Pinnacle performance fees rebound in H2

Pinnacle’s performance fees strongly rebounded in H2 after a disappointing H1 as the firm released its full-year results.

In its full-year results for the year to 30 June, Pinnacle Investment Management reported net profit after tax of $76.5 million.

Net inflows over the year were $1.5 billion, including $0.6 billion from retail investors. The firm noted robust inflows in H2 had offset outflows in H1. In the second half of the year, it reported net inflows of $3.1 billion and $5.6 billion from market movements and investment performance.

Outflows from public real estate, in particular, reflected asset allocation rebalancing in the absence of private real estate liquidity. Other challenges to flows included a style shift away from high-growth stocks, underperformance of REIT markets and significant volatility in equity markets.

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Looking at funds under management (FUM), Pinnacle’s affiliates had $91.9 billion in FUM compared to $83.7 billion in FY22. Some $6.7 billion of the increase was due to market movements and investment performance while there were inflows of $1.5 billion.  

The majority of this FUM ($58.7 billion) sat in the Australian institutional space while $22.7 billion was from Australian retail investors, and $10.5 billion came from international investors from 43 countries.

Pinnacle noted it was seeing “growing success offshore” with around $5 billion in net international flows over the past three years, and is running three offshore-domiciled affiliates in Aikya in London, Langdon Equity Partners in Canada and Palisades Americas in New York.

Pinnacle managing director, Ian Macoun, said: “Across the financial year, aggregate retail flows throughout the industry have been insipid and institutional investors at home and overseas have remained defensively positioned.

“These significantly lower-than-normal flows have impacted FUM and flow-based distribution fees in Pinnacle parent. The lower-than-initially-anticipated FUM has impacted management fee revenues in affiliates, relative to our initial expectations.”

Earlier this year, the firm reported the net share of performance fees from its affiliates over the six months to 31 December were disappointing at $950,000. Six of Pinnacle’s affiliates crystallised performance fees over the period of $3 million, down from $18.8 million in the previous year. However, this rebounded in the second half of the year.

In its full-year results, it said Pinnacle’s share of performance fees after tax was $14.7 million, down 11 per cent from $16.6m in the previous year, and was earned by 11 of its affiliates including Coolabah Capital, Palisade, Hyperion Asset Management, Langdon and Metrics Credit Partners.

In a shareholder letter from chair Alan Watson, he said: “Following a very modest contribution in the first half, we were pleased that performance fees were earned this financial year by 11 affiliates. 

“Still, the revenue contribution from performance fees was modest relative to longer term potential at $58.2 million in aggregate, up only slightly from $57.8 million in FY22 as, once again, none of our large performance fee FUM strategies, other than Coolabah and Palisade, contributed meaningfully. This is further evidence of the strength of our diversified platform and performance fee potential.”