Pinnacle has reported a significant decline in net profit after tax for the first half of the financial year, with a fall of 24 per cent versus the prior corresponding period (pcp) to $30.5 million.
According to its half-year results released on Thursday, affiliates generated performance fees which contributed only $0.9 million to Pinnacle’s profit, down from $6.4 million in the pcp.
“Several strategies which had the potential to produce performance fees during the half-year outperformed their benchmarks but earned nil or lower performance fees as they entered the period behind the relevant high-water marks,” said Pinnacle chairman Alan Watson.
“In some cases, style-related performance below benchmark was the reason performance fees have not been earned. Shareholders will be aware that performance relative to benchmarks can vary significantly over even quite short periods of time.”
Pinnacle stated that the increased uncertainty in investment markets during the half led to “challenging conditions” for generating new business, particularly in the Australian market.
The firm noted that its aggregate affiliates funds under management (FUM) fell 1 per cent compared to the previous half, sitting at $83.2 billion as of the end of December 2022.
Total net outflows of $1.5 billion were recorded for the half year, including domestic institutional net outflows of $2.5 billion, domestic retail net inflows of $0.3 billion, and offshore net inflows of $0.7 billion, while market movements and investment performance contributed $1.0 billion
“We observed domestic investors accumulating cash holdings in the absence of compelling expected returns for risk assets and continuing rebalancing away from public equities, both Australian and global,” said Mr Watson.
“Although, it was notable that within this trend, positive inflows into private credit and alternative asset classes continued. We believe we remain well positioned to prosper when market sentiment improves.”
The firm has declared a full franked interim dividend of 15.6 cents per share, down 11 per cent on the pcp, which will be payable to shareholders on 17 March.
“Pinnacle has an excellent platform in place to continue to prosper — driven by growth within existing affiliates, incubating new affiliates and strategies, domestically and offshore, as well as careful acquisitive growth into new asset classes and markets,” Mr Watson commented.
“Both within the Affiliates and Pinnacle, a consistent pattern of investment remains, designed to drive high return strategic growth over the medium term, creating additional capacity, nothing that this moderates profits in the short-term.”
Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.