Pinnacle (ASX: PNI) is a multi-affiliate funds management business that owns stakes in a range of boutique investment managers, giving investors diversified exposure across equities, private markets, credit and alternative strategies. Its earnings are highly leveraged to funds under management (FUM) and performance of the strategies, meaning rising equity markets and stronger investment performance naturally drive higher management and hopefully performance fees, although their largest equity affiliate, Hyperion, has really struggled over the past year – performance fee income is a long way off for them!
- If the ASX is poised to enjoy some performance catch-up to global indices, PNI is a strong candidate to position for such a move.
Lower interest rates (or at least not higher) typically provide an additional tailwind through stronger equity inflows and higher valuation multiples across growth assets. Importantly, Pinnacle also benefits from diversification within the model, with affiliates such as Metrics Credit helping offset some pressure during higher-rate environments. For investors seeking broad leverage to improved market sentiment and rising asset prices, we believe Pinnacle remains one of the best expressions of that thematic on the ASX, especially with the stock trading at a deep discount to its long-term valuation.
NB overnight, PNI traded a block of 3.4 million shares at $14.80 – about 1.7% of the company suggesting early weakness this morning. It also looked like this block was being shopped around yesterday, with the stock underperforming. Our guess would be a sell-down by Chair Ian MacOun – but it’s a guess only at this stage (no announcement yet).
- We can see PNI initially testing the $20 area in the coming months – MM is long Pinnacle in our Emerging Companies Portfolio.
MM is long and bullish PNI around $15
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