Pinnacle Investment Management Group Limited · ASX:PNI
Pinnacle Investment Management — Shareholder Meeting (October 2020)
77 slides from Pinnacle Investment Management's shareholder meeting presentation, Oct 29, 2020
Slide 1: 2020 Annual General Meeting
For personal use only PINNACLE INVESTMENT MANAGEMENT GROUP LIMITED (PNI) 2020 Annual General Meeting 29 October 2020
Slide 2: 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 29 October 2020. • PNI has prepared this presentation based
Slide 3: Agenda
For personal use only Agenda • Ordinary Business • Managing Director’s address – Ian Macoun • Institutional & International distribution update & outlook – Andrew Chambers • Retail distribution update & outlook – Ramsin Jajoo • Q&A
Slide 4: Ordinary Business
For personal use only Ordinary Business
Slide 5: Ordinary business
For personal use only Ordinary business 4 • Item 1 – Tabling of FY20 financial statements • Item 2 – Adoption of Remuneration Report • Item 3 – Re-election of Directors • Item 4 – Issue of securities to Directors (or their associates) under the Omnibus Incentive Plan
Slide 6: Item 1 – Tabling of FY20 financial statements
For personal use only Item 1 – Tabling of FY20 financial statements 5
Slide 7: Item 2 – Adoption of Remuneration Report
For personal use only Item 2 – Adoption of Remuneration Report 6 • To consider and, if thought fit, to pass the following as an ordinary resolution: “To adopt the Remuneration Report for the financial year ended 30 June 2020.”
Slide 8: Item 2 – Adoption of Remuneration Report
Item 2 – Adoption of Remuneration Report 7 RESOLUTION 2 Resolution by proxy Adoption of Remuneration Report For personal use only % of eligible proxies in favour 87.14% Total number votes cast 98,174,415 For 85,560,142 Against 12,571,375 Open usable 42,898 Excluded votes 40,673,147 Abstain 1,748,890
Slide 9: Board and Committee Structure
Board and Committee Structure 8 BOARD MEMBER CLASSIFICATION EQUITY OWNERSHIP COMMITTEES AUDIT, COMPLIANCE AND REMUNERATION AND For personal use only RISK MANAGEMENT NOMINATIONS Alan Watson Independent, non-executive Yes Member (Chairman) Ian Macoun Executive Yes (Managing Director) Deborah Beale Ind
Slide 10: Item 3(a) - Re-election of Mr Alan Watson
For personal use only Item 3(a) - Re-election of Mr Alan Watson 9 • To consider and, if thought fit, to pass the following as an ordinary resolution: “That Alan Watson, who retires from the office of Director by rotation and, being eligible, offers himself for re-election, is re-elected as a Directo
Slide 11: Item 3(a) - Re-election of Mr Alan Watson
Item 3(a) - Re-election of Mr Alan Watson 10 RESOLUTION 3(a) Resolution by proxy Re-election of Mr Alan Watson For personal use only % of eligible proxies in favour 99.93% Total number votes cast 139,832,005 For 139,729,934 Against 59,173 Open usable 42,898 Excluded votes 18,913 Abstain 745,534
Slide 12: Item 3(b) - Re-election of Mr Andrew Chambers
For personal use only Item 3(b) - Re-election of Mr Andrew Chambers 11 • To consider and, if thought fit, to pass the following as an ordinary resolution: “That Andrew Chambers, who retires from the office of Director by rotation and, being eligible, offers himself for re-election, is re-elected as
Slide 13: Item 3(b) - Re-election of Mr Andrew Chambers
Item 3(b) - Re-election of Mr Andrew Chambers 12 RESOLUTION 3(b) Resolution by proxy Re-election of Mr Andrew Chambers For personal use only % of eligible proxies in favour 95.97% Total number votes cast 134,247,304 For 128,840,264 Against 5,363,608 Open usable 43,432 Excluded votes 5,603,614 Abstai
Slide 14: Item 4(a) - Performance rights to Alan Watson
For personal use only Item 4(a) - Issue of performance rights to Alan Watson in lieu of directors’ fees 13 • To consider and, if thought fit, to pass the following as an ordinary resolution: “That, subject to the passing of resolution 3(a), for the purposes of Listing Rule 10.14 and for all other pu
Slide 15: Item 4(a) - Performance rights to Alan Watson
Item 4(a) - Issue of performance rights to Alan Watson in lieu of directors’ fees 14 RESOLUTION 4(a) Resolution by proxy Issue of performance rights to Alan Watson in lieu of directors’ fees For personal use only % of eligible proxies in favour 99.88% Total number votes cast 139,881,107 For 139,717,
Slide 16: Item 4(b) - Performance rights to Deborah Beale
For personal use only Item 4(b) - Issue of performance rights to Deborah Beale in lieu of directors’ fees 15 • To consider and, if thought fit, to pass the following as an ordinary resolution: “That, for the purposes of Listing Rule 10.14 and for all other purposes, approval is given for the grant o
Slide 17: Item 4(b) - Performance rights to Deborah Beale
Item 4(b) - Issue of performance rights to Deborah Beale in lieu of directors’ fees 16 RESOLUTION 4(b) Resolution by proxy Issue of performance rights to Deborah Beale in lieu of directors’ fees For personal use only % of eligible proxies in favour 99.89% Total number votes cast 139,900,020 For 139,
Slide 18: Item 4(c) - Performance rights to Gerard Bradley
For personal use only Item 4(c) - Issue of performance rights to Gerard Bradley in lieu of directors’ fees 17 • To consider and, if thought fit, to pass the following as an ordinary resolution: “That, for the purposes of Listing Rule 10.14 and for all other purposes, approval is given for the grant
Slide 19: Item 4(c) - Performance rights to Gerard Bradley
Item 4(c) - Issue of performance rights to Gerard Bradley in lieu of directors’ fees 18 RESOLUTION 4(c) Resolution by proxy Issue of performance rights to Gerard Bradley in lieu of directors’ fees For personal use only % of eligible proxies in favour 99.88% Total number votes cast 139,834,675 For 13
Slide 20: Ian Macoun, Managing Director
For personal use only Ian Macoun MANAGING DIRECTOR
Slide 21: Managing Director's address
For personal use only Managing Director’s address • FY20 Themes • Update – Q1 FY21 • FY20 Financial Results • Increasing resilience - diversity of: • Asset classes and investment strategies of Affiliates • Client type and domicile • Performance fee potential • Resuming growth, able to respond to pos
Slide 22: FY20 Themes
For personal use only 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
Slide 23: Update – First Quarter of 2021 Financial Year
For personal use only Update – First Quarter of 2021 Financial Year 22 • Aggregate Affiliates’ FUM of $61.7 billion at 30 September 2020 (at 100%) • Up $3.0 billion or 5% from $58.7 billion at 30 June 2020 • Aggregate Retail FUM (at 100%) at 30 September 2020 $13.8 billion; up 5% from $13.1 billion
Slide 24: FY20 Business Highlights – FUM and Flows
FY20 Business Highlights – FUM and Flows 23 • 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 For personal use only • Down $2.9 billion or 5% from $61.6 billion at 31 December 2019 • Aggregate Retail FUM (at 100%) at 3
Slide 25: FY20 Financial Highlights
FY20 Financial Highlights 24 • Net profit after tax (NPAT) attributable to shareholders of $32.2 million, up 5.6%1 from $30.5 million in FY19 For personal use only • Basic earnings per share (EPS) attributable to shareholders of 18.8 cents, up 2.7% from 18.3 cents in FY19 • Diluted earnings per shar
Slide 26: Building a resilient, diversified business
For personal use only Building a resilient, diversified business 25 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 27: Diversity of our Platform
Diversity of our Platform 26 C O N T I N U ING T O I N VES T I N A DI VER S I F IED PL AT F O R M T O S T R EN G T HEN F U T U R E G R O WT H Executives of both Pinnacle and Pinnacle For personal use only • Affiliates have significant equity interests • Equity ownership enhances alignment with share
Slide 28: Diversity by Affiliate
Diversity by Affiliate 27 30 June 2016 30 June 2020 For personal use only 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 Antipode
Slide 29: Diversity by Asset Class
For personal use only Diversity by Asset Class 28 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 Mark
Slide 30: Diversity by Client Type
For personal use only Diversity by Client Type 29 Institutional – Domestic International Retail – Intermediated Retail – Direct
Slide 31: Diversity by Client Type
Diversity by Client Type 30 Total FUM at 30 June 2016 (%) Total FUM at 30 June 2020 (%) Industry Super Fund Industry Super Fund 13 16 Public Pension Fund 18 Public Pension Fund For personal use only 1 24 3 Corporate Pension Fund Corporate Pension Fund 4 Financial Institution Financial Institution 1
Slide 32: Growth in Retail FUM
Growth in Retail FUM 31 Retail FUM evolution For personal use only 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 generat
Slide 33: Growth in Performance Fee FUM
Growth in Performance Fee FUM 32 Affiliates' FUM (at 100%) subject to performance fees For personal use only Total FUM 30 June 16: $19.8bn Total FUM 30 June 20: $58.7bn Subject to performance fees: $3.3bn Subject to performance fees: $18.9bn 17% Perf fees 32% Perf fees 83% No perf fees 68% No perf f
Slide 34: FY20 Funds Under Management
FY20 Funds Under Management 33 Gross FUM growth ($bn)1 • FUM of $58.7bn as at 30 June 2020 For personal use only • FUM has grown at a CAGR of 22.2% p.a. over the last ten years (20.0% excluding $6.8bn 70.0 ‘acquired’ in July 2018 and 3.0 billion ‘acquired’ 58.7 in December 2019) 60.0 • Increase in F
Slide 35: FY20 Funds Under Management
FY20 Funds Under Management 34 Pinna cl e H yp erion Pl a to Sol a ris RCL Pa l isa d e Antip od es Sp heria Tw o Trees Firetra il Metrics Om eg a Long w a ve Rip a ria n Cool a b a h Rem iniscent Aik ya (tota l ) For personal use only ($m ) ($m ) ($m ) ($m ) ($m ) ($m ) ($m ) ($m ) ($m ) ($m ) ($m
Slide 36: Continuing strong investment performance of Affiliates
35 Continuing strong investment performance of Affiliates Incep tion Incep tion 5Y (p .a .) 10Y (p .a .) (p .a .) d a te Pi n n acl e In vestm en t Man ag em en t 90% of Pinnacle Affiliated H yp erio n Asset M an agem en t - Gro ss Perfo rm an ce Hyp erio n Au stralian Gro w th Co m p an ies Fu n d
Slide 37: Affiliates' investment performance – September 2020
36 Affiliates’ investment performance – 30 September 2020 Incep tion Incep tion 1Y 3Y (p .a .) 5Y (p .a .) 10Y (p .a .) (p .a .) d a te Pi n n acl e In vestm en t Man ag em en t H yp erio n Asset M an agem en t - Gro ss Perfo rm an ce Hyp erio n Au stralian Gro w th Co m p an ies Fu n d 21.96% 18.24
Slide 38: Affiliates' investment performance – September 2020
37 Affiliates’ investment performance – 30 September 2020 Incep tion Incep tion 1Y 3Y (p .a .) 5Y (p .a .) 10Y (p .a .) (p .a .) d a te Pi n n acl e In vestm en t Man ag em en t Tw o Trees In vestm en t M an agem en t - Gro ss Perfo rm an ce Glo b al Macro Fu n d -11.91% -4.86% 11/1/2017 For persona
Slide 39: Pinnacle Affiliates continue to win major industry awards
38 Pinnacle Affiliates continue to win major industry awards 2020 Zenith Fund Awards (to be announced on 30 October 2020): 2018 Professional Planner | Zenith Fund Awards: • Pinnacle – Distributor of the Year Finalist (fifth consecutive year) • Pinnacle – Distributor of the Year Winner (third consecu
Slide 40: Pinnacle Charitable Foundation
39 For personal use only 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 foc
Slide 41: Pinnacle Charitable Foundation
40 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 For personal use only pressur
Slide 42: Institutional and International Distribution
For personal use only INSTITUTIONAL AND INTERNATIONAL DISTRIBUTION Andrew Chambers, Executive Director
Slide 43: FY21 - The Story So Far…
42 FY21 - The Story So Far… 1. Steady Origination and Crystallization of Sales Pipeline • Conversion of deferred allocations For personal use only • Resumption of suspended search processes • Origination of new search activity • Meaningful contribution from international channels 2. Active Portfolio
Slide 44: Australian Themes
43 Australian Themes • Sustained Pursuit of Scale Benefits • Consolidation occurring across all major investor segments For personal use only • Profit-To-Member Funds • Wealth Management Funds • Public Sector Funds • Regulatory pressure to demonstrate scale benefits • ‘Do more for less’ – deliver la
Slide 45: Global Themes
44 Global Themes • Lower for Longer – But How Much Longer? • Bidding up long duration assets and compressing yields For personal use only • Encouraging greater risk-taking to meet liabilities • Driving asset class and style performance • Growth outperforming • Value underperforming • Private Markets
Slide 46: Global Themes - Fiduciary Consolidation
45 Global Themes - Fiduciary Consolidation • Asset Management • 80% of M&A occurring in North America and Europe For personal use only • Highlights the inorganic growth in these markets • Middle sized managers struggling to distinguish themselves from the large-scale players and boutique sharp-shoot
Slide 47: Conclusion
46 Conclusion • Pinnacle competitively positioned to partner with talented teams disrupted by global asset management M&A For personal use only • Pinnacle well placed to partner with winners in the consolidation race • ‘Supported’ start-ups can offer the capacity, fees, viability and alpha potential
Slide 48: Retail Distribution
For personal use only RETAIL DISTRIBUTION Ramsin Jajoo, Head of Retail
Slide 49: Retail Market Trends
Retail Market Trends 48 • Secular headwinds impacting intermediated advice channel have accelerated under COVID-19 conditions: Adviser exodus continues (15% decline in FY20)1 For personal use only • • Regulatory reforms and increased compliance affecting productivity and profitability • Rise in corp
Slide 50: What Factors Drive Investment Flows? – A.I. and Machine Learning
‘What Factors Drive Investment Flows?’ – A.I. and Machine Learning 49 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 51: What Factors Drive Investment Flows? – Factor Statistics
‘What Factors Drive Investment Flows?’ – A.I. and Machine Learning 50 Factor Statistics – Persistence For personal use only The factor premia correlations are persistent through time. The fees and outflows are negative while five-star, positive growth rates and index funds are consistently positive
Slide 52: What Factors Drive Investment Flows? – A.I. and Machine Learning
For personal use only "What Factors Drive Investment Flows?“ – A.I. and Machine Learning 51 Source: Morningstar Direct. Data as of October 2020
Slide 53: Additional Information
For personal use only ADDITIONAL INFORMATION
Slide 54: FY20 in Review
For personal use only FY20 IN REVIEW
Slide 55: Our Response to the COVID–19 crisis
Our Response to the COVID–19 crisis 54 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 For personal use only growth depends on the strength
Slide 56: FY20 Financial Results
FY20 Financial Results 55 FY2020 ($M) FY2019 ($M) YoY Cha ng e PINNACLE Revenue 1 22.4 21.1 6.2% For personal use only Expenses 2, (28.0) (23.7) 18.1% 3 Sha re of Pinna cle Affilia tes net profit a fter ta x 4 38.0 33.1 14.8% Net profit before ta x (NPBT) from continuing opera tions 32.4 30.5 6.2% T
Slide 57: FY20 Business Highlights – Affiliates
For personal use only FY20 Business Highlights – Affiliates 56 • 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 milesto
Slide 58: Understanding FY20 financial outcome
Understanding FY20 financial outcome 57 • Total Affiliate revenues1 were $291.1m during FY20, including $26.7m (9.1%) in performance fees; in FY19, For personal use only total Affiliate revenues were $236.8m, which included $15.3m (6.5%) in performance fees • This represents 22.9% growth in total Af
Slide 59: Significant components of FY20 results
Significant components of FY20 results 58 • 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 For personal use only • institutional allocations; lower retail net inflows • Staf
Slide 60: PNI Balance Sheet
PNI Balance Sheet 59 30 Jun 2020 30 Jun 2019 YoY Cha ng e • Cash and Principal Investments of $50.1m ($M) ($M) • Includes $32.4m invested in strategies managed by Pinnacle Affiliates For personal use only CURRENT ASSETS Ca sh a nd ca sh eq uiva l ents 16.1 26.7 -39.7% • Excludes over $10m of cash ap
Slide 61: Corporate Sustainability
For personal use only CORPORATE SUSTAINABILITY
Slide 62: Pinnacle as a Responsible Firm
61 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 • Carbon Emissions • Pinnacle achieve
Slide 63: 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 For personal use only Program for employees and family members • Employees are encouraged to always act in Pinnacle’s best interests and ma
Slide 64: People, Diversity and Community
For personal use only People, Diversity and Community 63 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
Slide 65: Affiliate commitment to ESG
Affiliate commitment to ESG 64 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 65 Principles for Responsible Investment (PRI) PRI signatory since 2010 For personal use only • • signatory since 2011 • UN Global Compact signatory (2019) • Member of the Climate Action 100+ investor • Member of GRESB since 2017 group •
Slide 67: New Affiliates During the Year
For personal use only NEW AFFILIATES DURING THE YEAR
Slide 68: CCI acquisition
67 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 For personal use only • Funded by a facility from the CBA • Established
Slide 69: CCI's Edge
68 CCI’s Edge 1. Large team focussed exclusively on Australian investment-grade fixed-income • 6 portfolio managers, 11 analysts, and 26 staff in total CCI’s staff own 75% of business – remaining 25% held by Pinnacle For personal use only • • Chaired by Melda Donnelly (ex-CEO QIC, VFMC Deputy Chair)
Slide 70: Reminiscent Capital: Asia Macro
69 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) For personal use only • Reminiscent aims to deliver attractive, uncorrelated absolute returns through a concentrat
Slide 71: Aikya: Global Emerging Market Equities
70 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 For personal use only • 7 investment professionals with 80+ years collective experience investing in Emerging Market Equities, led by: •
Slide 72: Affiliate Summaries
For personal use only AFFILIATE SUMMARIES
Slide 73: 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 For personal use only • Aikya Global Emerging Markets Fund (AUT) was launched in March 2020 • UCITS fun
Slide 74: 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 For personal use only June 2020, the fund has outperformed its benchmark by
Slide 75: 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 For personal use only approximately $2.9 billion across Palisa
Slide 76: 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 For personal use only management, predominantly in Australia but also covering the United States an
Slide 77: Q&A
For personal use only Q&A
Pinnacle Investment Management Group — Shareholder Meeting (October 2020) on 6ix