Pinnacle Investment Management has reported a 151 per cent rise in net profit after tax (NPAT) in its half-year results, helped by overseas expansion and affiliate performance fees.
In its results for the six months to 31 December, the fund manager said NPAT was $75.7 million, up from $30.2 million in the prior corresponding period (pcp).
This was helped by strong performance fees from nine affiliates which contributed $36.4 million to the NPAT, compared to $12.3 million in the pcp.
Hyperion Asset Management was particularly flagged by the firm as a “standout affiliate” for its performance fees.
Funds under management (FUM) at the firm’s 18 affiliates was $155.4 billion, thanks to net inflows of $6.7 billion, “acquired” FUM of $27.9 billion and increases due to market movements, and investment performance of $10.7 billion.
This includes the acquisitions of Pacific Asset Management in the US and VSS in the UK during the half.
Wholesale and retail investors contributed $3.7 billion in the six months to bring total wholesale and retail FUM to $35.4 billion.
“At 31 December 2024, over 50 per cent of Pinnacle’s FUM was sourced from wholesale/retail and international clients, representing approximately two-thirds of base affiliate revenue. Product innovation and development has assisted in Pinnacle’s growth in wholesale/retail and international markets by providing access to new client verticals (LIT/LICs, ETFs, open-ended vehicles for private market strategies and build-out of fund structures available to international investors).”
It flagged net inflows into private market strategies represented 46 per cent ($1.4 billion) of total net inflows for the half year, reflecting the diverse nature of its affiliates with private markets FUM now standing at $27.5 billion. Pinnacle’s private markets affiliates include newly acquired VSS, Metrics Credit Partners, Palisade and Five V.
Some $1.2 billion went into fixed income and $1.1 billion went into listed equities and real assets, although the firm flagged it expected equities inflows to rise in the coming half.
“We expect strong equity flows to follow an equity rally as FOMO kicks in for investors. There should be good risk sentiment and advisers feeling good about holding equities in their portfolios so flows should increase,” said managing director Ian Macoun.
Overseas distribution
International funds under management (FUM) were $44.8 billion across 40 countries outside Australia. This was a rise of 143 per cent from $18.4 billion during the half, but some $22.2 billion of this came via acquisitions of Pacific Asset Management and VSS.
Offshore net inflows were $0.8 billion during the six months to 31 December 2024, dominated by those from the UK and Europe.
It now has five offshore affiliates: Life Cycle Investment Partners, Aikya and Pacific Asset Management in the UK; and Langdon Equity Partners and Pacific Asset Management in North America.
Speaking on a results webinar, Macoun said: “We definitely will do more in distribution overseas very soon in the UK and European wholesale and retail markets. We are doing a lot of work and working on new opportunities. It would be fair to say that we are seeing more opportunities than ever; it definitely feels like there are more people interested. We have already raised more dry powder as we can see the prospect to do more acquisitions.”
While he observed the opportunities overseas, he emphasised it is important for Pinnacle to take a controlled approach to expansion and remain within its core capabilities.
“The pace and size of opportunities is not limited by the opportunity set; it’s limited by our pace as we are doing this slowly and looking to work with high-quality firms.
“We are well aware of the risk of firms making ill-advised expansion decisions overseas, which they are ill-equipped to manage, are off their strategy or outside their core competencies.
“We are staying very closely within our core capabilities. We are confirming our target market demand before making any new ventures. The opportunity is enormous, but we are proceeding at a sensible pace. We won’t be proceeding in a haphazard or illogical way.”
Last year, it announced a deal with UK-based Life Cycle Investment Partners, which is run by former managers of Royal London Asset Management (RLAM). This has achieved $1 billion in assets since launch, with half coming from retail investors. Pinnacle said there will be a “material increase” to the distribution team around this in the UK and Europe.
