Pinnacle Investment Management Group Limited · ASX:PNI
Pinnacle Investment Management — Wilsons Rapid Insights Conference 2020
79 slides from Pinnacle Investment Management's conference presentation, May 22, 2020
Slide 1: ASX cover letter: Rapid Insights Presentation
22 May 2020 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 Conference
For personal use only PINNACLE INVESTMENT MANAGEMENT GROUP LIMITED Wilsons Rapid Insights Conference 28th May, 2020 Ian Macoun – CEO/Managing Director Andrew Chambers – Executive Director Adrian Whittingham – Executive Director
Slide 3: Important notice and disclaimer
2 For personal use only 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 22 May 2020. • • PNI has prepared this presentation based on
Slide 4: Agenda
Agenda Latest Update Introduction to Pinnacle For personal use only • • • Impact of COVID-19 Crisis on • Diversity of Asset Classes under Profitability management • Our Response to the COVID-19 Crisis • Affiliate Diversity • Investment Performance • Client Diversity Affiliate FUM growth Pinnacle wil
Slide 5: Latest Update
For personal use only Latest Update
Slide 6: Latest Update – Impact of COVID-19 crisis on profitability
5 Latest Update – Impact of COVID–19 crisis on profitability Impact of the COVID-19 crisis on the market value of FUM has been swift and large For personal use only • • Total Affiliate FUM (at 100%) at 30 April 2020 of $54.9 billion, compared with $61.6 billion at 31 December 2019 and $54.3 billion
Slide 7: Latest Update – Our Response to the COVID-19 crisis
Latest Update – Our Response to the COVID–19 crisis For personal use only • Largely 'business as usual' except working from home (moved early) and no travel • We have paid close attention to health and well-being of our people. Minimal direct health impacts; ensured extensive contact particularly wi
Slide 8: Introducing Aikya – Global Emerging Market Equities
7 Introducing Aikya – Global Emerging Market Equities Global Emerging Market Equity affiliate based in London, United Kingdom. 32.5% owned by Pinnacle, 67.5% by team For personal use only • members. • 7 investment professionals with 80+ years collective experience investing in Emerging Market Equiti
Slide 9: Institutional - COVID-19 Impact
8 Institutional - COVID-19 Impact For personal use only • Very few Australian institutional investors took advantage of the pronounced equity market sell off in March • Limited change so far in consultant or investor strategic asset allocation or dynamic asset allocation given the speed of the marke
Slide 10: Continuing strong investment performance of Affiliates
9 Continuing strong investment performance of Affiliates 5Y (pa) 10Y (pa) Inception (pa) Inception date Pinnacle Investment Management 94% of Pinnacle Affiliated Hyperion Asset Management - Gross Performance Investment Manager Hyperion Australian Growth Companies Fund 9.51% 9.99% 12.25% 1/10/2002 st
Slide 11: Affiliates' investment performance – April 2020
10 Affiliates’ investment performance – 30 April 2020 1Y 3Y (pa) 5Y (pa) 10Y (pa) Inception (pa) Inception date Pinnacle Investment Management Hyperion Asset Management - Gross Performance Hyperion Australian Growth Companies Fund 10.17% 10.06% 9.51% 9.99% 12.25% 1/10/2002 Outperformance 19.22% 8.08
Slide 12: Affiliates' investment performance – April 2020
11 Affiliates’ investment performance – 30 April 2020 1Y 3Y (pa) 5Y (pa) 10Y (pa) Inception (pa) Inception date Pinnacle Investment Management Two Trees Investment Management - Gross Performance Global Macro Fund -12.48% -4.50% 1/11/2017 Outperformance -13.59% -6.09% Firetrail Investments - Gross Pe
Slide 13: Pinnacle will continue to grow, 'post-crisis'
For personal use only Pinnacle will continue to grow, 'post-crisis'
Slide 14: Three Horizons of Growth
Three Horizons of Growth For personal use only • Continue to build Pinnacle by taking a measured 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 manage
Slide 15: Focus on managing the business to maximise profits and value
Focus on managing the business so as to maximise profits and Company value over the medium term For personal use only • How does ‘Horizon 2’ add value in the Medium Term? • Investment in growth initiatives that don’t require additional capital to be raised • Reasonable limits to be set given short-t
Slide 16: Recap on Horizon Criteria – What could we acquire?
15 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 • St
Slide 17: Future Growth
16 Future Growth For personal use only • Investment in distribution platform • Grow ahead of our Affiliates • Listen to clients and move quickly to meet their evolving needs • Do not become the market – be ahead of it • Investment in new affiliates adds diversification • Global equities (developed &
Slide 18: Enhancing the platform - strength, stability and reputation
17 Enhancing the platform - strength, stability and reputation For personal use only • Stable and diversified platform • Continuing investment excellence • Widespread industry recognition and support • ‘Article of faith’ reputation • Further investment in distribution capability • Retail • Internati
Slide 19: Introduction to Pinnacle
For personal use only Introduction to Pinnacle
Slide 20: Introduction to PNI
Introduction to PNI 19 • What we do A ‘pure play’ investment management firm providing affiliated investment managers with high quality distribution, For personal use only • infrastructure and other support services so their investment professionals can focus on investment excellence • Founded in 20
Slide 21: Affiliate FUM growth ($bn)
20 For personal use only Affiliate FUM growth ($bn)1,2 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’ 100
Slide 22: Diversity of Asset Classes under management
Diversity of Asset Classes under management 21 C O N T IN U IN G T O IN V E S T IN A D IV E R S IF IE D P L A T F O R M T O S T R E N GT H EN F U T UR E GR O W T H Executives of both Pinnacle and Pinnacle Affiliates have For personal use only • significant equity interests • Equity ownership enhance
Slide 23: Asset Classes Diversity
22 For personal use only Asset Classes Diversity
Slide 24: Client Diversity
For personal use only Client Diversity 23
Slide 25: Affiliate Diversity
24 For personal use only Affiliate Diversity
Slide 26: Business Model
For personal use only Business Model
Slide 27: Pinnacle business philosophy and approach
Pinnacle business philosophy and approach For personal use only 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 calibre i
Slide 28: Pinnacle differentiation
Pinnacle differentiation For personal use only 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 performanc
Slide 29: Additional information
For personal use only Additional information
Slide 30: Progress since 2016
Progress since 2016 Pinnacle is a multi affiliate investment management firm with a mission to establish, grow and support a diverse stable For personal use only of world-class fund managers Goals and strategy stated in 2016 Progress Continue to provide high quality distribution, 7 Affiliates, now 1
Slide 31: Aggregate Affiliates' FUM (at 100%) by Affiliate
Aggregate Affiliates’ Funds Under Management (at 100%) - by Affiliate For personal use only Pinnacle Hyperion Plato Solaris RCL Palisade Antipodes Spheria Two Trees Firetrail Metrics Omega Longwave Riparian Coolabah Reminiscent (total) ($m) ($m) ($m) ($m) ($m) ($m) ($m) ($m) ($m) ($m) ($m)1 ($m)1 ($
Slide 32: 1HFY20 Results
For personal use only 1HFY20 Results
Slide 33: First half FY20 Financial Highlights
First half FY20 Financial Highlights For personal use only • Net profit after tax (NPAT) from continuing operations of $13.8 million, up 37%1 from $10.1 million in the prior corresponding period (PCP). • Basic earnings per share (EPS) from continuing operations of 8.1 cents, up 33% from 6.1 cents in
Slide 34: First half FY20 Business Highlights – FUM and Flows
33 First half FY20 Business Highlights – FUM and Flows • Aggregate Affiliates’ FUM at 31 December 2019 (at 100%) $61.6 billion1,3 For personal use only • Up $7.3 billion or 13% from $54.3 billion at 30 June 2019 • Aggregate Retail FUM (at 100%) now $14.9 billion2, up 28% from $11.6 billion at 30 Jun
Slide 35: First half FY20 Business Highlights – Affiliates
34 First half FY20 Business Highlights – Affiliates 2 new Affiliates (one Horizon 3 and one Horizon 2), 2 UCITS Liquid Alts Fund launches For personal use only • • Acquisition of a 25% interest in Coolabah Capital Investments Pty Ltd (Public Markets Credit) for an initial $29.1 million in December 2
Slide 36: Understanding First Half FY20 financial outcome
35 Understanding First Half FY20 financial outcome • We remind shareholders of the ‘skew’ (H1/H2 split) in our results, with the impact of annual performance fees and success fees only being recognized in the second half of each financial year - H1 FY19 NPAT was 33% of FY19 full year NPAT; H1 FY18 N
Slide 37: Group financial summary
Group financial summary 36 36 1H2020 ($M) 1H2019 ($M) YoY change PINNACLE Revenue 11.41 8.61 32.6% For personal use only Expenses (15.3)2,3 (12.8)2,3 19.5% Share of Pinnacle Affiliates net profit after tax 17.7 14.3 23.8% Net profit before tax (NPBT) from continuing operations 13.8 10.1 36.6% Taxati
Slide 38: Understanding First Half FY20 financial outcome
Understanding First Half FY20 financial outcome 37 Strong FUM and revenue growth in Pinnacle Affiliates: Aggregate Affiliate revenues ($m)1 For personal use only • Total Affiliate revenues1 were $132.5m during 1H2020, including $0.5m (0.4%) in performance fees; in 1H2019, total Affiliate revenues we
Slide 39: Significant components of First Half FY20 results
38 Significant components of First Half FY20 results For personal use only • Continuing growth in ‘Pinnacle Parent’ revenues and capabilities • Continuing ‘P&L’ investment in support of Horizon 2 initiatives (including Offshore distribution, ETF, Direct to retail consumers, cost of Pinnacle servicin
Slide 40: PNI balance sheet
39 PNI balance sheet 31 Dec 2019 30 Jun 2019 YoY change For personal use only ($M) ($M) • Cash and Principal Investments of $44.7m CURRENT ASSETS Includes $35.3m invested in strategies managed by Cash and cash equivalents 7.9 26.7 (70.4%) • Financial assets 36.8 24.5 50.2% Pinnacle Affiliates Total
Slide 41: Funds under management
40 Funds under management Affiliate FUM growth ($bn)1,2 Aggregate Affiliates' FUM (at 100%) of $61.6bn as at 31 For personal use only • December 20191,2 • Aggregate Affiliates' FUM has grown at a CAGR of 23.3% p.a. over the last ten years (21.2% excluding $6.8bn ‘acquired’ in July 2018 and $3.0bn ‘a
Slide 42: Building a resilient, diversified business
41 Building a resilient, diversified business Resilience has been enhanced by: For personal use only 1. Diversity of asset classes 2. Diversity of client FUM by investor type and domicile 3. Growth in Global distribution platform 4. Increased weighting to Fixed Income and Alternative Asset Classes 5
Slide 43: Diversity of Asset Classes under management
42 For personal use only Diversity of Asset Classes under management • Less than half of total FUM (at 100%) was in Australian equities at 31 December 2019 • Investment in new affiliates adds to diversification • Increasing exposure to global equities, private capital, fixed interest and credit, and
Slide 44: Diversity of Sources of Funds Under Management
43 Diversity of Sources of Funds Under Management For personal use only Institutional – Domestic International Retail – Intermediated Retail – Direct
Slide 45: Institutional - Domestic
44 Institutional - Domestic • Industry fund consolidation continues Speed and magnitude of ‘Insourcing’ varies widely For personal use only • • These do impact Pinnacle to some degree, but keep in perspective (without being complacent) • Pinnacle will continue to evolve in response to (and in antici
Slide 46: Increasingly diversified client base
45 For personal use only Increasingly diversified client base • 170+ individual institutional clients at 31 December 2019, compared with ~60 at 30 June 2016 • Growth in Retail FUM as a proportion of total FUM (at 100%) and as a proportion of total revenues (at 100%) • Increasingly diversified client
Slide 47: International
46 International For personal use only • Distribution executives based in London, New York, Auckland, Sydney and Melbourne covering investors in the Americas, Europe, Middle East & Africa and Asia-Pacific time zones • ~A$4bn+ of aggregate FUM from international investors and invested in internationa
Slide 48: Retail market developments
47 Retail market developments • Royal Commission flow on effects For personal use only • Dismantling of vertical integration (~1,600 AFSL closures past 2 years) • Education standards lifted with FASEA • Geopolitical concerns • US-China Trade Conflict • Brexit • Hong Kong • Coronavirus • Continued ri
Slide 49: Growth in Retail FUM
48 Growth in Retail FUM Retail FUM evolution For personal use only 5.7x Total FUM 30 Jun 13: $10.8bn Total FUM 31 Dec 19: $61.6bn Retail: $0.9bn Retail: $14.9bn 16.6x 8% Retail 24% Retail 92% institutional 76% Institutional • Pinnacle has invested significantly in retail distribution and has generat
Slide 50: Growth in Performance Fee FUM
49 Growth in Performance Fee FUM Affiliates' FUM (at 100%) subject to performance fees For personal use only Total FUM 30 Jun 16: $19.8bn Total FUM 31 Dec 19: $61.6bn Subject to performance fees: $3.3bn Subject to performance fees: $19.1bn 17% Perf fees 31% Perf fees 83% No perf fees 69% No perf fee
Slide 51: Pinnacle Affiliates continue to win major industry awards
50 Pinnacle Affiliates continue to win major industry awards 2020 Morningstar Fund Manager of the Year Awards: 2019 Australian Alternative Investment Awards: • Hyperion – Winner, Domestic Equities – Large Cap • Metrics – Best Private Debt Fund Category Winner • Hyperion – Finalist, Domestic Equities
Slide 52: Pinnacle as a Responsible Firm
51 Pinnacle as a Responsible Firm • Pinnacle achieved carbon neutrality for the 2019 financial year • Tracking and measuring carbon footprint for air travel, travel via cars to client meetings as well as staff travel to and from work For personal use only • Seeking to avoid travel in favour of video
Slide 53: Pinnacle Affiliates at the forefront as responsible investors
52 Pinnacle Affiliates at the forefront as responsible investors • Principles for Responsible Investment (PRI) signatory since 2010 • Principles for Responsible Investment (PRI) signatory since 2011 • UN Global Compact signatory (2019) • Member of the Climate Action 100+ investor group For personal
Slide 54: Coolabah Capital Investments acquisition
53 Coolabah Capital Investments acquisition • Pinnacle acquired a 25% equity interest in Coolabah Capital Investments Pty Ltd (CCI) in December 2019, for $29.1m, together with a further $5m payable upon the business achieving certain milestones over the next 18 month to 4.5 year For personal use onl
Slide 55: CCI's Edge
54 CCI's Edge 1. Large team focussed exclusively on Australian investment-grade fixed-income ($3bn FUM, $4bn AUM) 4x portfolio managers, 9x analysts, and 21x staff in total For personal use only • • CCI’s staff own 75% of business – remaining 25% held by Pinnacle • Chaired by Melda Donnelly (ex-CEO
Slide 56: Reminiscent Capital: Asia Macro
55 Reminiscent Capital: Asia Macro • Discretionary Asian Macro investment firm with three investment professionals led by David Adams (ex-Brevan Howard Asia and Morgan Stanley Australia) For personal use only • Reminiscent aims to deliver attractive, uncorrelated absolute returns through a concentra
Slide 57: Alternative Credit & Fixed Income
56 Alternative Credit & Fixed Income • Ageing population in OECD markets creating significant demand for capital stable, income producing assets • Commercial and investment bank regulatory change around the globe creating opportunity for alternative credit For personal use only managers to fill the
Slide 58: Pinnacle Charitable Foundation
57 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 For personal use only • The Foundation’s foc
Slide 59: Affiliate Summaries
For personal use only Affiliate Summaries
Slide 60: Australian Equities
For personal use only Australian Equities
Slide 61: Australian Equities - Fundamental
Australian Equities - Fundamental 60 Australian High Conviction Equities For personal use only • Concentrated portfolio • Unconstrained by style or market cap • Thematic risk management reduces unintended risks • 90% of alpha comes stock selection • Highly experienced Team Australian Growth Equities
Slide 62: Australian Equities - Systematic
Australian Equities - Systematic 61 Australian Smart Beta Plus and Managed Volatility equities For personal use only • Smart Beta Plus • Proprietary Reverse Optimization approach • Identify beta factors driving market returns • Overlay beta returns with orthogonal alphas • Fully Systematic • Headqua
Slide 63: Australian Equities – Micro, Small & Mid Caps
Australian Equities – Micro, Small & Mid Caps 62 Australian Small Cap Growth Equities For personal use only • High quality, structural growth businesses • Sustainable competitive advantages • High return on capital • Predictable earnings, low debt • Concentrated portfolio (~20 holdings) • Low turnov
Slide 64: Global Equities
For personal use only Global Equities
Slide 65: Global Equities
Global Equities 64 Global Value Equities (Long Only and Long-Short) For personal use only • Pragmatic Value • Absolute return • Margin of safety (min 15% absolute return) • Multiple ways of winning • Limit correlated alpha clusters • 24 investment professionals • Headquartered in Sydney, Australia •
Slide 66: Global Equities – Micro Cap
Global Equities – Micro Cap 65 Global Micro Caps For personal use only • Greater potential for long term capital appreciation • Under-researched stock universe (40% no coverage) provides fertile ground for higher alpha • Greater geographic diversification (32% US) • Quality orientation • Focus on re
Slide 67: Global Emerging Market & Asian Equities
For personal use only Global Emerging Market & Asian Equities
Slide 68: Global Emerging Market & Asian Equities
Global Emerging Market & Asian Equities 67 Global Emerging Market Equities For personal use only • High quality • Absolute return • Concentrated portfolio • Long term sustainable growth • Stewardship and Sustainability • Headquartered in London, United Kingdom Asia Value Equities (Long Only and Long
Slide 69: Real Assets (Private & Public Markets)
For personal use only Real Assets (Private & Public Markets)
Slide 70: Real Assets – Private Markets
Real Assets – Private Markets 69 Australasian Private Infrastructure For personal use only • Mid-Market focus results in better acquisition multiples and portfolio yield • Actively involved in the operational management and governance of the assets unlocks embedded value • Owns airports, seaports, p
Slide 71: Real Assets – Public Markets
Real Assets – Public Markets 70 Global Real Estate Securities For personal use only • Concentrated portfolio of `best ideas’ • Multiple Portfolio Manager approach • Sector based research • Centralised, proprietary research mitigates regional biases • UNPRI signatory • 24 year track record • Headquar
Slide 72: Credit (Private & Public Markets)
For personal use only Credit (Private & Public Markets)
Slide 73: Credit – Private Markets
Credit – Private Markets 72 Australasian Private Credit & Direct Lending For personal use only • One of Australasia’s largest non-bank lenders • Participation across all loan market segments – leverage finance, project finance, commercial real estate, corporate • Investment across the capital struct
Slide 74: Credit – Public Markets
Credit – Public Markets 73 Australian & Global Public Markets Credit For personal use only • Australasia’s largest and leading `credit alpha’ investor • CCI minimizes fixed-income betas: interest rate duration, credit default risk and illiquidity risk • CCI seeks to acquire cheap, mispriced bonds pa
Slide 75: Absolute Return
For personal use only Absolute Return
Slide 76: Absolute Return – Equity Market Neutral
Absolute Return– Equity Market Neutral 75 Absolute Return Equities For personal use only • Market neutral exposure with minimal correlation to equities • Predominantly Australasian equities • Up to 50% in global equities • Unconstrained by style or market cap • Thematic risk management reduces unint
Slide 77: Absolute Return – Macro
Absolute Return– Macro 76 Discretionary Asia Macro For personal use only • Led by former Brevan Howard PM • Highly liquid portfolio, comprised of high conviction investment ideas, uncorrelated with equity market beta • Reminiscent employs a directional, discretionary Macro strategy using Futures, Op
Slide 78: Absolute Return – Long Short Credit
Absolute Return–Long Short Credit 77 Long Short Credit For personal use only • Zero duration long short credit strategy with daily liquidity • Australasia’s largest and leading ‘credit alpha’ investor • CCI minimizes fixed-income betas: interest rate duration, credit default risk and illiquidity ris
Slide 79: For personal use only
For personal use only
Pinnacle Investment Management Group — Wilsons Rapid Insights Conference 2020 on 6ix