PNI -3.83%: the investor and fund support company announced their FY23 results after market yesterday, coming in with a small beat to estimates. Profit was flat compared to FY22 at $76.5m, ~5% above the consensus of $72.8m while the dividend was broadly in line. Net flows for the 2H were strong for Pinnacle’s affiliate funds and total FUM was supported by strong markets. This was also propped up by Pinnacle itself, with the company drawing down $100m from a CBA debt facility to invest in affiliate funds with Metrics and Coolabah seeing the most love.
We like their model, backing good, independent fund managers with investment in the fund’s management business, and in the funds themselves. It promotes alignment and sends a great message to the market. However, they’ve juiced up this strategy by drawing debt to do it, meaning PNI is backing the manager’s ability to perform above the cost of capital, taking alignment to another level, and increasing the risk in their model as a consequence.
The other interesting aspect here is the funds they’ve chosen to invest in, one run by a manager that has ~60% of their book exposed to developer financing and other property-related activities, the other into funds run by a property bear who believes the mother of all default cycles has begun!
MM is neutral PNI
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