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Edited Transcript of WIG.AX earnings conference call or presentation 21-Feb-19 10:00pm GMT

Half Year 2019 Pinnacle Investment Management Group Ltd Earnings Call

Jun 25, 2019 (Thomson StreetEvents) -- Edited Transcript of Pinnacle Investment Management Group Ltd earnings conference call or presentation Thursday, February 21, 2019 at 10:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Adrian Whittingham

Pinnacle Investment Management Group Limited - Executive Director

* Alan James D. Watson

Pinnacle Investment Management Group Limited - Non-executive Independent Chairman

* Ian Macoun

Pinnacle Investment Management Group Limited - MD & Executive Director

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Conference Call Participants

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* Liam Cummins

Wilsons Advisory and Stockbroking Limited, Research Division - Research Analyst

* Nick Burmester

* Scott Murdoch

Morgans Financial Limited, Research Division - Senior Analyst

* Tim Lawson

Macquarie Research - Division Director of Australian Insurance and Diversified Financial Market Research

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by, and welcome to the Pinnacle Investment Management Group Half Year 2019 Result Investor Conference Call. (Operator Instructions) Joining us on today's conference we have: Ian Macoun, Managing Director; Alan Watson, Chairman; and Executive Director, Adrian Whittingham. I must advise you that this conference is being recorded today, Friday, the 22nd of February 2019.

I would now like to turn the conference over to your first speaker, Ian Macoun, Managing Director. Thank you. Please go ahead.

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Ian Macoun, Pinnacle Investment Management Group Limited - MD & Executive Director [2]

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Good. Thanks for that, and thank you to everyone on the call this morning. Thanks for your time this morning, and thanks for your interest in PNI. So we're announcing today our 2019 interim results, including the auditor-reviewed financial statements for the half year to 31st of December 2018.

Let's jump straight to Slide 2. The bottom half of this slide sets out information that we announced on the 23rd of January, all of which we are confirming as correct following the auditor's review of our financial statements. I'll leave it for people on the call to read those points. The brief highlights that: our net profit after tax was $10.1 million, up 25% on the PCP; basic earnings per share was $0.061, up 13% from the PCP; and diluted earnings per share, $0.057, up 14% from the PCP.

Now the top half of this slide sets out some further information that we're announcing today. And obviously, there's more detail again in the actual financial statements that we've lodged today quite a bit of detail. But just very briefly up to the top of this slide.

Our share of Affiliates' net profit after tax was $14.3 million for the half, which was up 44% from $9.9 million in the PCP. Our funds under management were at $48.7 billion at the 31st of January. We'd only previously reported the number to the end of December. So that's up $2 billion on the 31st of December number.

So obviously, markets were up substantially in January. And of course, they're up further in February to date. And it has quite a substantial impact on our funds under management and our P&L prospects. Also we've declared a fully franked interim dividend of $0.061 per share payable on the 22nd of March. That's up 33% from the $0.046 per share in the prior comparable period.

Slide 3 sets out the business highlights for the half. Most of this was announced on the 23rd of January. Just a couple of pieces of new information on this slide. Firstly, Longwave commenced managing money on the 1st of February. I think people would recall that we've been incubating Longwave, led by Dave Wanis, that they will initially be doing small caps. We call it...

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Adrian Whittingham, Pinnacle Investment Management Group Limited - Executive Director [3]

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Continental.

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Ian Macoun, Pinnacle Investment Management Group Limited - MD & Executive Director [4]

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Continental small caps. That's going very well. And Longwave started managing some Pinnacle seed money on the 1st of February. And it's going well. And there's a little extra commentary on the last paragraph on this slide about the market impact on our FUM. The market movement impact on total PNI FUM during the December quarter was about 7.5% of the average FUM during the period.

So this is kind of the pattern that we're seeing. For the ASX 300 that we use as an indicator, it was down 9.2% during the quarter and the MSCI World Index, 13%. Obviously, we have more Australian equities than anything. But we also have global equities. And something like -- so our FUM was down 7.5% on account of market movements, when the Aussie market was down 9.2% and the world market, 13%. So we moved quite strongly with the market, our FUM does but not 100%, something like, let's call it, 3/4 of the market movement. Obviously, it moves around a bit. But that's a broad indicator of the impact of the market on our FUM.

Now obviously, there was substantial negative impacts on our P&L for the half, occasioned by this drop in FUM. Firstly, there's the fact that the FUM drop reduces Affiliates' profits. Affiliates profits were up strongly anyway but not as strongly as they would have been if we haven't had that market drop. But secondly, we incurred losses on our principal investments. Both realized and unrealized capital losses are taken on our P&L -- on the P&L of Pinnacle parent strike-through even if they're unrealized. So we had about a $600,000 overall net loss on principal investments for the half year.

Thirdly, some distribution fees received in Pinnacle parent are based on Affiliate FUM, so it is somewhat lower on account of these market movements than they otherwise would be. But perhaps more importantly, poor market conditions prevented us from doing LIC and LIT IPOs during the half. And Pinnacle parent earns substantial upfront fees from such IPOs. We do earn ongoing fees from them. But it's those upfront fees that are really quite substantial in the short term have the biggest impact. Now in the PCP, we earned $928,000 from upfront LIC fees in Pinnacle parent. And that amounts was 0 in the half that we're reporting on.

The good news at this stage is that the Australian and global equities markets have repriced a substantial part of the Q2 losses during January and February so far. The ASX is up about 8% this calendar year. So we've made back all of our principal investment losses during January. So the 1 month of January, our net PI impact was greater than the losses for the half. And we've had some further gains during February.

And the other thing is that we expect to be coming to the market next week with the IPO of a new Metrics LIT. I believe that PDS will be lodged on Monday with ASIC. And so it will be out in the market. That's MOT, the Metrics Opportunity Trust. So we believe that market conditions are looking satisfactory for that to be successful. Who knows what the rest of the financial year holds for markets? You will all no doubt have your own views on this. But just for the moment, conditions are treating us better than the brutal last quarter of calendar '18.

So if we move on now to Slide 4, the next couple of slides here set out some further detail behind our financial results, especially the Pinnacle parent loss that was higher than in the PCP. The Pinnacle parent loss was $4.1 million, $3.5 million if you take back the $600,000 net loss on PI. That's during the half year period that we're reporting on. In the PCP, it was $1.8 million the loss or $1.3 million if we take out the PI losses. And in the second half of '18, Pinnacle parent broke even in the second half. So the second half is typically better than the first half as we receive some annual (inaudible) for example, there are various other factors there.

Now this loss, I do want to explain. But you will see that we're talking a lot in this presentation about Horizon 2 investments and how we're investing in ongoing growth, resourcing up for ongoing Horizon 2 growth.

And that's -- the cause of Pinnacle parent loss, we've done a lot of work, we've added a lot of people. You'll see we mentioned that during the 18 months, from the beginning of the PCP, the 31st of December, the number of people in Pinnacle parent has increased from 39 to 61. So we've done a lot of resourcing up.

That's because we are confident that these Horizon 2 investments are going to bring us very substantial growth over the medium term. We take a short-term hit, but this is all good for the medium term. So this is a major theme of this presentation. We ask you please don't get hung up on Pinnacle parent financials in isolation and come with us on this journey as we continue to invest in Horizon 2 initiatives that will each bring strong profits over the medium term.

So on this slide, we start off by emphasizing that Pinnacle remains well positioned to deliver superior business and financial performance in the medium term. And we've got 4 points -- 4 dot points there that sort of reiterate the basis for our confidence in this regard.

And then just at the bottom of this slide, we point out that during this half, we're reporting on costs that ramped up, very much as we had planned in preparation for ongoing growth. But Pinnacle parent revenues don't come through and grow as strongly. They didn't in the half come through as strongly as we originally expected because of the weak market conditions over the 4 months to the end of December. And we make the point that Pinnacle parent loss is expected to be less in the second half than in the first half.

Now just quickly continuing on with Slide 5. This continues the financial detail. Besides the Pinnacle parent numbers, you can see that there was this healthy increase of $4.4 million in our share of Affiliate profits to $14.3 million. And that produces the overall $10.1 million NPAT for the half year. Now we do emphasize, as always, that the second half profit tends to be a lot larger, a lot more than double the first half. And again, we've mentioned that Pinnacle parent's loss will be better than in the first half.

As always, you see that FUM inflows drive our share of the profits from Affiliates. I think people are very familiar with the pattern of our financials now. And what you'll see in this year -- in this half's results is sort of more of the same. Things are continuing along very much as planned and as people were expecting with Pinnacle parent. So people have said to me, "Oh, my goodness, the market was down a lot in the last quarter. What does it mean for Pinnacle?" I think you can see that in our numbers. But really nothing has fundamentally changed.

Our plans for Horizon 2, the use of the surplus capital that we have, it's been put to very good use. We're growing very strongly. We have resourced up to make sure that we don't drop the ball either for our established boutiques, which continue to grow very strongly, or for our new ones. We've resourced up to be very robust and to be able to cope with very high levels of growth. So that's what we've done. We're very happy with the way things are traveling.

You'll see in here, for example, things like 3 new executives who've come onboard. Each of those 3, we believe, are high-quality people. It's a big increase in our executive levels. But you'll see this is all about direct-to-retail Horizon 2 investments in initiatives that we've talked about for quite a while. We're well and truly getting into those now and you really will see the benefits of that over the medium term.

Slide 7 sets out the more significant components of our result. I'm starting to run out of time a little bit. So I'll just point to a couple of items of recent new information on these slides. I don't think much of this will be new to people. A couple of things I'll just call out from the rest of the press, I'll then leave people to read it.

We've had some nice ratings upgrades this month. These are very helpful to our retail sales efforts. I see Adrian smiling here. The pressure is on him now to produce all the retail sales. Lonsec upgraded Hyperion Global from investment grade to highly recommended. That is a very unusual two-step jump, which we are delighted with. Lonsec also upgraded Plato Global Income from investment grade to recommended.

And Zenith upgraded Firetrail's Absolute Return Fund from recommended to highly recommended. So that highly recommended rating now sits very nicely besides the existing highly recommended rating for Firetrail's High Conviction Fund. And this is all very helpful as we go -- as our highly regarded, high-quality retail distribution team goes forth into the market to promote our newer offerings into the retail market: Hyperion Global, Firetrail, et cetera, as well as Antipodes, Plato and the other, Solaris Long Short, Spheria and other great range of offerings that we have.

Haven't got time to go into flows and so on, maybe there will be questions on that. But suffice to say, our retail flows have held up quite nicely. I didn't go into them because they're already announced in January. But the retail net flows were $1.4 billion for the 6 months. The month of January, it was about $90 million, which is actually quite fine for January. January tends to be a poor month.

Anyway, I am going to stop rabbiting on now and go to questions. We really wanted to leave plenty of time for people's questions. So if the operator can go to questions now, please.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question comes from the line of Tim Lawson from Macquarie.

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Tim Lawson, Macquarie Research - Division Director of Australian Insurance and Diversified Financial Market Research [2]

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I was going to ask about the retail flows. You've talked about the January number. But just can you give us a bit more thoughts on the sort of ability to sustain that sort of momentum that you've had across the whole half? And then a question just on the level of investment in costs in the Pinnacle parent. You've called a few things out in regard to the second half. But any other items that we think should be sort of veering materially from sort of the run rate that we've seen in the first half?

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Ian Macoun, Pinnacle Investment Management Group Limited - MD & Executive Director [3]

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Yes. Thanks, Tim. So I'll throw to Adrian in a sec to talk about retail flows. My little comment is that obviously it's been the big question on everyone's minds about retail flows generally. With some pretty vicious drops in the market in sort of the 4 months to 31st of December, what does that mean for retail flows? I would make the point that we've got, as I mentioned, some great ratings, a whole range of really great offerings to the retail market and we've got a very strong retail distribution team that we're very proud of. It's very difficult to predict our market. But I would say we're pretty well positioned.

I would make the broad comment. People ask me about flows generally. And I throw back to the year before last. Because last year was just extraordinary. And I've been saying it's probably unrealistic to assume that the flows of last year, well over $200 million a month in retail and $7.9 billion in total. But the previous year, we had $5 billion of total flows, of which about 40%, $160 million a month, was retail. And I've always felt pretty confident on average of that over the long term. But I'll let Adrian answer the question on retail, just saying no, that no one really knows what lies ahead for the retail market.

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Adrian Whittingham, Pinnacle Investment Management Group Limited - Executive Director [4]

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Thanks for the question, Tim. Look, maybe if I just give one -- a brief view on what's happened just recently. Because it does set the scene for where I think the retail flows are going. As Ian mentioned, obviously we can't really forecast strongly where we're heading. However, I will state that we didn't expect the Royal Commission to have that much of an impact on flows from our perspective because of the distribution strategy we had in the retail market, in that it was heavily focused on independents from the larger practices. There's no doubt there will be perhaps some flowing for the industry as clients' budgets are parked forward. Probably the biggest -- the greater impacts that we've expected might be around the volatility in markets and just investors' sentiment. To this date, we haven't really seen that flow through very strongly in our flows. And even in speaking with the clients, in many cases, they've actually found that a good opportunity to go and speak to their clients about how they should alter or reconstruct their portfolio. So it is a bit of a wait and watch. We spoke of those. I guess, a key -- maybe a small, slight headwind in regards to clients.

What I will add is that, and you've seen it with the lots of [hub, net wealth, focus on firm], we continue to see a lot of rotation of portfolio out of other platforms or incumbent distributors into the newer-aged platforms. We are a net beneficiary of that. We are picking up managed account business. Not all the clients were paying the same managers whenever they move from the incumbent platforms to the newer-aged platforms. So often, we pick up new business there, Firetrail, Resolution Capital, Antipodes, et cetera, because of the ratings and because of the quality of the managers. So I think that is a bit of a tailwind for us in that regard. And overall, Ian mentioned, I mean, if you look at Horizon 2, and there is a slide in the pack, which is on Slide 27, which details the growth opportunities, particularly within our Affiliates.

We do have a number of managers who will be, I guess, you would call, coming on more major stream, such as Hyperion Global. We are seeing quite strong interest there, Plato Global Income, a little bit earlier, but now that we have the rating for approval, et cetera. The likes of Spheria opportunities as well as obviously the existing strategies, which still attract strong flows, such as Antipodes, Firetrail and Solaris Long Short. I already mentioned Resolution Capital. So I think broadly, we're pretty well positioned. We're making sure clients are absolutely front and center for our business. We are making sure we engage them regularly. Rather than just go and talk about products, we're spending a lot of time with them. So it's a long-winded answer, Tim. But I think the outlook looks okay, so it's pretty good for us.

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Ian Macoun, Pinnacle Investment Management Group Limited - MD & Executive Director [5]

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The question on cost in Pinnacle parent. So you'll see that our salary costs are up substantially in Pinnacle parent. That is a very deliberate and considered thing. I've been talking to people for a long time about how we're ramping up our resourcing in Pinnacle parent. Both distribution and all of the other support resourcing have increased. Risk and compliance has increased, our middle office, et cetera. Now the question that should be asked, is this just sort of undisciplined adding to the numbers of people? The answer is no. So Tim, people have been asking me for a long time, "Can Pinnacle really continue to grow at these extraordinary rates, taking on new Affiliates, new strategies in existing Affiliates, et cetera, without dropping the ball?" And I've said, "Absolutely, it is going to require extra resourcing. We need to do that carefully and keep our quality high." I believe we've done that. But this is all about investing for ongoing growth. So it's salaries, there are a few sort of one-off things, like our property cost was substantially higher.

We actually -- we had done a deal to take on a new small-cap affiliate that we were taking over. We have those people for a few months. The group we were taking it over from [a nick] on that deal and the small-cap affiliate didn't proceed, so we lost that bit of money. Also we've taken significant extra space for Firetrail and Longwave and so on. We wear those costs but it's all Horizon 2 until Affiliate is profitable. So Firetrail has now become profitable. And we'll start paying its rent from the 1st of January. But we wore those cost in the last half. So again, that's just cost of getting ready for new Affiliates. There's also some professional fees, which was recruitment costs. So we've done quite a lot of recruitment. We try to do it without spending much. But sometimes to get high-quality people, you need to pay recruitment costs. There's a slide in here with the brief CVs of our 3 new executives. So Chelsey and Ramsin, and Chris Meyer has been with us for over a year now, but those 3 people are all very significant executive hires. And they are all related to retail, including direct-to-retail, including ETFs and LICs and so on. So the Pinnacle parent costs are about being ready for ongoing growth in a robust way, which why we've added to risk and compliance and so on. So does that answer your question?

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Tim Lawson, Macquarie Research - Division Director of Australian Insurance and Diversified Financial Market Research [6]

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Yes.

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Operator [7]

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(Operator Instructions) Your next question comes from the line of Liam Cummins from Wilsons.

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Liam Cummins, Wilsons Advisory and Stockbroking Limited, Research Division - Research Analyst [8]

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Maybe just following on from Tim's question, can we get perhaps a feel of the mix in increase of cost between revenue and non-revenue-generating staff and then, I guess, within the non-revenue-generating staff, how scalable that is from where we are now?

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Ian Macoun, Pinnacle Investment Management Group Limited - MD & Executive Director [9]

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Yes. So Liam, I would say the vast majority of the people we take on are aimed at revenue-generating or pretty directly supporting revenue-generating. But sometimes, it will generate revenue in 3 years' time as opposed to now. So if you look at the increase in people, it's roughly half and half, distribution versus non-distribution. So distribution obviously are directly revenue-generating. In the non-distribution areas though, if you look at -- if you take our middle office, for example, which has gone from 6 to 10 people but including a lot of automation and reengineering and so on, that is all about coping with a large increase in the number of funds that we're running, its increased complexity as we do more offshore-based funds, Cayman, UCITS and so on. We have to make sure that as Antipodes moves into new areas and new Affiliates in derivatives-heavy areas and so on, we need to be ahead of the guide. But when we talk about Horizon 2, we are very serious about there is a business plan behind anything we do in Horizon 2. And that needs to look at substantial revenue within a few years.

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Alan James D. Watson, Pinnacle Investment Management Group Limited - Non-executive Independent Chairman [10]

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And Liam, it's Alan. Just reflect a little bit on the point that if we are -- when we make these investments in these people, compliance and IMS, then that increases the attraction of Pinnacle to new boutiques in the medium term. We've talked in the past about the attraction of distribution. But they also want these other services, which enable them to focus on what they're good at, which is investing.

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Adrian Whittingham, Pinnacle Investment Management Group Limited - Executive Director [11]

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And it also allows us -- having a high competency in the non-distribution areas, such as operations, compliance, et cetera. It enables the distribution people to provide a much richer experience to the client. And at the end of the day, for us, it's about clients and affiliates. So they are absolutely the backbone and critical. So we sort of both try and look at revenue and non-revenue, we look at how can we provide a greater experience for our investors.

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Ian Macoun, Pinnacle Investment Management Group Limited - MD & Executive Director [12]

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And just to add to the point that Alan made, there's no question, when people see the quality of that our distribution, it's kind of on display. But what's not so well recognized is the quality of our other support services. So the due diligence reviews that we are subjected to, I think weekly, they are so much more intense and so much more demanding than they ever were in the past. So it's a huge competitive advantage for us and a great benefit for our Affiliates having high quality there. But even if you take like risk and compliance, which we've doubled the cost of, you might say that's non-revenue-producing. But the robustness of that adds, in an environment where all spoils are going to go to the top-quality fund managers and everyone else can go and please themselves, you failed due diligence and (inaudible) -- that's what we've been doing.

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Liam Cummins, Wilsons Advisory and Stockbroking Limited, Research Division - Research Analyst [13]

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Great. And maybe sort of on the distribution side, presumably that's pretty much all retail-focused?

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Ian Macoun, Pinnacle Investment Management Group Limited - MD & Executive Director [14]

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So yes, in the half because we've resourced up in the institutional. But with the full period coming on with our offshore people, we're probably going to add another person in London.

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Adrian Whittingham, Pinnacle Investment Management Group Limited - Executive Director [15]

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Yes, it's good mix. It's marketing, it's offshore slightly, a little bit extra resourcing for retail and also been rounding up the domestic institutional team, who also do some offshore reach as well. So it is across the full spectrum. Very cognizant that we have grown quickly and we expect to continue to grow strongly. So we need to make the moves about the Affiliates and also the clients. So if we look at retail as an example, we've grown quickly to nearly $9.5 billion now. That's a broad range of advisers and also direct investors. So we want to make sure we continue to exceed that service level rather than fall back to any complacency.

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Liam Cummins, Wilsons Advisory and Stockbroking Limited, Research Division - Research Analyst [16]

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Got it. And then maybe one final one for me before I jump back in the queue. Just remiss, meaning to ask about the insto flow outlook for the second half, given sort of where we are kind of in Firetrail?

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Ian Macoun, Pinnacle Investment Management Group Limited - MD & Executive Director [17]

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Yes. So insto flows are just very difficult to predict. So the reality is that during the half -- so we have $5 billion of net inflows for the half. And over $3 billion of that was Firetrail. There was $1.1 billion, something (inaudible) that of Antipodes but not a lot other than that in this particular half. So our Affiliates, they sort of -- insto is very lumpy. And any particular Affiliate, their insto style sort of come and go a bit. We had a little bit of outflow in Hyperion, a few hundred million, which we can talk about is actually a positive for us. But looking forward, I mean, we do have pipeline. There's no question. We have institutional pipeline. When that arrives, who knows? And I really don't want people hung up on this month and next month, what the insto flows are going to be because you have a period...

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Liam Cummins, Wilsons Advisory and Stockbroking Limited, Research Division - Research Analyst [18]

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(inaudible) over time?

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Ian Macoun, Pinnacle Investment Management Group Limited - MD & Executive Director [19]

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Yes, it is. So who knows? But I'd tell you, I have guided the $7.9 billion of net inflows of last year. That was an extraordinary number. And I feel a lot more comfortable with the $5 billion in total in the previous year. But they're still very large numbers and certainly have an ongoing pipeline for insto.

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Liam Cummins, Wilsons Advisory and Stockbroking Limited, Research Division - Research Analyst [20]

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Great. Maybe ask specifically where we are in Hyperion Global as well, sort of how close is it to becoming fully launched?

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Ian Macoun, Pinnacle Investment Management Group Limited - MD & Executive Director [21]

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So as far as I'm concerned, it's fully launched in retail. But the rating upgrades will be helpful. But again, I'll let Adrian speak to it. But you know the process there. It takes time to get on to all the various slots and to get your ratings and so on. But I believe Hyperion Global is full on in retail. In insto, it's been slow-going in the Aussie insto market. My observation is none of the Aussie-based global equities managers have had much success in the Aussie insto market. It's been more offshore. And we are certainly putting in significant effort offshore for Hyperion Global as well. We've got some early Aussie insto in Hyperion Global. And I think there will be more. But it's taking time. But it will be in the retail market, Adrian, but it will be full bore

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Adrian Whittingham, Pinnacle Investment Management Group Limited - Executive Director [22]

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Yes. So we've done the job over the last 6 months, maybe a little bit longer, of getting on all the platforms. Still, there's still a few platform slots that still need to be completed. But most of the major ones are actually done. We're lacking because of the research ratings in regards to getting on approve list around PI cover, et cetera, but we are now through that. So really, if you think about the analogy, the tickets to the game, where we have tickets, so now it all boils down to execution. So we have a plan and we will be rolling that out over the next couple of years. We need to get momentum. As you know, if you look at our flows, it's very much about getting breadth, being consistent, engaging investors and getting momentum in inflows. So we have a number of strategies to achieve that. And hopefully, we can do a very good job this second half and heading into the next FY.

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Ian Macoun, Pinnacle Investment Management Group Limited - MD & Executive Director [23]

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You see we have updated performance tables at the back of 31st of January. Hyperion Global's performance has been extraordinarily good. Even during a period where some people say to me are they're growth managers, they've got lots of U.S. tech stocks and so on, which did badly during the last quarter. Hyperion, through this period, has done very well. So I get slightly annoyed that people say, "Magellan's performed so well." We'll have a look at Hyperion Global's performance numbers.

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Operator [24]

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(Operator Instructions) Your next question comes from the line of Nick Burmester from Ord Minnett.

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Nick Burmester, [25]

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Look, just a quick question more on the outlook for growth into different asset classes or markets, different strategies. I mean, you've done obviously the credit acquisitions. And I know Two Trees had a big increase in AUM, which is pretty interesting, given it's a global macro player. So yes, how are you feeling about all the non kind of long (inaudible) line of equity or long/short equity space?

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Adrian Whittingham, Pinnacle Investment Management Group Limited - Executive Director [26]

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Great question, Nick. Look, it's an area where managers domestically have traditionally struggled on average. As we all know, the market has very long equity (inaudible). So things like the Global Macro or Absolute Return do take much bigger job to do on education for clients. I feel pretty comfortable with where we see it actually. If you look at Two Trees, they did have some performance challenges that they've certainly well and truly bounced back and bounced back strongly relative to their peers. It's early days in regards to flow, but I think relative positioning versus peers is very strong. Firetrail is probably in that same bucket, to be frank, although they have highly recommended and we have -- that they have a strong interest for their Absolute Return strategy. So we continue to see that.

And Antipodes, I mean, if you look at the global strategy, it is long/short. And they're definitely getting used for global equities, but we're very clear with clients. We have a significant underway for U.S. We have a considerable short position. So should markets sell off, Antipodes is very well positioned for -- to be an anchor for global equity portfolio. So I think overall -- and then obviously, we have Metrics Credit, who will be rolling out an unlisted fund for their capabilities. So it will have listed and non-listed. So I feel pretty excited, to be honest, and the fact that we'll be able to take clients a broad range of high-quality capabilities that can fit the needs that they're probably perhaps a little bit underrepresented.

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Ian Macoun, Pinnacle Investment Management Group Limited - MD & Executive Director [27]

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So Nick, I think people are aware that it's been a deliberate strategy of Pinnacle. In the early days, we had a lot of Aussie equities. We deliberately added global equities, global REITs, et cetera. And now we've moved very consciously into the Two Trees and Metrics Credit and Omega, much less equities. So we've got a much more diversified overall portfolio. We've also signaled that we will take some baby steps into some other alternative areas. So that's all on the agenda. But as Adrian said, this is very much Horizon 2 stuff that will take some time. But we feel good about how it's done. And we've definitely put in the effort to make sure that we've had high-quality, including high-quality support, for the Two Trees and the Metrics and so on. We're taking Metrics to the market...

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Adrian Whittingham, Pinnacle Investment Management Group Limited - Executive Director [28]

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I mean, if you look at Metrics as an example, they did not have a retail brand. Their MXT is now north of $750 million. And there's very strong interest in the MOT that we're bringing to market. So there's clearly a big gap in the marketplace for those type of offerings.

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Ian Macoun, Pinnacle Investment Management Group Limited - MD & Executive Director [29]

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Plus we'll keep selling Metrics in the insto market. Metrics are broadening their product offerings for both the insto and the retail market, moving into high-yield areas, where obviously the revenue, the margins for Metrics are higher than their earlier Diversified Australian Senior Loan Fund. So that's all happening, Nick.

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Operator [30]

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Your next question comes from the line of Scott Murdoch from Morgans.

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Scott Murdoch, Morgans Financial Limited, Research Division - Senior Analyst [31]

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Just a couple of questions at the Affiliate level if I can. Just obviously, second half performance fees are pretty reliant on the Palisade contribution. Just any update on how Palisade is tracking compared to the performance expectations in the prior period?

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Ian Macoun, Pinnacle Investment Management Group Limited - MD & Executive Director [32]

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Palisade is doing just fine, doing what it always does. So I think we've got some performance numbers there for Palisade to the 31st of January. Of course, those don't have the valuation uplifts that tend to come later in the year. But no, we're happy with the way Palisade is traveling performance-wise. And they continue to -- just fairly slowly keep growing their FUM and finding new assets.

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Scott Murdoch, Morgans Financial Limited, Research Division - Senior Analyst [33]

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Okay. And just interested in your comment on Hyperion about the outflow there and it being a positive. And just whilst you're on that, any other Affiliates that you've seen a net outflow in this period, any comment around that, if it's possible?

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Ian Macoun, Pinnacle Investment Management Group Limited - MD & Executive Director [34]

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So you know that for Hyperion's Aussie equities offerings, they are hard-closed in the institutional markets. In fact, they ask people to take their distributions in cash. So that means that over time, there should be some probably reasonably modest outflows from instos. As things change, you get mergers and circumstances change for them. So that tends to release some capacity that can then be sold into the retail market. So Hyperion's Aussie equities products that were hard-closed and the large ones, soft-closed in the retail market, are now sort of quietly open again. So we can redeploy capacity at a higher speed.

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Scott Murdoch, Morgans Financial Limited, Research Division - Senior Analyst [35]

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Okay. And then just in the other Affiliates, has there been any other Affiliates where we've seen net outflows over the period?

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Ian Macoun, Pinnacle Investment Management Group Limited - MD & Executive Director [36]

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I don't believe so. I'd just get my table, it has them all.

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Adrian Whittingham, Pinnacle Investment Management Group Limited - Executive Director [37]

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Certainly, not from a -- you might have the lumpy scenarios of some institutional outflows but nothing systemic there. And on the retail perspective, we've had had some outflow in Hyperion on their small company side of things. But that was due to it being hard-closed and has now been reopened. So they started to see that subside, and more recently actually have net inflow.

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Ian Macoun, Pinnacle Investment Management Group Limited - MD & Executive Director [38]

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(inaudible) had some very, very modest net outflows that was just due to particular client circumstances but nothing substantial.

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Scott Murdoch, Morgans Financial Limited, Research Division - Senior Analyst [39]

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Yes, nothing systemic, okay.

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Operator [40]

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We have no further questions from the telephone lines. I would now like to turn the conference back to your presenters for any closing remarks. Thank you, and please continue.

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Ian Macoun, Pinnacle Investment Management Group Limited - MD & Executive Director [41]

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So I guess, if there are no more questions, we can close off. We have a lot of one-on-one meetings arranged with fund managers. If anyone has further questions, please just be in touch with us. We like to make sure that shareholders are pretty well informed. This presentation has more detail in it to enable people to sort of peruse it at their leisure.

But look, the overall message from us is that it's very much business as usual. The growth prospects that we've been talking about for quite some time remain on foot. We're getting on with things. We could have done without the market downturn in that last quarter. And who knows what lies ahead with markets? But whatever they might be, we think we're very well positioned with the quality of our Affiliates, the quality of our sales force and all of our back office and so on. So I'll say thanks very much to everyone for participating, and we'll probably see most of you in the next little while.

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Operator [42]

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Ladies and gentlemen, that does conclude our conference for today. Thank you for your attendance. You may all disconnect.