Pinnacle Investment Management Group Limited · ASX:PNI
Pinnacle Investment Management — Investor Presentation (August 2020)
52 slides from Pinnacle Investment Management's investor presentation, Aug 4, 2020
Slide 1: FY2020 financial results announcement letter
4th August 2020 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) FY2020 financial results Pinnacle Investment Management Group Limited (PNI) is pleased to advise shareholde
Slide 2: Cash, Coolabah acquisition and management commentary
> Cash and Principal Investments of $50.1 million at 30 June 2020. $30m debt facility from CBA – fully drawn down in December 2019 > Acquisition of a 25% interest in Coolabah Capital Investments Pty Limited (Coolabah) in December 2019, funded through the use of the CBA facility > ‘Horizon 2’ launch
Slide 3: Composition of Group Results
Composition of Group Results The profit after tax attributable to shareholders for the 2020 financial year was $32.2 million, representing basic earnings per share of 18.8 cents compared with 18.3 cents per share in the 2019 financial year. Success and FUM-based distribution fee revenue was restrain
Slide 4: FUM Update
FUM Update The aggregate FUM of PNI’s sixteen Affiliates as at 30 June 2020 was $58.7 billion (includes $3.0 billion ‘acquired’ in December 2019) reflecting: > an increase in FUM of $4.4 billion or 8.1% during the financial year ended 30 June 2020, comprising net inflows of $3.0 billion, decreases d
Slide 5: Retail FUM Update
Retail FUM Update Aggregate Retail FUM stood at $13.1 billion at 30 June 2020 (includes $1.6 billion1 ‘acquired’ in December 2019): > an increase in FUM of $1.5 billion or 12.9% during the financial year ended 30 June 2020, comprising net inflows of $0.9 billion, decreases due to market movements/in
Slide 6: Dividend
Dividend The Board has resolved to pay a fully franked final dividend of 8.5 cents per share to shareholders recorded on the register on 25 August 2020 and payable on 11 September 2020, which represents a full year dividend of 15.4 cents per share, the same as in FY19, and a payout ratio of 86% of d
Slide 7: Annual Results Discussion for the year ended 30 June 2020
PINNACLE INVESTMENT MANAGEMENT GROUP LIMITED (PNI) Annual Results Discussion for the year ended 30 June 2020 4 August 2020
Slide 8: Disclaimer
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 4 August 2020. • PNI has prepared this presentation based on information availabl
Slide 9: FY20 Themes
FY20 Themes • Solid financial outcome in prevailing circumstances, although below expectations at start of year • Early evidence of benefits of increasing diversity of: • Asset class and investment strategies of Affiliates • Client type and domicile • Performance fee potential • Entering FY21 the fi
Slide 10: FY20 Financial Highlights
FY20 Financial Highlights 3 • Net profit after tax (NPAT) attributable to shareholders of $32.2 million, up 5.6%1 from $30.5 million in FY19 • Basic earnings per share (EPS) attributable to shareholders of 18.8 cents, up 2.7% from 18.3 cents in FY19 • Diluted earnings per share attributable to share
Slide 11: FY20 Financial Results
FY20 Financial Results 4 FY2020 ($M) FY2019 ($M) YoY Change PINNACLE Revenue 22.4 21.1 6.2% 1 Expenses 2, 3 (28.0) (23.7) 18.1% Share of Pinnacle Affiliates net profit after tax 4 38.0 33.1 14.8% Net profit before tax (NPBT) from continuing operations 32.4 30.5 6.2% Taxation - - NPAT from continuing
Slide 12: FY20 Business Highlights – FUM
FY20 Business Highlights – FUM 5 • Aggregate Affiliates’ FUM of $58.7 billion at 30 June 2020 (at 100%) 1 • Up $4.4 billion or 8% from $54.3 billion at 30 June 2019 • Down $2.9 billion or 5% from $61.6 billion at 31 December 2019 • Aggregate Retail FUM (at 100%) now $13.1 billion2; up 13% from $11.6
Slide 13: FY20 Business Highlights – Flows
FY20 Business Highlights – Flows 6 • Net inflows for the financial year to 30 June 2020 (FY20) of $3.0 billion • $1.0 billion in the six months ended 30 June 2020 (2H2020) • Retail net inflows for 2H2020 of $19m ($68m less LIC outflows1 of $49m) • much lower than for the PCP ($1.5 billion, of which
Slide 14: FY20 Business Highlights – Affiliates
FY20 Business Highlights – Affiliates 7 • Three new Affiliates (one Horizon 3 and two Horizon 2) • Acquisition of a 25% interest in CCI (Public Markets Credit) for an initial $29.1 million in December 2019, with a further $5m payable upon the business achieving certain milestones over the next one-
Slide 15: Understanding FY20 financial outcome
Understanding FY20 financial outcome 8 • Total Affiliate revenues1 were $291.1m during FY2020, including $26.7m (9.1%) in performance fees; in FY2019, total Affiliate revenues were $236.8m, which included $15.3m (6.5%) in performance fees • This represents 22.9% growth in total Affiliate revenue (19
Slide 16: Significant components of FY20 results
Significant components of FY20 results 9 • Consolidation in Pinnacle Parent in a challenging year: • Success- and FUM-based distribution fee revenue restrained due to market dislocation in 2H2020 – deferrals in certain institutional allocations; lower retail net inflows • Staff costs (excluding STI)
Slide 17: PNI Balance Sheet
PNI Balance Sheet 10 30 Jun 2020 30 Jun 2019 Cash and Principal Investments of $50.1m YoY Change • ($M) ($M) • Includes $32.4m invested in strategies managed by CURRENT ASSETS Pinnacle Affiliates Cash and cash equivalents 16.1 26.7 -39.7% • Excludes over $10m of cash applied for Affiliate equity Fin
Slide 18: FY20 Funds Under Management
FY20 Funds Under Management 11 Gross FUM growth ($bn)1 • FUM of $58.7bn as at 30 June 2020 • FUM has grown at a CAGR of 22.2% p.a. over the last ten years (20.0% excluding $6.8bn ‘acquired’ 70.0 in July 2018 and 3.0 billion ‘acquired’ in December 2019) Increase in FUM of $4.4bn in the year to 30 Jun
Slide 19: FY20 Funds Under Management by Affiliate
FY20 Funds Under Management 12 Pinnacle TABLE Hyperion Plato Solaris RCL Palisade Antipodes Spheria Two Trees Firetrail Metrics Omega Longwave Riparian Coolabah Reminiscent Aikya (total) ($m) ($m) ($m) ($m) ($m) ($m) ($m) ($m) ($m) ($m) ($m) ($m) ($m) ($m) ($m) ($m) ($m) 1 1 2 FUM History (at 100%)
Slide 20: Continuing strong investment performance of Affiliates
13 Continuing strong investment performance of Affiliates Inception 5Y (p.a.) 10Y (p.a.) Inception date (p.a.) Pinnacle Investment Management 90% of Pinnacle Affiliated Hyperion Asset Management - Gross Performance Hyperion Australian Growth Companies Fund 12.85% 12.34% 12.78% 1/10/2002 Investment M
Slide 21: Affiliates’ investment performance – June 2020
14 Affiliates’ investment performance – 30 June 2020 Inception Inception 1Y (p.a.) 3Y (p.a.) 5Y (p.a.) 10Y (p.a.) (p.a.) date Pinnacle Investment Management Hyperion Asset Management - Gross Performance Hyperion Australian Growth Companies Fund 18.64% 13.85% 12.85% 12.34% 12.78% 1/10/2002 Outperform
Slide 22: Affiliates’ investment performance – June 2020
15 Affiliates’ investment performance – 30 June 2020 Inception Inception 1Y (p.a.) 3Y (p.a.) 5Y (p.a.) 10Y (p.a.) (p.a.) date Pinnacle Investment Management Two Trees Investment Management - Gross Performance Global Macro Fund -9.42% -4.24% 1/11/2017 Outperformance -10.27% -5.75% Firetrail Investmen
Slide 23: Pinnacle Affiliates continue to win major industry awards
16 Pinnacle Affiliates continue to win major industry awards 2020 Money Management Fund Manager of the Year: 2019 Australian Alternative Investment Awards: Metrics – Best Private Debt Fund Category Winner • Resolution Capital – Global REIT Category Finalist • Hyperion – Global Equities Category Fina
Slide 24: Building a resilient, diversified business
Building a resilient, diversified business 17 Resilience has been enhanced by progressive diversification of: 1. Asset classes 2. Client type 3. Client domicile 4. Percentage of funds exposed to performance fees
Slide 25: Diversity of our Platform
Diversity of our Platform 18 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 have significant equity interests • Equity ownership enhances alignment with shareholders Seed FUM and working capi
Slide 26: Diversity by Affiliate
Diversity by Affiliate 19 30 June 2016 30 June 2020 Total FUM $19.8bn Total FUM 58.7bn Hyperion 28.5% (largest affiliate) RCL 15.3% (largest affiliate) Hyperion 6.4 0.2 Solaris 13.4 7.6 Palisade Hyperion 2.3 Plato Solaris 7.3 23.2 28.5 Resolution Capital 14.6 Palisade Antipodes 7 Spheria Plato 15.5
Slide 27: Diversity by Asset Class
Diversity by Asset Class 20 FUM by Asset Class FUM by Asset Class 30 Jun 2016 (%) 30 June 2020 (%) 8 Australian Equities* Australian Equities 9 Global Equities* 7 4 24 Global Equities Real Assets (Public 46 Markets) Real Assets (Private 2 Real Assets (Public 16 Markets) 67 Markets) Credit (Public Re
Slide 28: Diversity by Client Type
Diversity by Client Type 21 Institutional – Domestic International Retail – Intermediated Retail – Direct
Slide 29: Diversity by Client Type
Diversity by Client Type 22 Total FUM at 30 June 2016 (%) Total FUM at 30 June 2020 (%) Industry Super Fund Industry Super Fund Public Pension Fund 13 16 Public Pension Fund 18 1 24 Corporate Pension Fund 3 Corporate Pension Fund 4 Financial Institution Financial Institution 1 1 14 Sovereign Fund 2
Slide 30: Growth in Retail FUM
Growth in Retail FUM 23 Retail FUM evolution 5.4x Total FUM 30 Jun 13: $10.9bn Total FUM 30 Jun 20: $58.7bn Retail: $0.9bn Retail: $13.1bn 14.6x 8% Retail 23% Retail 92% institutional 77% Institutional • Pinnacle has invested significantly in retail distribution and has generated substantial retail
Slide 31: Growth in Performance Fee FUM
Growth in Performance Fee FUM 24 Affiliates' FUM (at 100%) subject to performance fees Total FUM 30 June 16: $19.8bn Total FUM 30 June 20: $58.7bn Subject to performance fees: $3.3bn Subject to performance fees: $18.9bn 17% Perf fees 32% Perf fees 83% No perf fees 68% No perf fees • Significant grow
Slide 32: Our Response to the COVID–19 crisis
Our Response to the COVID–19 crisis 25 We believe that 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 w
Slide 33: Remuneration outcomes FY2020, LTI contemplated for FY2021
Remuneration outcomes FY2020, LTI contemplated for FY2021 26 • Restrained outcomes for FY2020 as we recognise profit and FUM inflow outcomes were below original expectations • No salary increases for most executives, no net LTI issuance during the year, STI at a maximum of 50% of ‘normal’ expectatio
Slide 34: Corporate Sustainability
CORPORATE SUSTAINABILITY
Slide 35: Pinnacle as a Responsible Firm
28 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. • Carbon Emissions • Pinnacle achieved carbon neutrality fo
Slide 36: People, Diversity and Community
People, Diversity and Community 29 People • Fully supportive of initiatives to optimise the mental health of employees through access to the Employee Assistance Program for employees and family members • Employees are encouraged to always act in Pinnacle’s best interests and maintain a line of sight
Slide 37: People, Diversity and Community
People, Diversity and Community 30 Community • Through the Pinnacle Charitable Foundation and engaged Affiliates, we are supporting a number of key social priorities, including the following, by donating in excess of $400k per annum: • Human Rights: legal assistance for victims of domestic and famil
Slide 38: Affiliate commitment to ESG
Affiliate commitment to ESG 31 Ten affiliates are signatories to the United Nations supported Principles of Responsible Investment (“PRI”): Incorporate ESG into Affiliate Signatory to PRI Have an ESG policy Investment process Aikya Yes Yes Yes Antipodes Yes Yes Yes Coolabah No Yes Yes Firetrail No Y
Slide 39: Pinnacle Affiliates at the forefront as responsible investors
Pinnacle Affiliates at the forefront as responsible investors 32 • Principles for Responsible Investment (PRI) • PRI signatory since 2010 signatory since 2011 • UN Global Compact signatory (2019) • Member of the Climate Action 100+ investor • Member of GRESB since 2017 group • Member of ESG Research
Slide 40: Pinnacle Charitable Foundation
33 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’s focus is on backing the g
Slide 41: Pinnacle Charitable Foundation
34 Pinnacle Charitable Foundation • Combined donations of over $450,000 were predominantly directed to 10 not-for-profit partners across the following five identified priority areas. They included a new partnership with The Kindness Factory, developed in response to the pressures and stresses associ
Slide 42: New Affiliates During the Year
NEW AFFILIATES DURING THE YEAR
Slide 43: CCI acquisition
36 CCI acquisition • Pinnacle acquired a 25% equity interest in CCI in December 2019, for $29.1m, together with a further $5m payable upon the business achieving certain milestones over the following 18 month to 4.5 year period • Funded by a facility from the CBA • Established in 2011, CCI is a lead
Slide 44: CCI’s Edge
37 CCI’s Edge 1. Large team focussed exclusively on Australian investment-grade fixed-income • 6 portfolio managers, 11 analysts, and 23 staff in total • CCI’s staff own 75% of business – remaining 25% held by Pinnacle • Chaired by Melda Donnelly (ex-CEO QIC, VFMC Deputy Chair) with Independent Dire
Slide 45: Reminiscent Capital: Asia Macro
38 Reminiscent Capital: Asia Macro • Discretionary Asia Macro investment firm with three investment professionals led by David Adams (ex-Brevan Howard Asia and Morgan Stanley Australia) • Reminiscent aims to deliver attractive, uncorrelated absolute returns through a concentrated, directional and dy
Slide 46: Aikya: Global Emerging Market Equities
39 Aikya: Global Emerging Market Equities • Global Emerging Market Equity Affiliate based in London, United Kingdom. 32.5% owned by Pinnacle, 67.5% by team members • 7 investment professionals with 80+ years collective experience investing in Emerging Market Equities, led by: • Ashish Swarup, former
Slide 47: Affiliate Summaries
AFFILIATE SUMMARIES
Slide 48: Update – Pinnacle Affiliates
Update – Pinnacle Affiliates • Focused on generating healthy long term returns with strong down-side risk protection, by investing alongside high quality stewards of businesses in Emerging Markets • Aikya Global Emerging Markets Fund (AUT) was launched in March 2020 • UCITS fund planned for launch i
Slide 49: Update – Pinnacle Affiliates
Update – Pinnacle Affiliates • Long-term business owner mindset • Average holding period for the companies in their portfolios is 10 years • Hyperion Global Growth Companies Fund opened to retail investors in 2019. As at 30 June 2020, the fund has outperformed its benchmark by 11.0% (per annum, sinc
Slide 50: Update – Pinnacle Affiliates
Update – Pinnacle Affiliates • Manage investments in assets within the Transport, Energy, Utilities, Renewables, Agri- infrastructure and Social (PPP) sectors • As at 30 June 2020, funds under management and investor commitments totalled approximately $2.9 billion across Palisade’s three pooled fund
Slide 51: Update – Pinnacle Affiliates
Update – Pinnacle Affiliates • Specialist water, agriculture and food investment firm, established in early 2019 • Riparian’s investment team has extensive experience in agriculture, finance and asset management, predominantly in Australia but also covering the United States and Asia- Pacific • Ripa
Slide 52: Q&A
Q&A
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