ASX CEO Session with Ian Macoun (ASX:PNI)

Pinnacle Investment Management Group Ltd (ASX:PNI) Managing Director, Ian Macoun, talks about its multi-affiliate investment management offering, FY16 results and growth prospects.

Pinnacle Investment Management Group Limited, Ticker PNI is a multi affiliate investment management company. We own substantial equity stakes in seven high performing, high quality investment management businesses, which between them, invest about $21.5 billion at the moment. Pinnacle’s job, besides having these equity stakes, is to provide distribution and backoffice services to support our affiliates. We’re a distribution powerhouse. We’re one of the largest most successful distribution groups in the country, in the institutional and retail markets.

So a lot of good things happened in FY16. Our funds under management grew 23 per cent to $19.8 billion at the 30th of June. The total revenue of our affiliates grew 29 per cent, to $92.8 million. The profits of each of our affiliates grew and overall, our earnings per share from continuing operations grew 44 per cent, to 5.2 cents a share. Dividend, we paid a special dividend of five cents per share, a final dividend of 1.9 cents a share and the interim dividend of 1.4 cents per share. These were all fully franked and we expect our dividends to remain fully franked in future.

So we have experienced strong net inflow growth, every year for the last 10 years and the past year was no exception. Our aggregate net inflows were a little in excess of $2 billion, of which $525 million was retail. So very strong growth in our funds under management, which brought significant increases in revenue profitability. So we have multiple sources of growth. We’re clearly a high growth company. The market has priced us as a very high growth company, and there’s no question that we will grow substantially in the years ahead.

We think of growth in three horizons. Horizon One is kind of the organic growth of our existing affiliates. Most of our affiliates have capacity to just continue to add funds under management, in their existing strategies. In addition to that a number of our affiliates are adding new strategies. So Hyperion Asset Management for example, is adding Hyperion Global. Hyperion is essentially at capacity in Aussie equities at about $6 billion, but they’re launching a global strategy this year. Plato Fund Manager and Solaris Investment Management are also offering new strategies. So that’s Horizon One from our existing affiliates.

Horizon Two is where we will add some new affiliates. We might add one or two brand new boutique affiliates each year, and also Horizon Two is new markets. So we’re expanding offshore and indirect to individual investors and self-managed super funds, in addition to our traditional markets, which is the institutional and the intermediated retail markets. So Horizon Two is more from existing new strategies for existing affiliates and some new affiliates.

And then Horizon Three is where we think about we could potentially acquire some existing fund managers. We might or might not do this, but that would be where there would be synergies with our existing businesses, where we think we could create value in a business like that. For example, from our skills with succession plan. So three Horizons, multiple sources of growth.

I’d be disappointed if we didn’t add $3 billion or $4 billion each year, including next year. I would hope that a year from now, three years five years from now, our investment performance track record and reputation is as good as it is at the moment. I would hope that the new strategies that we’re planning to launch have been successfully launched. I would hope that we would add one or two new affiliates each year, as we have been doing. I would also hope that we’ve added some more listed investment companies, like the successful Antipodes Global Investment Company (ASX:APL) that we launched this year. And I’d hope that our mFunds offerings grow substantially.

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