Pinnacle is a multi-affiliate asset management business. In effect, it acts as a platform/holding company that partners with specialist boutique investment firms (called “Affiliates”), seeds and backs them, provides distribution and infrastructure, and takes a share of the revenue/profit.
It’s a great business model that has performed exceptionally well. We own the stock in the Emerging Companies Portfolio, holding the model in high regard. However, the share price has underperformed in recent times, even following a very strong FY25 result, with profits up 49% year-on-year to $134.4m and FUM surging to $179.4bn, driven by a standout half from their newest affiliate “Life Cycle”, which came on in May 2025.
The key to the business is having breadth of affiliates, across the spectrum of asset classes, while different managers within the same asset class create diversification of strategy. The group continues to impress on scale and product breadth. That said, with the share price underperforming strength in the broader market, we ask the question – why?
While the near-term earnings picture remains solid, the group has a strong reliance on private credit flows, principally via Metrics Credit Partners, which manages over $30bn, representing around 17% of total affiliate FUM. But this success introduces concentration and liquidity risk into the group’s earnings base. Private credit is booming, until it isn’t. Rising competition, potential repricing of risk, and any cracks in the credit cycle could impact flows or valuation metrics quickly. PNI’s model, which relies heavily on flow-based earnings, becomes more exposed in that scenario.
This may be offset by good flows elsewhere, with the new “Life Cycle” affiliate a recent standout, adding ~$14bn in 2H inflows alone. But stripping out Life Cycle, flows were more subdued, with Retail adding ~$1bn and Institutional posting a modest ~$1bn net outflow in Q4.
- While we have more work to do around this, we see some risks bubbling away in the background, principally in private credit, and more broadly around the trajectory of flows.
We have no conclusion today on our position in PNI; however, we are conscious of recent trends and have some lingering concerns around the future pace of fund flows, particularly if their golden goose (Metrics) has any further issues. We’re trimming our enthusiasm on the stock for now.
MM has turned neutral on PNI
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