Good day, and thank you for standing by, and welcome to the Pinnacle Investment Management Group Limited half-year FY 2022 financial results teleconference. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press Star One on your telephone. Please be advised that today's conference is being recorded. If you need any further assistance, please press star zero. I'd now like to hand the conference over to you for our speaker today, to Mr. Ian Macoun. Thank you. Please go ahead. Thanks, Kevin, and welcome to everyone who's joined us on the call this morning. Thank you for your time. Thanks for being with us. As you've heard, this call is to discuss our results for the first half of the 2022 financial year. We posted with the ASX last night our formal results announcement, our directors' report and audit-reviewed financial statements for the half year, our Appendix 4B, and importantly, our investor presentation. We'll be speaking to the presentation this morning, or rather to a few parts of it. The colleagues with me on the call are Alan Watson, our Chairman, Andrew Chambers, Executive Director with particular responsibility for institutional and international distribution, Ramsin Jajoo, who leads our retail distribution function, and Dan Longan, our CFO. I'll simply call out the main themes and highlights of our results and briefly elaborate a few aspects that we feel are particularly important for analysts and shareholders. We'll leave plenty of time for questions which you're welcome to direct to any of the Pinnacle representatives on the call. As you can see on the agenda, slide three, there are sections where the relevant executive will probably be Andrew or Ramsin or Dan rather than me. Slide two is a disclaimer that is important, and we would ask you to read this at your leisure. Slide three is an agenda. Slide five is titled A Broadly Diversified Platform in Place to Move Ahead with Sustained Growth. This is really our theme slide for the half year period that we're reporting on. As that heading indicates, we believe very strongly that we have in place a broadly diversified platform that gives us great confidence that we'll be able to move ahead with continued sustained growth. We make four major points. In summary, we have ongoing opportunities for growth from multiple sources in three horizons, both in Australia and overseas, and in a range of markets and a range of asset classes. We have a diversified, increasingly international platform generating sustained and resilient performance. We are prepared for and are seeking attractive inorganic growth. We have approximately AUD 135 million in dry powder available to apply to investments that will provide inorganic growth. Though we recognize the possibility of further external adversity, such as equity market downturns, we have seen these before and proved ourselves to be resilient to them, and increasingly so, given our growing and increasingly diverse platform. Now, the first subpoint under point one relates to Horizon 1 growth. Although we've had some net outflows from the domestic institutional market over the six-month period due to client rebalancings, we believe this is a short-term factor, and those outflows have been more than offset by the combination of international inflows, which tend to be at higher fees, and most importantly, our record retail inflows, the highest of any six-month period in our history at AUD 2.9 billion, yielding overall net inflows for the half year from all markets of AUD 2.2 billion, setting aside the AUD 3.9 billion very low fee, only the mandate that we've discussed in previous presentations. When you consider the much higher fees, not to mention the stickiness of these retail net inflows, the financial impact, so the ongoing revenue and profit impact of these strong retail and international inflows well and truly overwhelm that of the short-term domestic institutional outflows. We've continued to make Horizon 2 investments which have negatively impacted, in the short-term, the profit outcomes of both Pinnacle itself and the affiliates. The returns on these investments will be another factor driving future profit growth through the market cycle, irrespective of equity market conditions. Funds under management attracting performance fees have continued to grow, they are up 9% from AUD 28.7 billion at 30th of June to AUD 31.2 billion at December 31st. We emphasize that the timing and size of performance fees from the 18 significant performance fee strategies are uncorrelated with each other strategy and almost entirely uncorrelated with equity markets being based on outperformance of benchmarks, not absolute returns. Our average base fees have increased again, albeit very modestly, and we have continued to increase the diversity of our client base. There's been ongoing evidence demonstrating another important factor that we believe will continue to add to our profit growth, namely the operating leverage that is embedded throughout our business, particularly in virtually all of the affiliates, which results in far greater percentage revenue growth than cost growth as funds under management grow over time. Take as a simple example, the expansion of Hyperion margins as Hyperion funds under management in its global equity strategy increased from the current sum of just under AUD 4 billion towards the capacity of that strategy, which is a multiple of that. Think similarly of strategies such as all Antipodes strategies, Plato's global strategies, Sirius global strategies, Firetrail's global strategies, most of Coolabah's strategies, Aikya's emerging market strategy and so on, to name just a few. This operating leverage factor has to date been masked to some degree by the commitment of most affiliates as well as of Pinnacle itself to add resources ahead of and for the development of additional strategies, paving the way for future revenue and profit growth. Now in terms of point two on this slide, we have in place a platform by which we mean high quality distribution capabilities, high quality infrastructure capabilities, and a reputation in the market for partnering with high quality investment managers, each among the very best in their field and for consistently delivering to the needs of both the affiliates and their clients. We will continue to add funds under management and profits by way of organic inflows into our high quality existing affiliates, incubating new affiliates and strategies, and careful but deliberate acquisitive growth into new asset classes and markets. We are prepared for and seeking attractive inorganic growth. Multiple attractive opportunities are emerging, but the discipline and patience that we demand of ourselves means we can't know what the timing of proceeding with any of these will be until the stars align and we're actually ready to commit and consummate a transaction. We are indeed committed to taking advantage of the significant offshore opportunity that exists for us to evolve into a global multi-affiliate by exporting our models. But again, we don't want to place pressure on ourselves to achieve outcomes by any particular dates or times as that is how bad decisions and bad acquisitions happen. Point four on this slide. I've already mentioned that we've demonstrated that although we are not immune from market downturns, a significant portion of our fund moves with markets and that can be quantified fairly easily. We have proved ourselves to be resilient. We are far more diversified than many other fund managers and increasingly so in recent years. We believe we can continue to grow in those kinds of conditions should they eventuate, and there's no reason to believe flows would be negatively impacted. We've explained previously that periods of market downturn have actually been beneficial for us in several respects. It emphasizes and demonstrates strongly the benefits for clients of our business model. Standalone boutiques can experience stress, and institutions often respond by cutting costs and reducing the quality of their services and resourcing. Down markets can throw up acquisition opportunities at more favorable prices. Turning now to Slide six, a few financial highlights of our results. I've mentioned that the revenue growth resulting from our strong retail and international inflows have far exceeded any financial impact of the institutional net outflows. The raw net flow numbers don't provide a good representation of the ongoing financial impact. In any event, we are confident that these reflect short-term factors and our institutional pipeline remains strong. Our aggregate funds under management at December 31st were AUD 93.6 billion, up AUD 4.2 billion or 5% from June 30th. Retail funds under management. Hello, are you there? Pardon me, the speaker's line has been muted. Please continue, Ian. Thank you. Okay, I was just turning now to slide six, a few financial highlights, and I was mentioning that the raw net flow numbers don't provide a good representation of the ongoing financial impact and that in any event, we're confident these reflect short-term factors, and our institutional pipeline remains strong. I mentioned our aggregate funds under management, December 31st, AUD 93.6 billion. Retail funds under management increased 17% to AUD 23.8 billion over the half. Aggregate affiliate revenue was up 19% to AUD 240.5 million, with base fee revenue up 42% and performance fee revenue 58% lower than the high level of performance fees in the prior comparable period. Our net profit after tax at AUD 40.1 million was up 32% on the PCP. It would have been AUD 41.9 million up 38% were it not for the write-off through the P&L of AUD 1.8 million for Reminiscent. Basic earnings per share was up 23% to AUD 0.215 per share, and diluted EPS up 26% to AUD 0.21 per share. We've declared an interim dividend of AUD 0.175 per share, up 50% on the prior comparable period, 100% franked. Seventy-seven percent of strategies with a track record in excess of five years have outperformed their benchmarks over the five years to December 31st, with further detail on investment performance in slides 10, 49, 50, and 51. Slide seven has further detail on our platform, including the 16 affiliates and some business highlights, including the Horizon 3 acquisition of 25% of 5V and the Horizon 2 incubation of Langdon Equity Partners in Canada and some additional initiatives in Palisade. Slide 8 shows our continued track record of earnings growth. Over the six years since we became a pure play listed funds manager, our EPS have grown at 47% per annum compound to the end of the last financial year. You can see the growth, dividends have grown at over 50% per annum compound as well. Slide nine shows our growth over the past two and a half years, which encompasses the whole of the COVID crisis period to date. Slide 10 shows the specifics of the affiliate five-year performance records. Slide 11 shows the growth in our funds under management over the years. Note that our closing sum is 21% higher than the average through the first half. Slide 12 provides some detail on the affiliate's performance fees, earned and potential. The volume of performance fee funds continues to increase. Slides 16 and 17 show further details on our financial results. I've already called out the highlights. Slide 18, further details on our balance sheet. We have cash and principal investments of AUD 176 million, having drawn down a further AUD 70 million of loan facility, giving us AUD 135 million of dry powder. Now the remaining slides provide detailed information on institutional international distribution, retail distribution, our growth agenda, and our commitment to corporate responsibility, including our highest ever donation to the PNI Foundation. I'll stop there and invite questions now. Thank you very much. We will now begin the question and answer session. To ask a question, you will need to press Star-Star One on your telephone and wait for your name to be announced. If you wish to cancel your request, please press the Pound Hash key. Once again, it is Star One and wait for your name to be announced. Thank you very much. We have multiple questions in the queue. Our first question comes from the line of the company, Morgans, from Scott Murdoch. Scott, please ask your question. Thank you. Good morning, Ian, everyone. Just a couple from me to start off, if that's all right. I want to start on retail flows, I guess, to the extent that this is possible to answer, the current volatility and pullbacks in some of the high-profile names that have attracted inflows over the last half. I'm just interested in your confidence that the current run rate in retail can be sustained. I'll start off, Scott, and perhaps throw to Ramsin. You know, it is very difficult to predict short-term movements in flows, retail perhaps easier than insto, but still difficult to predict. I'd make the point, our retail flows are very diversified, so we have quite a range of affiliates that are all experiencing quite strong inflows. Now, you're right, the largest have been, you know, Hyperion, ResCap, Coolabah, Metrics, and, you know, there have been changes in the marketplace recently. You know, then in retail, including some, such as the Metrics retail fund that's been recently launched, you know, that really does underpin growth. Ramsin, did you want to say anything about retail flows? Sure. Ian, can you hear me? Yep. Excellent. Thanks for that question, Scott. We've talked on numerous occasions about the momentum being a big factor of driving flows. In retail, when you get an allocation in model portfolios, when you get strong research ratings, short-term volatility doesn't impact what advisors are doing on a month-to-month, quarter-to-quarter basis. Our confidence remains that we have strong exposure in models, and that should continue for the foreseeable future. Okay. Thank you. I'll just ask the easy ones on flows while I've got the line. Just on the insto pipeline, obviously you've expressed confidence in that pipeline, you know, for some time now, and that's largely come through, you know, especially in the FY 2021 year. Just, I guess interested in a bit more color, given there has been outflows in this period, just that pipeline where you see areas and funds that give you confidence to make those strong statements around insto flows. Andrew, do you wanna take that? Yeah. Thanks for the question, Scott. If you think about, you know, flows from an institutional perspective versus retail, you typically find that retail investors tend to be more cyclical and institutional investors tend to be countercyclical in terms of the way they allocate flows. What we've seen over the last half is a lot of rebalancing, a systematic rebalancing back to target weights in asset allocation within portfolios, particularly in equity markets as they continue to rally through the course of the second half. Markets have fallen through the course of January, which we believe removes that, probably that impulse to continue to rebalance away from equities. We think our headwinds potentially over time become more of a tailwind. That's probably point number one. I should also highlight in the first half that our combined institutional international growth flows were 27% higher than PCP. It's just that the outflows, largely owing to rebalancing, obviously the Omega outflow, was higher, more elevated than previously. In fact, even our domestic flows were 40% higher than PCP. Certainly the sales momentum is there. But obviously the rebalancing, which is countercyclical, as I mentioned, can be pronounced from time to time. Now in terms of our pipeline today, if I look through the pipeline we put together and we run within our own sales force, it's never been bigger than what it is today. It's obviously we have a larger sales force. We also have a very large global addressable market. If I think about the boutiques, a very strong potential upside in the likes of Hyperion, Antipodes and Aikya. Two-thirds of their pipeline sits outside of Australia today for those three boutiques. They have potentially a very good pipeline ahead. The likes of our credit managers, given the magnitude and direction of base rates around the world, running zero duration base strategies such as Coolabah in public markets or floating rate strategies such as Metrics in private credit, which has enormous structural growth behind it, provides us a lot of confidence in ongoing AUM growth to what we've seen during the first half. Does that give you sufficient color or would you like me to elaborate it further? No, I think that's good. Thanks, thank you very much. It's been an interesting time. I've just got a couple more before I pass it on, if that's all right. Just on performance fees, obviously you can give us all the details there, but just interested if you have this number, what% is currently above its necessary hurdles? And just I guess high level on a second one on performance fees. There has been, you know, a certain amount of performance fees linked to unlisted assets, sort of sensitive to interest rates. You know, Palisade comes to mind with a big tailwind from interest rates in recent years. Just your view on the potential for some of these performance fees to be at risk given that interest rate environment has shifted. Perhaps I'll start off on that. Palisade, you're absolutely correct, Scott. Palisade has historically produced quite large performance fees, and that's a fundamental part of their business model. Their FUM is not huge and doesn't grow, you know, in the billions in the way that some of the other affiliates do, but they earn, you know, quite high base fees and more so performance fees. We always have to be careful about making predictions, but what I can tell you, Palisade is in very good shape. The assets that it owns, by and large, are doing well, notwithstanding, you know, there's been some short-term issues with airports and so on. They're in very good shape. They're adding assets. They've announced they've added, you know, a wind farm, the Port of Geelong, and they're making other investments, deploying more capital. All I can say is I feel very confident about Palisade's performance fee. I recognize the point about higher interest rates increase the discount rate, but, you know, I don't see any fundamental problem in the performance fee potential of Palisade. They're a very good manager. They've made very good investments, and I feel good about them. Probably just adding additional points about it, if I may. Yeah. Is that if you look at what actually valuers have done with real assets, is they typically haven't followed base rates down. They've added an alpha factor to find a midpoint for long-term base rates, which is higher than the current rate. To the degree that rates go up, there's no need to necessarily move, adjust that discount rate and therefore have the same impact on the valuation of those assets. That's right. They've taken a kind of a long-term average view of interest rates rather than marking their discount rate down to market for short-term rates. Yeah, that's right. Now, Scott, you also asked about the proportion that are sort of at or above the high watermark. We're not publishing that number 'cause it honestly, it moves around a lot, even in a fairly short space of time. Hyperion, for example, we've seen their performance relative to benchmark move quite a lot with market conditions. So, I'm gonna pass on that number for you. But what I would point out is there are 18 strategies, so at any point in time, there are typically a number that are sort of in the money and a number that are out of it. You know, there's significant sum in Antipodes that's under Firetrail that has quite large performance fee sum. Its performance has been quite strong. You know, I'm just gonna duck the question, not because we don't like to be as transparent as we can be, but it just moves around so much. No, that's fine. I'll work for my money there and work it out myself. Yeah, that's your job. One last- Yeah. Yeah, exactly. Just one last one. Thanks, Ian. I know there's others that wanna question, but I just had one more, if that's okay. Just your statements around exporting the model. Clearly, you've flagged offshore expansion for some time. It's pretty clear you're keen to do something offshore, but just interested in the term exporting the model. Clearly in Australia you're strong on capital allocation and distribution support for your affiliates. One of those things is really easy to export, the other two, maybe not, maybe not so easy in terms of time or investment. I'm really interested in what investment and time you plan to put into operational and distribution support in offshore jurisdictions, or one or multiple jurisdictions. Yeah. Capital is the one that's easy to export. I'm sure you're referring to distribution and ops, more difficult. Yeah. Look, exporting the model we've sort of started. Aikya is going very well, and that was an incubation offshore. Langdon is an incubation offshore. Again, it's our model. We've said we've been pleasantly surprised. Adrian Whittingham, who's sort of leading this, has been pleasantly surprised at how receptive talented investment professionals have been to coming into our model. We've had quite a lot of people very keen. We are careful, and this is what you're referring to, Scott. We are a conservative, cautious group. We believe we're well-disciplined, and I think the inability to travel has held us back a bit, but we've done a lot of work. We think we can export distribution. I might shut up and let Andrew Chambers speak to that. We're doing that already. We've got a significant force overseas. We tend to have smaller numbers of very high-quality people, and it's very manageable. Ops, we also have done a lot overseas already with our UCITS platform, our Cayman platform, et cetera. We do have some people. We've got a senior ops person in London. You're right, we will need to add resources to that. We've called that out. We will do it progressively and carefully. We're not gonna make huge impacts on our P&L. You know, when I boringly kept talking about our Horizon 2 investments in Pinnacle, that's a big part of it. Andrew, do you wanna speak to offshore distribution? Yeah. We made a couple of additional hires I've called out in the presentation over the last six-month period in London and in Pennsylvania. You may have seen in the press in the last day or so. The speed of hiring in terms of international distribution is really in proportion to four key factors. The first of all is the growth in revenue, both expected as well as current. There's the commitment of our affiliates themselves to doing international marketing. We need their full commitment to doing that. There's the breadth of native products for local investors. What I mean by that is ensuring that we have products which are relevant to, say, investors based in the North American market. Obviously, asset classes which are domestic based in Australia, like Australian equities, aren't sellable over there, so you need sufficient breadth of sellable products into those local markets. Obviously we're increasingly expanding that product set. There's the availability of culturally aligned distribution talent. That's also, we're not gonna hire anyone that doesn't fit our much more collaborative sales culture and intense working culture as well. It's really those four key factors which will determine the pace of it, but expect us to be adding additional hires over the coming six to 12 months because we feel optimistic about what's in front of us, given the ongoing flows we have and the current fund we have from 37 countries outside of Australia, and of course, flows from 32 countries in the last six months. We could talk a bit more about ops too, but the theme's the same. We will add ops resources as we need them. We're not gonna sort of damage our P&L with the extent of that investment, but we will keep resourcing ahead of need. Okay then. Thanks. I've taken up enough time. I really appreciate the answers. I'll pass it on to someone else. Thanks, Scott. Our next telephone question comes from the line of Macquarie, Mr. Tim Lawson. Tim, please ask your question. Thanks, gentlemen. Just a couple of questions from me. Just in terms of the growth in insto relationships, Andrew, you might have sort of touched a little bit on it, but can you talk about that, the 260 now up from, you know, 190 a year ago? How much is organic? How much is, you know, bringing on new acquisitions? Just trying to understand where that's coming through from. Yeah, happy to answer that question, Tim. Good to hear from you. That net 30 new institutional clients in the half excludes anything, for example, based on an acquisition, such as the case with Five V Capital, because that's not included in the numbers. That's net new institutional clients added. Most of those have come largely from outside of Australia, rather than inside of Australia. Obviously matches the run rate of the six months prior, as well. You'll note also the diversity of the fund by institutional client. I think you may even called out in your own report, where our largest single institutional client only represents less than 2% of Pinnacle's NPAT as well. Obviously, within the institutional clients themselves, we have a lot of affiliates represented. They're quite deep relationships. Within our top 20 clients, it's really four and a half affiliates on average. They range between one at the low end to nine affiliates within client portfolios at the upper end, to give you a bit of a feel. Does that help answer your question? Yeah, that's great. Also, you made a comment in the slide pack on gross institutional flows. Obviously, there's some moving parts in the half around the low fee mandates, et cetera, but you talked about the gross flows being, you know, higher than costs. Yeah. Can you talk about how sort of stable that is through time and then obviously the net number being affected by the gross outflows, so interested how stable that gross inflow is? The trajectory has tended to be rising through time. But obviously based particularly on equity markets, given how much of our FUM is dominated still by equities overall, as markets tend to run, you tend to find there's this rebalancing effect. That's therefore the redemption rates tend to lift as markets. Obviously, your FUM is going up, but investors rebalance back to strategic weights. But the general trajectory of our inflows has been positive and rising over time. That's reflective of more boutiques, more diverse boutiques, and sellable to a global marketplace rather than just a local one as well. Yep. Just a question to finish just on costs. Can you categorize the sort of the investment in both across the affiliates and then at the sort of head office, maybe mix on sort of how much is fund investment from the increase in cost and how much is distribution investment? Like, is there some way you can sort of split that for us? Dan, I'm not sure if you can help with this. I mean, we obviously look at our expenses, you know, by category and so on. We've increased each of those, Tim. In my head, Dan, they're sort of proportionately Going up similarly. Distribution, we've certainly added a lot of resource, you know, quite a lot of resource there ahead of more revenue, and we've also been growing our fund services capabilities. I don't know whether you can be a bit more specific, Dan. Yeah, no, that's about right. Traditionally, Tim, our people have been split almost down the middle between ops and distribution, and we're sort of maintaining that trajectory as we grow. About equal numbers of people in distribution and ops, and they've both grown at similar sort of rates. Yep. Yep. Thank you. Our next telephone question is from the company of Barrenjoey, from Mr. Nicholas McGarrigle. Nicholas, please ask your question. Goodday, guys. Thanks for taking questions. There's obviously a lot of commentary around offshore expansion, and Ian touched on the methodology around how you're looking at acquisitions and expanding. Can you talk through what some of the key strategic attributes of an offshore acquisition would be? Is it really around distribution, or is it sector or strategy capability? What are the key attributes you're looking for strategically? Yeah, thanks for that, Nick. The answer to it is that, look, we have a number of sort of criteria that are very important to us, and they all are in the mix. I should also say, you know, we're doing a lot of work on things offshore, but we don't know when we'll actually do things. The things we're looking for, you know, our preference is in diversifying asset classes, so we're certainly putting a lot of effort into private market asset classes. Having said that, so is everyone else, you know? The multiples on those businesses are higher. We do have a preference to do things that would be more diversifying of our existing sort of asset class coverage. You mentioned distribution. That's absolutely correct. We are not a financial investor in fund managers or in anything. We are looking to invest in businesses where we can add value, particularly through our distribution, but sometimes also through our experience with, you know, business strategies and so on. We are definitely looking to add value to anything we do. There's quite a range of things that we're looking at, Nick. In terms of any acquisition that you might execute on, is it not necessarily to provide some of that administrative distribution, support services capability? You think you can build that out organically and then invest in more asset manager-focused investments in North America or Europe? Yeah. Look, could be that we acquire things like that would help. I would say, sort of thematically, we're very confident of our ability to build our institutional distribution, including offshore, maybe retail distribution, and maybe some ops capability could be part of any acquisition, but it really depends. Look, the main thing we're looking for always is investment excellence. It's exactly the same as what we've done in Australia. Is this team that we're looking at, are they best of their class? You know, are they excellent, talented investment professionals, and is there a major market for what they do? That's still the most important thing. Recognizing at the same time we've got the objective of diversifying asset classes and, yes, building our distribution and ops capability offshore as well. It's all in that. Yeah. That's good to understand. I mean, I suppose it's easier to build out that operational capability when you've got profitability coming from an existing asset manager in that market, as opposed to building that Pinnacle overhead and support structure well ahead. True. of that revenue. Is that the way you think about timing? Yes, that's true. We like to know the revenue is there or coming. Also, that also informs us as to exactly what the nature of those ops capabilities should be. The ops that you need for this asset class is not exactly the same as that asset class. It helps to inform the emphasis in our ops capability as well. Ian, it's probably worth interjecting as well. The number one reason why people want to partner with us ultimately is large scale distribution. 'Cause globally, you tend to find anyone that's looking to acquire the interest in a boutique asset manager wants to own a majority shareholder, the majority shareholder in the firm. We've mastered being minority shareholders and with protections, and typically any competition we have in the minority staking business is the GP staking firms, like Petershill Partners and others, but they don't provide large scale distribution. That's a real competitive advantage is we're really marked to that minority shareholder ownership with large scale distribution and operational infrastructure, which makes our model utterly unique globally. Yeah. Absolutely. When we talk about exploring our model, that's all part of it. It's our model for supporting talented investment professionals, but it's also the distribution value that we bring to them. That's, yeah, as Chambers said, that's really important. Yes. I mean, in that context, you mentioned that some of the asset classes and things that you're looking at are competitive. I imagine to your point, there's very few players in the U.S. that are providing minority investment and distribution support hand-in-hand. Usually it's passive minority or distribution support, but owning the majority. Does that mean that you're actually in competitive processes or you tend to self-select the less competitive processes because they want that distribution support? Yeah. What you've said there is absolutely correct, but it doesn't mean that they can completely ignore valuations. You know, we're always to some degree in competition. Competition's not as sharp because as you say, we have some special advantages. You know, when the multiples in private asset classes are elevated, we can't completely protect ourselves from that. Just in terms of the appetite to acquire, you've obviously got AUD 135 million of dry powder. You know, there's obviously large acquisitions that could be on the table in North America. Does the current Pinnacle share price create complications in doing some of these deals? Or do you feel like you're comfortable with the balance sheet position and equity if it's needed? Yeah. Look, we don't like to speculate on these things, Nick. I don't think the current share price should loom too large in our thinking. Our thinking is dominated by the opportunities, the quality of them, the growth that we believe can be generated and so on. If we find the right things at the right price then we'll figure out funding. Having that dry powder, you know, we raised that capital, that sort of replenishment capital, that's very helpful. It puts us in a much stronger position when we're talking to people, when we know we've got that money sitting in the bank or sitting in the liquid strategies of affiliates. I might just ask one last one, apologies if I'm being a bit long on the questions. Obviously the Pinnacle Parent profitability was quite high in the half year compared to prior years. Can you just I think you might have partly answered this in the previous responses, but is there an intention to reinvest some of that profitable run rate given it is sustainable because it's revenue share driven? Is there a plan to reinvest that in offshore particularly, and certainly domestic strategic priority? Yeah. We don't really think of it, Nick, that, oh, well, we're generating bigger profits in Pinnacle Parent, therefore we'll put the foot down on spending on, you know, for Horizon 2. The Pinnacle Parent P&L is just an outcome, and we don't sort of particularly target things. We've said we won't let it, you know, become substantially negative. Look, we will invest in additional resourcing for Horizon 2 as needed and as dictated by the opportunities. We like to think that we wouldn't be constrained from being ready and servicing any opportunities that we find that are attractive. It's like the opportunity first and then we'll decide the resourcing, not sort of ration how much resourcing we'll put in. Although we're always sensible about it relative to revenue. Does that sort of answer it? You know, we've always signaled to people, "Don't budget for substantial profits or losses in Pinnacle Parent." Now, obviously, our revenue is growing very nicely, but so will our costs keep growing as we expand. Yeah, I guess you probably can't make a comment on this, given it would constitute guidance, but you've obviously produced AUD 4 million profit in the half year. Usually, the second half is stronger because of institutional success-based fees. You're potentially annualizing a better than AUD 8 million result, which quote unquote would be substantial. That's probably just where I'm thinking in terms of what the implication is of that really strong result in the first half. Well, you're right, we can't forecast those things and so I'm gonna respectfully duck that a little bit, Nick. That's fair. You know, there's a lot of moving parts there in Pinnacle Parent. Yeah. I mean, I noticed that you've made a couple of relatively senior appointments in the U.S. in the last couple of months as well, so I'm sure that that adds to that cost growth in the second half. Yeah, that's true. You know, our costs have grown significantly, which is a significant part of that has been adding resource ahead of, you know, Horizon 2 resource. Thanks. Our next telephone question is from Shaun Ler of Morningstar. Shaun, please ask your question. Thank you. Good morning, guys. I just have two quick questions. The first one, probably to you, Ian. Today's release echoes a recent news, which you explained super funds are sort of sticking to benchmark tracking and vanilla strategies, and hedge funds are an area where super funds has lost appetite. I'm just curious, how should we make of this statement? Does this imply, you know, Pinnacle has better odds to beat the super funds or Pinnacle can better fill some of the gaps in the super fund's asset allocation or there's just less demand for Pinnacle's alternative strategies. So is it overall a positive or a negative? Yeah. This might be one for Andrew, but the general comment is, I mean, there are certain trends in the institutional market that we've been calling out for quite some time, and we've been explaining how, you know, to some extent, that's a negative for all active fund managers. Equally, we have a range of strategies that are ideal for those trends. You know, on a net basis, we're not saying it's particularly either negative or positive. There are swings and roundabouts in it. We did mention, there was rebalancing, which we think is a short-term factor. We did mention, Your Super, Your Future, which is exactly as you said there, Sean, which is causing people to be, you know, take less active positions. You know, that varies by super fund according to how close they are to their, you know, failing performance tests and so on. That's not uniform either. We do have quite a significant range of strategies that are very suitable for that particular market. Andrew, did you wanna say anything about that? Look, I think that you've summarized it very well. A number of our managers can run lower risk type strategies for investors, and Plato would be a very good example of that, where you're seeing more money flow to enhanced passive type portfolios because the tolerance for tracking error risk, particularly for underperforming funds, has brought in their appetite for being much more actively exposed. In other cases, we're tending to find that simply mandates are being trimmed in size because the active component is not as large. Where that's occurred, I think that's largely finished what it did in the last half and not something we're gonna see on a really substantial basis in the future. Clearly there's cost pressures in the market and there's pressure to perform and not be in that bottom quartile of superannuation funds. I should add that, obviously we have a trend of internalization, which is obviously occurring in a number of very large superannuation funds. The demand has not gone away for high active risk managers, which can complement those sort of core-based internal capabilities. Really interestingly, in some cases, we're actually in the process of taking on what was an internally managed capability to some of our managers to manage on their behalf. It's the reverse, the externalization of a former internal capability. It's not just one-way traffic. Thanks for that. The second question and the last question is just some further clarification on the prior question on institutional flows. Just to be clear then, institutional clients rebalance their portfolio and take profits. Where do you see this money going to? Do they, you know, flow into other Pinnacle boutiques or does it go out of Pinnacle affiliates? And also, does the money typically come back at the bottom of the market or do they usually come back, you know, some point of the time in the future when the market is recovering strongly? Again, for Andrew. Oh, sorry. You go, Andrew. Yeah. You tend to find at market extremes, then the reweighting happens with greater intensity as we saw when the market rallied. Equally on the other opposite side, in March 2020, the rate of inflows was particularly strong as well on the other side of it. You do tend to find that at a market extreme point, the rebalancing can be more intense, and then there's a lot more trimming and tailoring based on other levels in the market in between. What's one trend in superannuation land over the last five years has been much more systematic rebalancing than what they have done historically, which was much more fundamentally based. It tends to be en masse and correlate among a number of clients when it occurs. Obviously during that period of time, you can still be winning net business, you know, overall in terms of appointments versus terminations of mandates, which is something we've clearly been doing with the addition of 30 new clients in the last half. All right. That's it. Thank you. Certainly some of those that rebalance money did come into other Pinnacle affiliates. Sorry, Ian, that's good point. Yeah. Got it. Thank you. Yeah, probably the two to call out would have been Metrics Credit Partners and Coolabah onto the alternative credit side where we've seen that. Obviously a lot of superannuation funds have been accumulating larger cash levels as well in the process, too. Our next telephone question comes from the company of Ord Minnett from Nick Burgess. Nick, please ask your question. Yeah. Morning, Ian. Morning, team. Just a couple of follow-up questions. Just at the risk of laboring the point, just to the previous point, Ian, on the Pinnacle parent, I think you've been quite strong previously on sort of saying to aim for a break-even result, but as has been discussed. It's profitable, but you're also quite positive on the retail flow environment. Is that break-even comment that you've previously made still valid? Yeah. Thanks for that, Nick. Again, we don't want to make forecasts, you know, sort of financial forecasts. But, I mean, you're right, the trends that you called out. We have said for some time, look for Pinnacle Parent revenue to grow nicely as our, you know, our distribution arrangements that are, you know, percentages of retail revenue and so on. As retail flows continue to be strong, but like, obviously, our retail flows have been extraordinarily strong, and that has been very helpful for Pinnacle Parent revenue. That is definitely a factor that should be ongoing. We're also equally calling out that we will be adding to our costs. We already did. Our salary costs went up, like, from about AUD 6 million to AUD 9 million. We're not skimping on extra resources to be ready for growth. I think what I said before is valid, which is that we don't say, "Oh, well, we're getting extra revenue, therefore we'll spend more on expenses." We will spend on resourcing according to the opportunities that we're seeing. We want to be resourced ahead of growth. That's why I called out all of that Horizon 2 expenditure. As to what the net of all of that is in the P&L of Pinnacle Parent, we don't really wanna forecast it. Yeah. Okay. That's helpful. Thanks. Just a couple of further questions. Just on Reminiscent, you know, clearly small and not really a profit contributor, but your assessment of why that didn't work and any lessons from that venture? Yeah. Look, there was some bad luck there, to be honest. Dave Adams had quite a lot of indications of institutions who wanted to put quite large amounts with him, which were sort of deferred and then deferred. I do think the environment of the last two or three years has not been conducive to, you know, hedge funds, macro funds and so on. In the end, you know, it was basically Dave and we all sort of lost patience and we said, "We don't know how long it's gonna be before these people will put money into it." There's also a little bit of a view that standalone boutiques in that kind of space are not as desirable anymore as being part of something bigger, which is why, for example, Omega merged into Plato, so they could be part of something bigger. Yeah, there was certainly some lessons. I've got to tell you, if I could be a bit cheeky, one lesson for me is that I feel it's a bit unfair that our P&L doesn't mark up increases in the value of affiliates, but marks down the ones that you know, the little ones that don't work. Look, we have had very few that don't work, but we've shown discipline in calling them when that's been the case. I think that's also part of the lesson. Yep. Okay. It's probably worth noting that, just to that point, the capacity to be face to face with people when you're a discretionary hedge fund manager versus a systematic one becomes incredibly important. The people that look you in the eyes in person, particularly in the hedge fund world, where 70% of the capital is sourced from North America, where we haven't, of course, been able to travel since really the establishment of the firm. So that made it challenging. Then as Ian pointed out, I think that gravitation away from boutiques or large multi-strategy platforms, you know, the likes of Millennium Management and others, globally, has also been sort of a trend, towards really larger, more diversified platforms. Okay. Thanks very much. That's helpful. Just one final question. Ian, just Coolabah and Metrics have both had extraordinary growth since you've taken your ownership stakes in those businesses. Just how should we think about the current momentum and the broader question of capacity in each of those? Both in retail and institutional, we've had very strong growth. Retail for me has been particularly exciting for both Metrics and Coolabah, but also institutional. They both have large capacity and are adding additional strategies, call them sub-sub-strategies or adjacent strategies, which will keep growing their capacity. Both Metrics and Coolabah have large capacities. Okay. Thanks very much. Yeah. Our final question in today's Q&A is from the company WILSONS, from John Hynd. Please ask the question, John. Oh, good morning, gents. Thanks for taking my question. Just on affiliate margins, if I may, another, you know, strong result, but down a little bit on the PCP and maybe perhaps starting to be reflective of a bit of a change in FUM. Can you give us an indication on what's gonna drive that in the near term and perhaps what contributed to the result this time? Yeah. It's fairly straightforward in the sense that, as I mentioned, there is operating leverage in most of our affiliates, so that as their FUM grows, their percentage revenue growth is higher than their percentage cost growth. That's inherent. That will come through over time. Offsetting that, we talked about the Horizon 3 investments. Just about every one of our affiliates has added resources to add strategies to meet market demand that they're seeing. That's an offsetting factor. What you're seeing in the affiliates P&L is the net of those two forces, if you like. Yes, you know, to the extent that inflows were a bit lower, you get less of the operating leverage coming through. We definitely have added resources in, you know, most of our affiliates, and we encourage that. It's a really good investment to add some resource to bring in new strategies, because the return you're gonna get on that investment over time is gonna be large. Yeah. I mean, notwithstanding, perhaps Reminiscent might move the dial, but there are other funds that have probably been loss-making. Is that expected to change within the next six months? Could that improve or lead to further expansion with that margin? We always have affiliates that are still in the development phase. Aikya has been loss-making. We're very confident Aikya is going to become profitable reasonably soon. It flips from being a negative to a positive. That's sort of an ongoing process. The pace of it varies by affiliate, but we typically then are always, as affiliates are coming out of loss-making, we're adding new ones. We've added Langdon, and we'll probably add some more. It's a little bit of a revolving thing, John. Great. Last one from me is just perhaps it'd be nice to get some color on the strategy you have around seeding the second or the next Palisade fund. I've always understood that there's a fair bit of, I guess, capital lined up to be deployed with those funds because the performance is so good. Just explain your thinking. Is that an initial and then you pull it back out, or is it just an investment opportunity here that's just too good to ignore for shareholders? Yeah. Well, it's sort of, it's a bit of both of those. What happened? This is a bit unusual for us to put that amount of money in. Yeah. It could be there as long as a year. It was seen as very valuable to boost. They're doing a AUD 250 million fund raise for Palisade Impact. There's a little bit of chicken and egg that you wanna get the assets so that you can get the sum. We boosted that by investing some sum, and they gave us a bit of extra equity directly in Palisade Impact. To be honest, there were other people pressing and suggesting that they could provide some seed sum in exchange for some equity, and we said, "No, we'd prefer it not to go outside of the family. We'd sooner have Pinnacle do that." That money, I don't know how long it'll be tied up. Probably up to a year, but no longer. We'd recycle it. Great. Thank you very much. I appreciate that, taking my questions. You're welcome. Look, we're late for another commitment. We probably need to jump off, to the organizer. That's perfectly fine. Ladies and gentlemen, that does conclude our conference call today. Thank you for all participating. You may all disconnect and have a great day. Goodbye. Thanks to everybody for joining.