If there was ever a stock that I regret not backing 5 years ago, Pinnacle (ASX:PNI) would probably top the list.
I regret it, not simply because the stock has risen over 8 times since 2016 but because they backed fund managers who I knew of back then (Hyperion, Solaris, Antipodes etc) and despite all that... I did not have the sense to put money into Pinnacle itself.
For those unfamiliar with them, Pinnacle was established by Wilson HTM and from the early days was headed up by former Perennial CEO Ian Macoun.
It was created to provide support services to a suite of "boutique" funds, help them fundraise, via Wilson HTM's strong network of capital, and use Pinnacle's balance sheet to provide cornerstone investments into the manager itself.
There are other firms like this in the Australia - so what makes them so special?
The key differences are that Pinnacle focused on the boutique end of town; not the established brands. In doing so, they could take big stakes in the fund manager (20-40%), get a share of performance fees and importantly the funds they chose have mostly performed well for their investors.
The Pinnacle suite of funds
As you can see they cover every type of strategy under the sun now, but they have generally been big backers of global growth equities - which has proven to be a winner.
The more exciting part is where they are seeding new funds such as Aikya (Emerging Markets), Reminiscent (Asia) and more interestingly Riparian (Water & Agriculture) and opening up to the retail market (set out below)
Their slow but amazing growth in FUM
So... should I buy PNI shares
Uninspiringly, the answer is not right now. But let me explain - my valuation of the company is closer to c.$12-$13 (vs. $16.8) for the following reasons:
They won't be able to replicate performance fees going forward
Gearing (c.40%) will come down as markets get less bullish
Most brokers assume retail FUM means higher fees, I do not think it is significant given the fees of their institutional capital; particularly global or long-short funds
Capital markets are at all time high; so EPS growth will grow at c.10-15% (not the +100% we saw this year)
Once some of the newer funds get some early FUM, there are plenty of reasons to lift this valuation
So put this one in your watchlist, closely follow Macoun's succession plan and this could be a company well worth buying when pricing chills out
Comments