermediated Retail – Direct
Slide 27: Growth in Retail FUM
Growth in Retail FUM 25 Retail FUM evolution For personal use only 6.5x Total FUM 30 June 13: $10.9bn Total FUM 31 December 20: $70.5bn Retail: $0.9bn Retail: $16.7bn 18.6x 8% Retail 24% Retail 92% institutional 76% Institutional • Pinnacle has invested significantly in retail distribution and has g
Slide 28: Growth in Sources of, and Total, Performance Fee FUM
Growth in Sources of, and Total, Performance Fee FUM 26 Affiliates' FUM (at 100%) subject to performance fees For personal use only Total FUM 30 June 16: $19.8bn Total FUM 31 December 20: $70.5bn Subject to performance fees: $3.3bn Subject to performance fees: $23.0bn 17% Perf fees 33% Perf fees 83%
Slide 29: Introduction to Pinnacle
For personal use only INTRODUCTION TO PINNACLE
Slide 30: Introduction to PNI
Introduction to PNI 28 • What we do • A ‘pure play’ investment management firm providing affiliated investment managers with high quality distribution, infrastructure For personal use only and other support services so their investment professionals can focus on investment excellence • Founded in 20
Slide 31: Affiliate FUM growth ($bn)
For personal use only Affiliate FUM growth ($bn)1,2 29 2 1Includes $6.8 billion ‘acquired’ in July 2018 and $3.0 billion ‘acquired’ in December 2019. FUM shown is 100% of the FUM managed by Pinnacle Affiliates. Pinnacle holds significant minority stakes in each of its Affiliates and does not ‘own’ 1
Slide 32: Growth of our Platform
Growth of our Platform 30 CON TI N U I N G TO I N V E ST I N A DI V E RSI FI E D PLATFO R M TO STRE N G TH E N FU TU RE GROWT H Executives of both Pinnacle and Pinnacle Affiliates For personal use only • have significant equity interests • Equity ownership enhances alignment with shareholders Seed F
Slide 33: Growth in Asset Classes
Growth in Asset Classes 31 FUM by Asset Class For personal use only FUM by Asset Class 30 Jun 2016 (%) 31 December 2020 (%) 8 Australian Equities* Australian Equities 9 Global Equities* 7 3 24 Global Equities Real Assets (Public 46 Markets) Real Assets (Private 2 Real Assets (Public 17 67 Markets) M
Slide 34: Growth in Client Type and Breadth
Growth in Client Type and Breadth 32 Total FUM at 30 June 2016 (%) Total FUM at 31 December 2020 (%) Industry Super Fund Industry Super Fund 13 16 Public Pension Fund 19 Public Pension Fund For personal use only 1 24 3 Corporate Pension Fund Corporate Pension Fund 4 Financial Institution Financial I
Slide 35: Growth by Affiliate
Growth by Affiliate 33 30 June 2016 31 December 2020 For personal use only Total FUM $19.8bn Total FUM $70.5bn Hyperion 28.5% (largest affiliate) RCL 16.1% (largest affiliate) Hyperion Solaris Palisade 7.1 14.1 Plato 7.2 Resolution Capital Hyperion 2.3 Antipodes 6.3 23.2 Solaris Spheria 28.5 14.1 Pa
Slide 36: Business Model
For personal use only BUSINESS MODEL
Slide 37: Pinnacle business philosophy and approach
For personal use only Pinnacle business philosophy and approach 35 The formula for investment success involves experienced, dedicated, passionate money- makers, free from distractions, spending most of their time on investing Equity ownership for key investment professionals attracts a higher calibr
Slide 38: Pinnacle differentiation
For personal use only Pinnacle differentiation 36 Australia’s leading “multi-affiliate” investment firm Distinguished from competitors by comprising the highest quality investment management firms High quality, experienced, dedicated, passionate investment professionals – strongly focused on perform
Slide 39: Additional Information
For personal use only ADDITIONAL INFORMATION
Slide 40: 1HFY21 Results
For personal use only 1HFY21 RESULTS
Slide 41: 1H FY21 Themes
For personal use only 1H FY21 Themes 39 • Strong financial outcome, strong growth in FUM and strong net inflows • Growth in size and breadth of Affiliate base is delivering clear benefits to shareholders: • Greater diversification across different asset classes and investment strategies • Enhanced p
Slide 42: 1H FY21 Financial Highlights
1H FY21 Financial Highlights 40 • Net profit after tax (NPAT) attributable to shareholders of $30.3 million, up 120%1,2 from $13.8 million in the prior corresponding period (PCP) For personal use only • Basic earnings per share (EPS) attributable to shareholders of 17.5 cents, up 116% from 8.1 cents
Slide 43: 1H FY21 Financial Results
1H FY21 Financial Results 41 H1 FY21 ($M) H1 FY20 ($M) % Change PINNACLE Revenue 1 14.4 11.4 26% For personal use only Expenses (15.9) (15.3) 4% 2, 3 Share of Pinnacle Affiliates net profit after tax 31.8 17.7 80% 4 Net profit before tax (NPBT) from continuing operations 30.3 13.8 120% Taxation - -
Slide 44: 1H FY21 Business Highlights – FUM
For personal use only 1H FY21 Business Highlights – FUM 42 • Aggregate Affiliates’ FUM of $70.5 billion at 31 December 2020 (at 100%)1 • Up $11.8 billion or 20% from $58.7 billion at 30 June 2020 • Up $8.9 billion or 14% from $61.6 billion at 31 December 2019 • Aggregate Retail FUM (at 100%) now $16
Slide 45: 1H FY21 Business Highlights – Record Flows
For personal use only 1H FY21 Business Highlights – Record Flows 43 • Net inflows for the six months 31 December 2020 (1H FY21) of $5.5 billion • $1.0 billion in the six months ended 30 June 2020 (2H FY20) • $2.0 billion in the six months ended 31 December 2019 (1H FY20) • Retail net inflows for 1H
Slide 46: FY21 Business Highlights – Affiliates
For personal use only FY21 Business Highlights – Affiliates 44 • Four Affiliates earned performance fees totalling $45.2 million (at 100%; Pinnacle post-tax share $11.0 million) in 1H FY21 • The diversity of strategies with performance fee potential is now large (and growing), and performance fees o
Slide 47: Understanding 1H FY21 financial outcome
Understanding 1H FY21 financial outcome 45 • Total Affiliate revenues1 were $201.3m during 1H FY21, including $45.2m (22%) in performance fees; in 1H FY20, total Affiliate revenues were $132.5m, which included $0.5m (0.4%) in performance fees For personal use only • This represents 52% growth in tot
Slide 48: Significant components of 1H FY21 results – Pinnacle Parent
Significant components of 1H FY21 results – Pinnacle Parent 46 • Revenue growth returning with costs controlled in Pinnacle Parent: For personal use only • Typically, Pinnacle Parent revenues are stronger in the second-half, when certain ‘success-based’ distribution fees crystallize and become payab
Slide 49: Significant components of 1H FY21 results - Affiliates
For personal use only Significant components of 1H FY21 results - Affiliates 47 • Significant growth ($14.1 million, or 80%) in Pinnacle’s share of Affiliate profits compared with 1H FY201: • Performance fees (at 100%) of $45.2 million in 1H FY21, across four Affiliates (Pinnacle share post-tax of $
Slide 50: PNI Balance Sheet
PNI Balance Sheet 48 Cash and Principal Investments of $51.4m 31 Dec 2020 ($M) 30 Jun 2020 ($M) Change • • Includes $38.7m invested in strategies managed by CURRENT ASSETS Pinnacle Affiliates For personal use only Cash and cash equivalents 10.8 16.1 (33%) • Excludes $10m of cash applied for Affiliat
Slide 51: Our Response to the COVID–19 crisis
Our Response to the COVID–19 crisis 49 “The reputations and future success or otherwise of investment management companies are often determined by their behaviour and performance during periods of crisis and their capacity to resume growth depends on the strength of the capabilities with which they
Slide 52: Performance Fees
For personal use only PERFORMANCE FEES
Slide 53: Performance Fees – Repeatability and Size
For personal use only Performance Fees – Repeatability and Size 51 • Potential aggregate performance fees, from multiple asset classes and strategies, are both sizeable and repeatable each year • Deliberate strategy to seek performance fee structures as an alternative to higher base fees – they are
Slide 54: Performance Fees – FUM and Strategy Growth
Performance Fees – FUM and Strategy Growth 52 • The volume of FUM with performance fee potential has increased significantly For personal use only • The number and diversity of strategies with significant performance fee potential continues to increase (improving the mix and annual reliability of ov
Slide 55: FUM subject to material performance fees, by strategy
53 FUM subject to material performance fees, by strategy Date 30 June 2016 30 June 2018 31 December 2020 FUM ($bn) $3.3bn $10.3bn $23.0bn For personal use only Significant strategies 5 8 18 30 Jun 16 30 Jun 18 31 Dec 20 Large and increasing performance fee FUM and strategy diversity
Slide 56: Performance fees have been delivered by a number of Affiliates each year
For personal use only Performance fees have been delivered by a number of Affiliates each year 54
Slide 57: Factors to consider in estimating future performance fees
Factors to consider in estimating future performance fees 55 • 2H v 1H - the potential and reliability of performance fees are, logically, greater in 2H than 1H • 7 out of 18 strategies that currently have potential to deliver significant performance fees crystallise only in in 2H Thus, 11 of 18 str
Slide 58: Funds Under Management
For personal use only FUNDS UNDER MANAGEMENT
Slide 59: 1H FY21 Funds Under Management
1H FY21 Funds Under Management 57 Gross FUM growth ($bn)1 • FUM of $70.5bn as at 31 December 2020 For personal use only • FUM has grown at a CAGR of 22% p.a. over the last ten years (21% excluding $6.8bn ‘acquired’ in July 2018 and 3.0 billion ‘acquired’ in December 2019) • Increase in FUM of $11.8b
Slide 60: 1H FY21 Funds Under Management
1H FY21 Funds Under Management 58 Pinnacle Hyperion Plato Solaris RCL Palisade Antipodes Spheria Two Trees Firetrail Metrics 4 Omega Longwave Riparian Coolabah Reminiscent Aikya (total) ($m) ($m) ($m) ($m) ($m) ($m) ($m) ($m) ($m) ($m) ($m) ($m) ($m) ($m) ($m) ($m) ($m) 1 1 2 For personal use only F
Slide 61: Corporate Sustainability
For personal use only CORPORATE SUSTAINABILITY
Slide 62: Pinnacle as a Responsible Firm
60 Pinnacle as a Responsible Firm We are focused on continuous improvement, striving to do better by building a long-term, sustainable firm that focuses on our staff, customers and shareholders as well as the communities in which we engage For personal use only • Sustainability Committee • Pinnacle
Slide 63: Diversity, People and Community
Diversity, People and Community 61 Diversity For personal use only • Pinnacle believes that workplace diversity in this context includes but is not limited to gender, gender identity, age, race, disability, nationality, marital status, cultural background, sexual orientation, religious belief and et
Slide 64: People, Diversity and Community
People, Diversity and Community 62 People Fully supportive of initiatives to optimise the mental health of employees through access to the Employee Assistance Program for employees and For personal use only • family members • Employees are encouraged to always act in Pinnacle’s best interests and ma
Slide 65: Affiliate commitment to ESG
Affiliate commitment to ESG 63 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 66: Pinnacle Affiliates at the forefront as responsible investors
Pinnacle Affiliates at the forefront as responsible investors 64 • PRI signatory since 2010 • PRI signatory • PRI signatory • Responsible Investment Association Australasia (RIAA) • CDP signatory • Fundamentally integrate ESG into the investment For personal use only member • Fundamentally integrate
Slide 67: Pinnacle Charitable Foundation
65 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 For personal use only • The Foundation’s focus is on gro
Slide 68: Pinnacle Charitable Foundation
66 Pinnacle Charitable Foundation • Key focus areas and partners for 2021 are as follows: For personal use only • Promotion of strong mental wellbeing, together with support for prevention and early intervention strategies aimed at reducing mental illness and driving down suicide rates. Long-term pa
Slide 69: Affiliate Summaries
For personal use only AFFILIATE SUMMARIES
Slide 70: Pinnacle Affiliates
Pinnacle Affiliates 68 Global Emerging Market Equities • High quality • Absolute return For personal use only • Concentrated portfolio • Long term sustainable growth • Stewardship and Sustainability • Headquartered in London, United Kingdom Global & Asian Value Equities (Long Only and Long/Short) •
Slide 71: Pinnacle Affiliates
Pinnacle Affiliates 69 Experts in high conviction investing • Deep fundamental research approach consistently applied for 15+ years For personal use only • Focused on generating alpha from stock selection, whilst reducing exposure to unintended macroeconomic or thematic risks • Unconstrained approac
Slide 72: Pinnacle Affiliates
Pinnacle Affiliates 70 Australasian Private Credit • One of Australasia’s largest non-bank lenders For personal use only • Participation across all loan market segments – leverage finance, project finance, commercial real estate, corporate • Investment across the capital structure– investment grade
Slide 73: Pinnacle Affiliates
Pinnacle Affiliates 71 Australian Accumulation, Low Volatility and Tax-Exempt Equities, Global Income Equities and Global Long/Short Equities For personal use only • Customised alpha models and portfolio construction for accumulation, retirement and absolute return solutions • Systematic implementat
Slide 74: Pinnacle Affiliates
Pinnacle Affiliates 72 Australasian Private Agriculture, Food & Water • Real asset backed investments For personal use only • Uncorrelated exposure to traditional asset classes • Inflation protection • Mid-Market value focus • Commodity agnostic and counter-cyclical • Change of land use and asset op
Slide 75: Pinnacle Affiliates
Pinnacle Affiliates 73 Systematic Global Macro • Former GMO SGM team For personal use only • Competitive edge is the novel way in which the firm fuses together a deep philosophical understanding of financial economics with rigorous scientific techniques for forecasting returns, volatility and correl
Slide 76: Q&A
For personal use only Q&A
Pinnacle Investment Management Group — Wilsons Rapid Insights Sydney 2021 on 6ix