Pinnacle Investment Management Group Limited · ASX:PNI
Pinnacle Investment Management — Shareholder Meeting (October 2019)
79 slides from Pinnacle Investment Management's shareholder meeting presentation, Oct 31, 2019
Slide 1: 2019 Annual General Meeting
For personal use only PINNACLE INVESTMENT MANAGEMENT GROUP LIMITED (PNI) 31 OCTOBER 2019 2019 Annual General Meeting
Slide 2: Disclaimer
Disclaimer • This presentation has been prepared by Pinnacle Investment Management Group Limited (PNI). The information in this presentation is current as at 31 October 2019. For personal use only • This presentation is not an offer or invitation for subscription or purchase of securities or a recom
Slide 3: Agenda
Agenda For personal use only • Chairman’s address – Alan Watson • Ordinary business • Managing Director’s Address – Ian Macoun • Secular Trends Facing Our Industry – Impact on Distribution – Ramsin Jajoo • Q&A • Results of meeting
Slide 4: Chairman's Address
For personal use only CHAIRMAN’S ADDRESS Alan Watson, Chairman
Slide 5: Chairman's address
Chairman’s address For personal use only • Building a resilient, diversified business • Diversity of asset classes under management • Diversity of sources of Funds Under Management • Medium term track record • Review of progress since becoming a ‘pure play’ Funds Management Group in 2016 • Future gr
Slide 6: Building a resilient, diversified business
Building a resilient, diversified business For personal use only Resilience has been enhanced by: 1. Diversity of asset classes 2. Diversity of sources of FUM 3. Percentage of FUM exposed to performance fees 5
Slide 7: Diversity of Asset Classes under management
Diversity of Asset Classes under management CONTINUING TO INVEST IN A DIVERSIFIED PLATFORM TO STRENGTHEN FUTURE GROWTH • Executives of both Pinnacle and Pinnacle Affiliates have For personal use only significant equity interests • Equity ownership enhances alignment with shareholders Seed FUM and wo
Slide 8: Adding quality affiliates
Adding quality affiliates For personal use only A specialist debt fund manager, offering investors actively managed access to attractive risk-adjusted returns in private debt markets Smart beta, factor investing and client solutions (including ESG) capabilities High conviction investment manager of
Slide 9: Diversity of Sources of Funds Under Management
Diversity of Sources of Funds Under Management For personal use only 1. Institutional – Domestic 2. Institutional – Offshore 3. Retail – Intermediated 4. Retail - Direct 8
Slide 10: Australian Institutional Funds Market – Challenges and Mitigants
Australian Institutional Funds Market – Challenges and Mitigants For personal use only • Trends – Amalgamation, ‘Insourcing’ and some increase in ‘passive’ (index) funds • Pinnacle response: • Client base diversity (78 institutional separate accounts, 95 institutional separate accounts; the largest
Slide 11: An Unusual Year in the Retail Market
An Unusual Year in the Retail Market For personal use only • Royal Commission • Federal election • Geo-political concerns • US-China Trade Conflict • Brexit • Hong Kong • Consequence: Too early to predict medium term effects, but lower inflows short term • Pinnacle response: We have a diversified sk
Slide 12: Growth in Retail FUM
Growth in Retail FUM For personal use only Retail FUM evolution Total FUM 30 Jun 13: $10.8bn Total FUM 30 Jun 19: $54.3bn Retail: $0.9bn Retail: $11.6bn Retail Retail 8% 21% $10.8bn $54.3bn Institutional 92% Institutional 79% • Pinnacle has invested significantly in retail distribution and has gener
Slide 13: Growth in Performance Fee FUM
Growth in Performance Fee FUM For personal use only FUM subject to performance fees Total FUM 30 Jun 16: $19.8bn Total FUM 30 Jun 19: $54.3bn Subject to performance fees: $3.3bn Subject to performance fees: $16.3bn Perf fees Perf fees 17% 30% Subject to Subject to Performance Fees: Performance Fees:
Slide 14: Progress since 2016
Progress since 2016 For personal use only Pinnacle is a multi affiliate investment management firm with a mission to establish, grow and support a diverse stable of world-class fund managers Goals and strategy stated in 2016 Progress Continue to provide high quality distribution, 7 Affiliates, now 1
Slide 15: 2019 Financial Highlights
2019 Financial Highlights For personal use only • 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 33% from 14.3 cents in the prior year • Share of NPAT from Pi
Slide 16: Fully franked dividend yield AND earnings growth
Fully franked dividend yield AND earnings growth For personal use only • 15.4 cents per share Fully Franked dividends FY19 • Up 67% pa from 3.3 cents in FY16 • Ample franking credits ($28.8m at 30 June 2019) • Shareholders appreciate dividend income (in addition to earnings growth) • Earnings have g
Slide 17: Future Growth – Measured
Future Growth – Measured 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 (dev
Slide 18: Future Growth – Ready for Opportunities
Future Growth – Ready for Opportunities For personal use only • $51.2m of cash and principal investments at 30 June 2019 • 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 Tree
Slide 19: Ordinary business
Ordinary business For personal use only • Item 1 – Tabling of FY19 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 18
Slide 20: Item 1 – Tabling of FY19 financial statements
Item 1 – Tabling of FY19 financial statements For personal use only • Tabling of FY19 financial statements 19
Slide 21: Item 2 – Adoption of Remuneration Report
Item 2 – Adoption of Remuneration Report For personal use only • 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 2019.” 20
Slide 22: Item 2 – Adoption of Remuneration Report
Item 2 – Adoption of Remuneration Report For personal use only RESOLUTION 2 Resolution by proxy Adoption of Remuneration Report % of eligible proxies in favour 93.63% Total number votes cast 45,094,186 For 42,219,963 Against 2,754,739 Open usable 119,484 Excluded votes 27,426,202 Abstain 779,739 21
Slide 23: Board and Committee Structure
Board and Committee Structure For personal use only BOARD MEMBER CLASSIFICATION EQUITY OWNERSHIP COMMITTEES AUDIT, COMPLIANCE REMUNERATION AND AND RISK MANAGEMENT NOMINATIONS Alan Watson Independent, non-executive Yes Member (Chairman) Ian Macoun Executive Yes (Managing Director) Deborah Beale Indep
Slide 24: Item 3(a) - Re-election of Ms Deborah Beale
Item 3(a) - Re-election of Ms Deborah Beale For personal use only • To consider and, if thought fit, to pass the following as an ordinary resolution: “That Deborah Beale, who retires from the office of Director and being eligible, offers herself for re-election, is re-elected as a Director.” 23
Slide 25: Item 3(a) - Re-election of Ms Deborah Beale
Item 3(a) - Re-election of Ms Deborah Beale For personal use only RESOLUTION 3 (A) Resolution by proxy Re-election of Deborah Beale % of eligible proxies in favour 92.63% Total number votes cast 73,103,398 For 67,718,744 Against 1,343,056 Open usable 4,041,598 Excluded votes 0 Abstain 196,729 24
Slide 26: Item 3(b) - Re-election of Mr Adrian Whittingham
Item 3(b) - Re-election of Mr Adrian Whittingham For personal use only • To consider and, if thought fit, to pass the following as an ordinary resolution: “That Adrian Whittingham, who retires from the office of Director by rotation and, being eligible, offers himself for re-election, is re-elected
Slide 27: Item 3(b) - Re-election of Mr Adrian Whittingham
Item 3(b) - Re-election of Mr Adrian Whittingham For personal use only RESOLUTION 3 (b) Resolution by proxy Re-election of Adrian Whittingham % of eligible proxies in favour 92.92% Total number votes cast 71,972,898 For 66,872,555 Against 1,058,745 Open usable 4,041,598 Excluded votes 0 Abstain 1,32
Slide 28: Item 4(a) - Issue of securities under Omnibus Incentive Plan - Alan Watson
Item 4(a) - Issue of securities under the Omnibus Incentive Plan - Alan Watson For personal use only • 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 of perfor
Slide 29: Item 4(a) - Issue of securities under Omnibus Incentive Plan - Alan Watson
Item 4(a) - Issue of securities under the Omnibus Incentive Plan - Alan Watson For personal use only RESOLUTION 4 (a) Resolution by proxy Issue of securities under the Omnibus Incentive Plan – Alan Watson % of eligible proxies in favour 99.64% Total number votes cast 61,793,100 For 61,569,770 Agains
Slide 30: Item 4(b) - Issue of securities under Omnibus Incentive Plan - Deborah Beale
Item 4(b) - Issue of securities under the Omnibus Incentive Plan - Deborah Beale For personal use only • 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 purpos
Slide 31: Item 4(b) - Issue of securities under Omnibus Incentive Plan - Deborah Beale
Item 4(b) - Issue of securities under the Omnibus Incentive Plan - Deborah Beale For personal use only RESOLUTION 4 (b) Issue of securities under the Omnibus Incentive Plan – Deborah Resolution by proxy Beale % of eligible proxies in favour 99.64% Total number votes cast 61,791,100 For 61,567,780 Ag
Slide 32: Item 4(c) – Issue of securities under Omnibus Incentive Plan – Lorraine Berends
Item 4(c) – Issue of securities under the Omnibus Incentive Plan – Lorraine Berends For personal use only • 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 of p
Slide 33: Item 4(c) - Issue of securities under Omnibus Incentive Plan - Lorraine Berends
Item 4(c) - Issue of securities under the Omnibus Incentive Plan - Lorraine Berends For personal use only RESOLUTION 4 (c) Issue of securities under the Omnibus Incentive Plan – Lorraine Resolution by proxy Berends % of eligible proxies in favour 99.64% Total number votes cast 61,786,100 For 61,562,
Slide 34: Item 4(d) - Issue of securities under Omnibus Incentive Plan - Gerard Bradley
Item 4(d) - Issue of securities under the Omnibus Incentive Plan - Gerard Bradley For personal use only • 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 of per
Slide 35: Item 4(d) - Issue of securities under Omnibus Incentive Plan - Gerard Bradley
Item 4(d) - Issue of securities under the Omnibus Incentive Plan - Gerard Bradley For personal use only RESOLUTION 4 (d) Issue of securities under the Omnibus Incentive Plan – Gerard Resolution by proxy Bradley % of eligible proxies in favour 99.63% Total number votes cast 61,791,100 For 61,562,270
Slide 36: Managing Director's Address
For personal use only MANAGING DIRECTOR’S ADDRESS Ian Macoun, Managing Director
Slide 37: Managing Director's Address
Managing Director’s Address For personal use only • Group financial summary • Enhancing the platform – strength, stability and reputation • Diversified platform • Enhanced opportunities for growth • Pinnacle affiliates continue to win major industry awards • Continuing strong investment performance
Slide 38: Group financial summary
Group financial summary For personal use only • Group NPAT from continuing operations of $30.5m, compared to $23.1m in FY18, an increase of 32.0% FY2019 ($M) FY2018 ($M) YoY change • EPS from continuing operations of 18.3 cents per share, PINNACLE compared to FY18 EPS of 14.3 cents per share Revenue
Slide 39: Significant components of FY 2019 results
Significant components of FY 2019 results For personal use only • Continuing growth in ‘Pinnacle Parent’ revenues and costs • Significant ‘P&L’ investment in support of Horizon 2 initiatives (including Offshore distribution, ETF, Direct to retail consumers, new Affiliates) • Net gains on principal i
Slide 40: PNI balance sheet
PNI balance sheet For personal use only FY2019 ($M) FY2018 ($M) YoY change CURRENT ASSETS 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% • Cash and Principal Investments of $51.2 million Other current assets 18.3 12.6 • Incl
Slide 41: Enhancing the platform - strength, stability and reputation
Enhancing the platform - strength, stability and reputation For personal use only • Stable & diversified platform • Continuing investment excellence • Widespread industry recognition and support • ‘Article of faith’ reputation • Further investment in distribution capability • Direct to retail • Inte
Slide 42: Pinnacle Affiliates continue to win major industry awards
Pinnacle Affiliates continue to win major industry awards For personal use only 2019 Zenith Fund Awards: 2018 Lonsec/Money Management Fund Manager of the Year: • Pinnacle – Distributor of the Year (fourth consecutive year) • Resolution Capital – Global REIT Category Finalist • Resolution Capital – G
Slide 43: Continuing strong investment performance of Affiliates
Continuing strong investment performance of Affiliates For personal use only 5Y 10Y INCEPTION INCEPTION DATE PINNACLE INVESTMENT MANAGEMENT Hyperion Asset Management – Gross Performance Hyperion Australian Growth Companies Fund 11.61 % 10.65 % 12.57 % 1 OCT 2002 Outperformance 2.06 % 2.61 % 3.06 % H
Slide 44: Affiliates' investment performance - September 2019
Affiliates’ investment performance - 30 September 2019 1Y 3Y 5Y 10Y INCEPTION INCEPTION DATE Hyperion Asset Management – Gross Performance For personal use only Hyperion Australian Growth Companies Fund 8.87 % 9.50% 11.61% 10.65% 12.57% 1 OCT 2002 Outperformance -370 % -2.35% 2.06% 2.61% 3.06% Hyper
Slide 45: Affiliates' investment performance - September 2019
Affiliates’ investment performance - 30 September 2019 1Y 3Y 5Y 10Y INCEPTION INCEPTION DATE For personal use only Spheria Asset Management – Gross Performance Microcap Fund 0.22% 9.55% 12.68% 16 MAY 2018 Outperformance -3.73% 0.75% 2.27% Smaller Companies Fund 2.54% 10.37% 11.22% 11 JUL 2016 Outper
Slide 46: FY19 funds under management
FY19 funds under management For personal use only Gross FUM growth ($bn)1 Gross FUM growth ($bn) • FUM of $54.3bn as at 30 June 2019 (increased to $56.9bn as at 30 September 2019) • FUM has grown at a CAGR of 34.6% p.a. over the last ten years (31.0% excluding $6.8bn ‘acquired’ in July 2018) • Incre
Slide 47: Pinnacle Affiliates financial highlights
Pinnacle Affiliates financial highlights For personal use only Strong FUM and revenue growth in Pinnacle Aggregate affiliate revenues ($m)1 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
Slide 48: Pinnacle Charitable Foundation
Pinnacle Charitable Foundation For personal use only • 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 to drive positive, long t
Slide 49: Recap on Horizon Criteria – What could we acquire?
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 Status •
Slide 50: Secular Trends Facing Our Industry
For personal use only SECULAR TRENDS FACING OUR INDUSTRY Ramsin Jajoo, Head of Retail Distribution
Slide 51: Australian market – who moved my super?
Australian market – who moved my super? For personal use only Investment Management • $3.6 trillion • #7 largest in the world • #1 Asia Pacific Superannuation • $2.8 trillion • #4 largest in the world Source: ABS & APRA as at 31st March 2019 50
Slide 52: Australian market segmentation
Australian market segmentation For personal use only Self directed 28% • $749 billion • 600,206 SMSF’s Engaged (Intermediated) 44% • $1.2 trillion • 187 superfunds Disengaged (Institutional) 28% • $747 billion • 187 superfunds Source: ABS & APRA as at 31st March 2019, Pinnacle Estimates 51
Slide 53: Consolidation of the Australian market
Consolidation of the Australian market For personal use only Corporate Superfunds Source: ABS & APRA as at 31st March 2019 52
Slide 54: Institutional – consolidation and convergence
Institutional – consolidation and convergence For personal use only Retail Superfunds Industry Superfunds Public Sector Source: ABS & APRA as at 31st March 2019 53
Slide 55: Fragmentation of the Australian market
Fragmentation of the Australian market For personal use only Self Managed Superfunds Source: ABS & APRA as at 31st March 2019 54
Slide 56: Fragmentation of the Australian market
Fragmentation of the Australian market For personal use only $250 billion • Accountants Self directed $250 billion 28% • $749 billion • Advisers • 600,206 SMSF’s $249 billion • Individual (DIY) Source: ABS & APRA as at 31st March 2019, Pinnacle Estimates 55
Slide 57: Fragmentation of the Australian market
Fragmentation of the Australian market For personal use only $750 billion • Advisers Engaged (Intermediated) 44% • $1.2 trillion • 187 superfunds $450 billion • Individual (DIY) Source: ABS & APRA as at 31st March 2019, Pinnacle Estimates 56
Slide 58: Fragmentation of the Australian market
Fragmentation of the Australian market For personal use only $250 billion $700 billion $1 trillion $747 billion Accountants Direct Investors Advisers Institutional Source: ABS & APRA as at 31st March 2019, Pinnacle Estimates 57
Slide 59: Megatrends
Megatrends For personal use only Digitalization Regulation Personalization 58
Slide 60: Megatrends
Megatrends For personal use only Digitalization Regulation Personalization 59
Slide 61: Artificial intelligence
Artificial intelligence For personal use only Data + Algorithm + Action = A.I. Memory Compute Storage 60
Slide 62: Then and NOW…
Then and NOW… For personal use only 1956 2013 5MB 4TB Capacity x 1 million times Source: TNW and Amazon 61
Slide 63: Digital eco-system: trends and technologies impacting investors
Digital eco-system: trends and technologies impacting investors For personal use only Trends Advanced Technologies • Active vs Passive • Multi-goal assessment • Artificial intelligence • Engaging millennials • Smart beta • Cognitive computing • Going global, going mobile • Business intelligence • In
Slide 64: Digital eco-system: So what?
Digital eco-system: So what? For personal use only How can technology help me do my job better? Which technology allows me today to do what I could never do before? 63
Slide 65: Megatrends
Megatrends For personal use only Digitalization Regulation Personalization 64
Slide 66: Global regulatory collaboration
Global regulatory collaboration For personal use only Switzerland (4) Canada (4) UK (8) Denmark (2) Poland (2) Lithuania (1) Japan (4) USA (1) South Korea (2) China (2) Hong Kong (7) Vietnam (1) India (1) Brunei (1) Singapore (16) France (2) Latin America (1) Malaysia (3) Lebanon (1) Kenya (2) Indon
Slide 67: Megatrends – Regulation
Megatrends For personal use only Regulation Fiduciary Transparency Differentiation 66
Slide 68: Megatrends
Megatrends For personal use only Digitalization Regulation Personalization 67
Slide 69: Megatrends – Personalization
Megatrends For personal use only Personalization Passive Goals-based Values aligned Value / low cost 68
Slide 70: Scrutiny of value – FREE?
Scrutiny of value – FREE? For personal use only 69
Slide 71: “Investor first” innovation
“Investor first” innovation For personal use only Solaris Core Australian Equity Fund (Performance Alignment) – Zero Management Fee NEW: Pinnacle aShares Dynamic Cash – Zero Fee (ASX Ticker: Z3RO) 70
Slide 72: Next gen – Asset Manager IP manufacturers
Next gen – Asset Manager IP manufacturers For personal use only App Store Model Marketplace Advisor / Investor Subscriptions* *STP implementation, execution and rebalancing (Morningstar Illustrative Concepts in the USA). 71
Slide 73: The rise of the machines
The rise of the machines For personal use only Fact sheets* Stock reports* *Illustrative purposes (sample reports sourced from Plato Investment Management and Morningstar research). 72
Slide 74: Instant investment plan based on your conversation
Instant investment plan based on your conversation For personal use only Hi Mary, your personalized investment plan based on your conversation today is ready. Shall we proceed? Yes Alexa Your personalized plan is ready for execution Source: GCN & Morningstar 73
Slide 75: Future proofing your business
Future proofing your business For personal use only “Loyalty today is nothing more than the absence of something better” Howard Tullman, Former CEO of 1871* * 74
Slide 76: Tomorrow's solutions
Tomorrow’s solutions For personal use only “FRICTION FREE” DATA + TRANSPARENCY + EFFICIENCY * *1871 is the Number 1 ranked University-Affiliated Tech Incubator in the World 75
Slide 77: Helping investors and advisors reduce friction
Helping investors and advisors reduce friction For personal use only 0009994 ACME Inc. http://pinnacleinvestment.com/ * 76
Slide 78: Conclusion
Conclusion For personal use only Technology Innovation Enabling better lives Accelerating change Survive and thrive Investment excellence * 77
Slide 79: Q&A
Q&A AjuoO esn feuosied JOS
Pinnacle Investment Management Group — Shareholder Meeting (October 2019) on 6ix