Thank you for standing by. Welcome to the PNI's Full Year FY 2023 Financial Results Teleconference. All participants are in a listen only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Managing Director, Mr. Ian Macoun. Please go ahead. Thanks, Rachel, and welcome to everyone who's joined us on the call this morning. Thanks for being with us. As you've heard, this call is to discuss our results for the 2023 financial year. We're coming to you from our new offices at levels 2025 and 2026 of Australia Square. We posted with the ASX last night our formal results announcement, our annual report, including the audited financial statements for the year, our corporate governance statement, and importantly, our corporate sustainability report, and also importantly, our investor presentation. We'll be speaking to the presentation this morning, or at least to parts of it. The colleagues with me on the call are Alan Watson, our Chairman, Andrew Chambers, Executive Director, with particular responsibility for institutional distribution and international. Kyle Macintyre, who leads our wholesale and retail distribution function, and Dan Longan, our CFO. I'll call out the main themes and highlights of our results, and also briefly provide some further context and elaborate a few aspects that we feel are particularly important for analysts and shareholders to understand. 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 be Andrew or Kyle or Dan, rather than me, and some will be best directed to Alan. Slide two is a disclaimer that is important, and we ask you to read this at your leisure. Slide three is an agenda. Slide five is a summary of our themes for the 2023 financial year. We have continued, in fact increased somewhat, our extensive program of investing in initiatives aimed at adding to future growth, including in most of our affiliates. We've earned some performance fees, showing one of the benefits of our diversified platform. New business conditions have remained challenging throughout the financial year, particularly in retail. The benefits of our diversified platform continue to be demonstrated. Not only by earning some performance fees, despite our largest performance fee fund strategies not delivering during this particular year for various reasons, also the holding of some and flows and profits to levels that would not have been possible had we been exclusively in equities. The benefit of us being able to provide to the market offerings that they are particularly seeking when traditional asset classes are out of favor. We are pleased with the strong performance rebound across multiple of our affiliates. Slide 14 provides further detail on this. Net inflows into our private market strategies have remained resilient with a growing product set, with us offering these strategies to more and more end markets, both in Australia and overseas. We've had growing success offshore, this is ongoing. As I said, our Horizon 2 investment program has continued, this is setting us up to deliver additional future growth. These investments have been both within Pinnacle and within affiliates. We note that this has had a significant negative impact on our profits in the short term. Particular market and style shifts significantly impacted our funds under management and therefore revenues in certain areas. We spoke a lot about this in our half year results. This has now largely been reversed, particularly in relation to Hyperion, so you don't get back in your full year results, the revenue lost in the first half. In relation to ResCap, REIT markets generally remained stubbornly down through the year. The domestic retail market has been challenging for nearly two years now, and as far as we can tell, remains challenging. We have further increased our investment in our wholesale and retail distribution capability to ensure that we are well-placed to generate very strong retail inflows again as investor confidence returns. Slides six and seven elaborate these themes. The benefits of our diversified platform continue to be demonstrated. Our diversified base of affiliates by asset class and style, and investors by channel and geography, have delivered positive net inflows, solid performance fees, and steady revenues in a challenging and volatile market. The ongoing Horizon 2 investment across affiliates has established further strategies and products and added capacity, which will deliver additional growth in our funds under management and in our profits over and above the AUD 300 billion or so of capacity in our pre-existing strategies over the medium term. As I said, we've enjoyed a strong performance rebound across multiple affiliates in the second half. Performance fees disappointed in the first half with the volatility in equities markets and rapid changes in the lending rate. Performance rebounded strongly in the second half, demonstrating the value of our diversified platform of affiliates. Net inflows into private markets strategies have remained resilient, with a growing product set offering these strategies to more end markets, both in Australia and overseas. We achieved over $2 billion of committed and or drawn capital for private markets affiliates in the financial year. Over $900 million of that was raised from wholesale or retail investors. We've enjoyed growing success offshore and expect it to continue. We now have $10.5 billion of FUM from 43 countries outside of Australia. We've achieved more than $5 billion of net international inflows over the past three years. Our two offshore domiciled start-up affiliates are experiencing early success. Aikya, which is based in London, has reached $1.5 billion of FUM in three years. Langdon, based in Toronto, has passed $100 million of wholesale or retail FUM in its first 12 months and is going very well. Palisade Americas, based in New York, is up and running and acquired its first two American infrastructure assets in the financial year and is building momentum. Continuing on slide seven, our Horizon 2 investment program has continued and is setting us up to deliver additional growth, both within Pinnacle and within affiliates, bringing significant short-term profit impacts. Pinnacle and the affiliates have continued to invest. This will drive strategic growth over the medium term. The short-term profit impact in FY 2023, Pinnacle share after tax of this investment is equivalent to an estimated AUD 14 million of NPAT. These initiatives create additional capacity, providing medium-term growth opportunities, and have historically delivered high returns on investment. Slides 30 to 35 provide further detail. Remind everyone that co-investment from affiliates in the Horizon 2 initiatives reinforces focus from our partners on growing their businesses and delivering superior growth through the cycle. Our affiliate partners have a lot of skin in the game in the Horizon 2 initiatives. Our core business remains in excellent shape, notwithstanding the challenging flow environment during the year. In fact, it's been over 18 months now that we've had this challenging environment. Market and style factors significantly impacted funds under management and therefore revenues in certain areas. Style shift away from high growth stocks impacted FUM in the first half, recovered strongly in the second half. REIT markets underperformed major equity markets throughout the year. Whilst most equity markets, but not REITs, ended the year ahead, there was significant volatility throughout. The domestic retail market remains challenging. Pinnacle has further increased its investment in this capability to ensure that we're well-positioned to prosper again as confidence returns. The industry-wide flow environment has been negative. The numbers are really quite large, the net outflow numbers in the industry. Net inflows in retail were modest in aggregate, Pinnacle and affiliates were able to deliver a positive net result in both halves. We have invested and continue to invest in our retail capability to ensure that we have the right people and processes to capitalize on a market recovery when it comes. Turning to slide eight, the financial highlights. We've reported net profit after tax of AUD 76.5 million for the year, essentially the same as for FY 2022, and about 14% above the record at the time, FY 2021 NPAT of AUD 67 million. When we had that big lift, we doubled our profits in FY 2021. Our diluted EPS was AUD 0.39 a share, down 1% on FY 2022, but still 7% above the FY 2021 level of AUD 0.365. We've declared a fully frank final dividend of AUD 0.204 per share, taking total dividends for the year to AUD 0.36 per share, up AUD 0.03 on FY 2022. To the left-hand side of the slide, our aggregate affiliate funds under management at 100% at 30th of June, 2023 was AUD 91.9 billion. This was up AUD 8.2 billion, or 10% on AUD 83.7 billion at 30th of June, 2022. Aggregate retail funds was AUD 22.7 billion at the 30th of June 2023, up AUD 1.6 billion or 8% on a year earlier. The ASX 300 Index was up 9.4% over the year, and the MSCI World Index up 14.4%. The Nasdaq, which is relevant to Hyperion Global, was up 25%, and the REIT index, relevant to ResCap, was down 11.4%. Total net inflows for the year were AUD 1.5 billion, of which AUD 600 million was retail, AUD 1.1 billion was from international investors, and we had AUD 200 million of net outflows from Australian institutions. Section 3 of the presentation provides an institutional and international market update, and Andrew Chambers will explain the factors at work in these markets during question time and in one-on-ones. Section 4 of the presentation provides a wholesale and retail market update, and Kyle Macintyre will elaborate during questions and one-on-ones. Slide nine shows our record of earnings growth over the seven years that we have been listed Pinnacle. Slide 10 shows the detail of the affiliate platform and highlights of the 2023 financial year. Slide 11 provides the specifics of the five-year performance track records of the 33 affiliate funds or strategies. Slides 14 and 50-53 provide further performance detail. Slide 12 elaborates our track record of strong earnings growth through periods which incorporate a range of stages of market cycles, the good and the bad. Slide 13 shows some detail on our performance fee record and opportunities. As mentioned, we've been growing the size and diversity of our performance fee potential, and we look forward to larger performance fee fund strategies delivering in future years. Slide 14 provides some detail on our strong performance during the second half. Slide 15 shows our 17-year sum and net flow history. Sum has grown at a CAGR of 22%. Our institutional pipeline remains strong, and our client base is increasingly diversified, including overseas, as we grow and evolve, recognizing changing market circumstances. Again, slide 16 provides some detail on the increasing diversification of our business. Slide 18 updates on more recent major industry awards. Slide 19 has detail on our revenue and margin performance and slide 20 has further detail on our financial results. The main item I would point out there is the change in NPAT, excluding the return on our principal investments and offsetting interest costs. I think of that as an important measure of our core earnings. That was down 13% on last year. I'll skip over the rest of Section 2 and Section 3 and 4, leaving that detail to questions and one-on-ones. I think I've referred to the key points from those sections in any event, and I'll move to Section 5, titled Growth Agenda, slide 28-38. In slide 29, we might remind shareholders that we think in terms of three horizons of growth. Horizon 1 is the main game. It is continuing to pursue net inflows into existing strategies of existing affiliates. We remain very confident of our ability to continue to do that. We conservatively estimate the capacity of affiliate's existing strategies at AUD 300 billion, so there is plenty of Horizon 1 runway left. with the attendant strong gains in operating leverage that will be accompanied by such growth. Horizon 2 is the subject of an enormous amount of activity, both within Pinnacle itself and within all of the affiliates, just about all of the affiliates. We've stated that we estimate this is costing in the order of AUD 40 million to Pinnacle's bottom line NPAT. This is a slow, patient process where we invest now for medium-term gain, but we've been doing this for a long time and have a very strong record of very high returns on our past Horizon 2 investments, not even including the unrealized capital gains on the value of the businesses and strategies that we have built. We are confident that we will this will continue to be the case in the future. Slide 31 contains two graphs which show the return profile on, of past Horizon 2 investments. We've mentioned specific domestic Horizon 2 initiatives in slides 31, 32, and 33, and the international Horizon 2 initiatives in slide 35. Slides 36 and 37 provide some detail on the Horizon 2 initiatives within metrics. In relation to Horizon Three, which of course, is where we use capital to buy into existing businesses, we were pleased to have completed our acquisition of 25% of private equity and venture capital manager Five V in December 2021. In terms of potential new opportunities, slide 38 explains in summary that we have done a lot of work on a large range of opportunities, but in the final analysis, we haven't progressed with any since Five V. This is because we have remained disciplined and patient, and we have not been convinced that the quality and valuations of the opportunities we've considered during that time were satisfactory. Also, by the way, gives us even more enthusiasm for Horizon 2, where we can build things of the right quality and at less cost. I'm out of time, I really want to mention Section 6: Corporate Responsibility. We're proud of the progress we've made on so many fronts in this regard, I'll leave it to shareholders to ask questions or read slides 39-44 of the presentation and the corporate sustainability report that we tabled last night and is on our website. Just in conclusion, referring to slides 46 and 47, I'd like to remind shareholders of the basis on which we remain so confident of our company's ability to continue to grow and prosper, which is our distinctive business model, that was designed specifically to ensure sustained investment excellence. This is embedded in our DNA, call it our core ideology or our fundamental beliefs, which are the basis on which our business was built, which will endure and guide us for many years, hopefully decades, into the future. This is the source of our competitive advantage. The most talented and experienced investment professionals love it, more importantly, their clients love it. It delivers stability and sustainability and longevity, which traditional investment institutions are less able to facilitate. We are experts at the multi-affiliate model. We've been successfully executing on it for two decades. We execute on it better than others. We understand talented investment people and their needs, the subtle forces that sustain enduring excellence and those that are inimical to it. We ensure succession when others don't seem able or willing to. Importantly, these basic principles are applicable to a very broad range of asset classes, geographies, and markets. They will sustain our growth as we evolve and adapt and as the world changes. The need for investment excellence is massive, greater than ever, and more so as investing becomes more and more difficult and as market circumstances change. I'd like to turn the meeting over to questions now, and note the appendix has some additional information people are often interested in. If we can please invite questions to any of the team. Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to change your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Tim Lawson with Macquarie. Please go ahead. Thanks. Thanks for taking my questions. Maybe just on the flows and the sort of, green shoots sort of pipeline comment, can you expand, maybe, in terms of the stages, are they sort of early stage, or are we sort of talking about mandates not yet, funded, in terms of that sort of spectrum, types of institutions and the asset classes as well? It'd be great to get some color on those sort of flows, comments, and pipeline. We'll ask Andrew to address that. In terms of retail, I might also make a comment. I would make the point that markets have moved up in the last six months. In fact, I think a lot of people are surprised at the, at the market index numbers, even over the whole year. Retail investors seem to follow market movements, and we don't really see a lot of evidence of that yet. That's in retail. Institutional is a different story. We talk about our pipeline, so I'll let Andrew speak to that. Yes, I think the question, Tim, so the, the pipeline remains pretty strong on the institutional and international side. It's not really a function of people being positive on any asset class in particular. I mean, for example, you're seeing a lot of movement in the fixed income market that's really shoring up previous substantial underweight to the asset class rather than going overweight. For us, it's really about a market share gain, and we believe that we can take and concede market share for most of our competitors, certainly in a local context here in Australia. That has been evident in the last six months, which has been a complete turnaround, obviously, in our flow numbers from the first half domestically. Obviously, the story internationally continues on with AUD 1.1 billion raise over this over 12-month period. We feel pretty good about the outlook on the international side, across several affiliates, and that's really a function of consultant ratings across the board. The search activity you've seen, so the inbound from the consultants around RFP processes and where you fit in those processes. We have a pretty substantial pipeline, which we think we can convert over the, over the coming years. It's very hard to determine exactly when those things fall and whether they're going to fall in your favor, but we feel good about the sentiment towards our, our affiliated businesses. It's important to highlight in our flow numbers as well on the international side, that AUD 370 million of the AUD 1.1 billion offshore was sourced from wholesale and retail investors overseas. Of the AUD 10.5 billion now of AUM outside of Australia, AUD 600 billion of that is from wholesale and retail investors through places like Canada, the U.K., Channel Islands, Luxembourg, Switzerland. That's a growing feature we'll continue to talk about over the coming years. Good diversification by channel and investor type, which is also giving us, you know, a lot of confidence around that pipeline. Does that sufficiently answer the question, or do you want me to expand further? No, that, that, that's great. Maybe I'll just, I'll just push on that point, in terms of the pipeline, how much is sort of what you'd sort of consider early stage versus, you know, where mandates are really just to get finalized and funded? Is there sort of a maturity that you'd talk to about the pipeline? It's, it's always weighed, and I can tell you that somebody, something that might be expected to fund in the next, three months might actually take 12 months or 18 months. It's just the way the investment committees operate, so it's very weird. We're very hard to speak with confidence around the exact timing of it, but we're very comfortable about the pipeline as it sits today and based on our past experience, that we will, we will convert a number of those. We feel pretty good about it, but until it's in the door, it's not in the door. It's, it's as wide as it's ever been in terms of our pipeline, our affordable pipeline across both, international and institutional divisions. Some of it is quite advanced. Some of it is quite advanced, Tim, but we're just hesitant. As soon as you say we're expecting it in a particular period, it doesn't come. We just need to be cautious. Yeah, okay. Then just the sort of implications for, for base fees. Obviously, we understand retail and, and offshore, typically being better, but are there other themes within the flows that outside those two I just mentioned, that could impact sort of the level of base fee? This is an area that, you know, moves around a fair bit, Tim. There... we do believe that there is a sustained trend, that the sort of things that we have outflows in tend to be old domestic equities, institutional mandates, The inflows tend to be in, you know, more global, alternative private markets, et cetera, tend to be at higher fees. That was certainly quite pronounced a year ago. Pronounced that we felt we needed to call it out. It's been less clear this time, though, because. We've always said, you know, we don't target particular fee levels, so the fee trend is just a, is just a result of whatever the inflows and the outflows have been. The inflows in the last period haven't particularly been at higher rates than the outflows, over time, that, that will tend to be the case. You know, we will also, from time to time, win significant amounts that are not at particularly high fees, which is good business, and we get, it does mess with our average rates a bit. The lack of big retail inflows has meant that our average fees haven't gone up as strongly as they do when we're getting large retail inflows. Thanks. Just, just one more question from me. In terms of the spending you called out on the Horizon 2, and in terms of sort of particularly the comment around the sort of peak nature of it, can you sort of sort of disaggregate that in terms of any sort of one-offs in that number, or do they just become sort of normal operating costs as sort of strategies get to, I mean, not maturity, but sort of, you know, live or, or commercial, whatever you want to call it? Yeah. It's hard for us to predict because, you know, we're always looking for opportunities, and we encourage our affiliates, and they're very keen themselves to pursue things that are attractive. We don't want to put artificial restraints on that. For example, in Metrics, they found some extra fees in the last little while and gone for them, and that probably stepped it up a little bit. We try to guide. We, we feel that we're basically at peak levels because there's just so much going on, you can't be absolutely certain. There's a bit of a sense, Tim, a lot of it is one-off, in that we're spending it now, and as it produces revenue then, then the net expense goes down. There's a natural reduction in it unless we start new Horizon 2 initiatives. We're not sure about the extent that we'll do that. We haven't started any new affiliates in recent times. You know, that would tend to indicate that it'll slide down. Hey, if I find a really good team and a good asset class, we'll do another, another Horizon 2 affiliate. It's hard to say, but I think I know you have to model it, and what we've guided in modeling is don't expect it to keep going up as it has been, but it's hard to predict what it'll do. Probably the best estimate is to predict, you know, similar levels or down a little bit. Okay. Does that keep fair, Dan? Yeah, just to be clear, we're talking about the net expenditure there, Tim. It's the costs will largely remain, but they'll drive revenues, which drives the net expenditure down. Yeah. If you take Aikya, for example, it's no longer in Horizon 2. They're still spending, they're spending more than they were, but it's not counted as Horizon 2 anymore, and they're now contributing to our Pinnacle Parent revenues. That's, that's gone. That number that we calculate, the AUD 14 million, that's a net number of Horizon 2 initiatives. That's great. That's clear. Thank you. Your next question comes from Nicholas McGarrigle with Barrenjoey. Please go ahead. Good day. Thanks for taking questions. Just on the Horizon 2 cost, can you talk through any of the particularly notable ones accounting for proportions of the, of that loss, just so we can get a sense of where we need to see success to defray those costs? Yeah. That's AUD 14 million number, that's, that's a net to us. In broad terms, that's AUD 7 million is in Pinnacle Parent and AUD 7 million is in affiliates. That AUD 7 million net to us is about AUD 21 million of gross expenditure by affiliates. AUD 21 million and AUD 7 million, it's about AUD 28 million being spent on Horizon 2. Now, Dan, do you, do you want to just talk to the Pinnacle Parent one, but then roughly indicate, like it's across a range. I said pretty much every affiliate has Horizon 2 happening, and that's great. We're very happy with that. The biggest one, Metrics is the biggest one. It probably accounts for about 1/2 of that AUD 21 million, perhaps. Firetrail is quite substantial because there's a large global team in there. What are the other, what are the other ones? Just to clarify, quickly upfront, that AUD 21 million number that Ian refers to, that is the net Horizon 2 expenditure in affiliates at 100%. That's net of revenues against those initiatives. As Ian said, that AUD 21 million net expenditure at 100%, broadly, half of that is in Metrics. We've called out some specific details in a slide that explains how much of that was in the second half of the year. There was a weighting of those expenses towards the second half rather than the first, and you can see that from the pack. Of the Pinnacle numbers, it's a AUD 7 million cost. About half of that is foregone service fees. That's where we're supporting start-up affiliates and not getting cost recovery for the provision of those services. Then the remaining half is the building of teams, such as their offshore distribution function and the offshore infrastructure function, where we're not yet receiving revenues to cover those costs. Does that give you a bit of extra color, Nick? The other affiliates? Sure. The others that are doing things, Firetrail has a small companies and a global team. Those teams are fully staffed. The revenues are yet to come through to totally cover those costs. Palisade has two new sub-affiliates. We've talked about these before, Real Assets. In Impact, they're progressing incredibly well, but still yet to become profitable. There's also Palisade Americas, which are in a similar position. They've deployed about $200 million of assets into North America within the last six months. Again, that team is yet to become profitable on a standalone basis, so we include that cost as Horizon 2. Plato is growing a number of new initiatives. Resolution Capital has their real assets and global listed infrastructure teams, and then Spheria has its global small caps team. All of these things currently are fully staffed. The teams are doing all the things they need to do to run those strategies at scale. Once the fund comes in, they'll become profitable, and we'll then move them out of Horizon 2, but currently, they contribute towards that, that cost number. Just to clarify, the AUD 21 million is a net cost pre-tax, and the AUD 7 million at the parent, you know, is. That's why. All right, the AUD 21 million is a pre-tax number, you mentioned? Yeah, pre-tax net of revenues. That's correct. Yeah, so if we add up, I mean, if we take AUD 28 million at 60 bits, it means kind of AUD 5 billion of flows to get to defray that to, you know, the flow environment. You know, it's very sensitive, not just to the Pinnacle Parent, but use it also to defray those Horizon 2 costs. That would be one way of looking at it. Yeah. I mean, we do expect a lot of fun growth over time from those initiatives. If you take Aikya, and I'm not going to put numbers on it, but over the next year or two, you'll see the benefit of the Horizon 2 investment we put into that, which is pretty substantial. Overseas, we had to do, like, lots of new fund structures and compliance costs and that sort of thing, and a team, sizable team, but the benefits will just be very large. Same thing with Langdon. Yeah, I mean, there's one particular line on that, I think it's slide 31, where it's like an AUD 10 million-year one initial investment that's now kind of reaching break-even. Is that what... I'm just trying, is that Aikya or is it one of the, one of the other startups? Yeah, that's Firetrail. Yeah. There was a significant capital cost to Firetrail in the beginning. The business has been profitable for some time, cumulus have been now it's approaching break-even. That's what that one is. On a cumulative basis. Got it. Yep. Yeah. Just, it's an interesting point, if you sort of strip out the principal returns and the Pinnacle Parent revenues, so obviously, revenues were under some pressure. Can you just talk through the, the way that flows drive revenue at the parent? Because obviously, that was a big delta. Yeah. Well, flows and, and affiliate revenue are important to Pinnacle Parent revenue. Sure. Of the distribution fees within the Pinnacle parent revenue, the split as to which of those are driven by FUM and by revenues is about 50/50. Probably about 30% of those fees are on a retainer, and then half of the balance is split between revenues driven by fund flows and revenues driven by revenue share. Revenue share obviously is partly driven by fund flows. The higher the fund, the higher the revenue, the higher the take to Pinnacle. It can also be, to a degree, impacted by performance fees. In certain affiliates, we get a share of those performance fees. That was lower this year than it was last year. Then the remaining balance, as I said, is driven by FUM. Okay, got it. Yeah, there's obviously a fair bit, because obviously reflecting the cost base as well, though, given it looked like the expenses came back a decent way, was that, was there sort of a specific cost program, or was it more just STIs not hitting the method the OpEx was managed? Yeah. We talked about this a bit in the annual report, Nick. We don't feel that the results this year have been what we might otherwise would have expected, so we have adjusted the STI that people are eligible to earn, relatively significantly. Yeah, and that's, that's a significant element of the way we operate. Deliberately, STI is significantly variable with overall organization results. We said in all the material about RIM, that we have to strike a balance because we do have very good, good quality people, and, you know, we need to pay them well, but they also understand that results will dictate the overall environment for them. STI, in particular, varies with the performance of the business, and that's deliberate. Yeah, I mean, it flows bounce back, you get revenue back, the STIs, you know, would, we see some in obviously increasing costs related to that success should it happen this year? Yeah, correct. You know, if flows come back, revenues grow in all sorts of ways, and that enables us to increase the STI cost. Maybe one last question, one last question from me. Obviously, you bought Five V towards late 2021. This is kind of first full year of ownership of Five V. Can you just talk through the way that their profitability has evolved and, and maybe if there's Horizon 2 costs embedded in that business as well, that might be dragging on profitability in the short term? There certainly are Horizon 2 costs there. They have, they've doubled the number of people. They're adding strategy. They'll be bringing forward their, their next major private equity fund. Five V is going very well, but Chambo is our Director on Five V, so I might just let him speak to a little bit. Yeah. So, obviously, the, the case of deployments, we've been very happy with since we've bought into the business. That's been very much in line with our expectations of the business. The launching of Horizon 2-related strategy, that just wants to market an open-ended fund for the wealth space on platform, which is called Horizons. This is a new product innovation for wholesale investors on platform, people that can't manage a capital call structure under the, the traditional private equity model. This is all part of the sort of democratization of private capital in the hands of wholesale investors, rather, as opposed to the ultra high net worth who might be able to invest directly in the, in the client-driven funds. They've also bring to market in time, a growth equity fund. They've built out a New Zealand private equity team on the ground in New Zealand, so brought on three people. They've increased staff numbers from, I think, at 12 people when we first invested, to a touch over 30 today, to resource themselves up, to increase the cadence of deployment and crystallization of assets. Obviously, achieved two exits during the period of time they've been invested, both on [Dennett] as well as Monson. 2.1 x multiple money and 2.3 x. Exiting at very attractive multiples in a more challenging environment for private equity, which is really important signaling for new investors that are coming to the new fundraise, so they can still achieve really good returns on money, even in tougher environments. That's going particularly well. So the open-ended fund, we think, should be potentially a category killer product for the platform. Private equity, the closed-end funds should be at some stage of this financial year, potentially before the end of this calendar year or early next year. That's earlier than what we had forecast in our, you know, our initial case when we, we bought into Five V. They're deploying the balance sheet really well into assets, so they're using that balance sheet to hold particular investments for the horizon fund, so people can get deployed without sitting in cash for long periods of time. It removes that whole cash drag in the performance, so giving a great outcome for investors. That balance sheet being, being put to very good use. We're delighted with the way it's all heading and, the returns which seem to deliver to investors. Nick, do you want me to expand on Five V? Maybe I'll just add another one. In terms of the next fundraisers, do they expect those to get bigger for the core private equity fund? And when do they look to start crystallizing the, the Fund III? Yeah. That's happening as we speak. There are obviously crystallized two assets from Fund III. I think we can expect some more over the next period of time. I won't predict when, because it's always very hard to, to do exactly that, but I'm sure they will share with the market some way of exit when they occur. In terms of the next fundraise, I would expect it to be larger than the previous one. Remember, they're very disciplined about staying in that mid-market private equity space. They're not going to gravitate towards doing large deals. You know, there's over 15,000 companies they could potentially invest in that sort of lower mid-market to mid-market space, which has that sort of very much that growth orientation, BB SaaS businesses and the like. We're pretty confident about the deployment of that capital, albeit it'll be a larger fund than the previous one. Thanks a lot. The next question comes from John [Fentein Heid] with [Wilsons]. Please go ahead. Good morning. Good morning, gents. Thanks for taking my questions. Thinking about affiliate margins that have moved around a little bit in this period, are we correct in thinking that, excluding metrics, that the affiliates have probably seen some margin expansion, maybe in the second half and the fourth quarter? With metrics, what should we expect it, given it's sort of post-investment now, that those margins should bottom here as well? With metrics, John, with Ian sort of alluded to earlier, it's difficult to predict exactly when that change happens, but we certainly don't think that the margin that's running at a steady state margin, is not. As the initiatives that they have spent this money on begin to yield revenues, we would expect those margins to improve. Quite when that happens, it's very difficult for us to predict, but over the medium term, we would ex-absolutely expect to see that improve significantly, yes. In terms of the other affiliates, there's probably two things I'd mention. The raw margins in a couple of affiliates, ResCap in particular, are lower year on year. The cost base is largely unchanged, as you would expect. Because the market being reached has been down significantly, their fund is down and therefore, so are their revenues. Who knows what's going to happen to that market, but we would expect that that's a transitory or temporary thing. Whilst we have seen in the second half of the financial year, some larger wins across our affiliate base in lower fee business, we think that that's just a function of timing, and over time, we still expect the growing international business and the return of retail to drive those fees up again. Thanks. Okay. I suppose for us, another way to look at metrics with, with that margin, is what additional capacity do you think, these strategies have added for the group? What's come through the door so far for that? Again perhaps, what sort of capacity does it have to grow, do you expect that capacity to have similar margins to the existing business? Yeah. I mean, over time, metrics capacity will be enormous, right? It's private credit. This is an area where there are not the sort of limits and constraints on capacity that there are with equities and so on. That's very much what the metrics team is on about. Like, they've got a lot of initiatives that are investing money to grow origination. Like, origination is extremely important. That's the really big value add in, in private credit. There are a lot of private credit managers that really originate stuff, and that's not value add. They're building a lot of origination in a whole range of verticals, and they're also building, you know, their marketing, and they're building their presence in Japan and U.S. and, and so on. The money they're spending at the moment will definitely add a lot to capacity over time. In terms of the margins, I mean, you may be-- well, I mean, essentially, the areas they're moving into tend to be higher margin than the original ones that they started with to get their reputation established, et cetera. Do you want to talk to that? The traditional lending space they operated when they began was the corporate institutional part of the market. We're talking about over AUD 1 trillion of assets in that particular market. Over AUD 120 billion of new loans get originated every year in that space. You don't have the economies of scale or capacity issues as you get larger. In fact, you command better terms and conditions as a lender, the larger you get, which is very the opposite of an equity manager as you get larger in size. That's before you even get to the area of business and consumer, which are the new areas they're moving into. Small ticket business finance, equipment finance, and you name it, we share. All of them are areas and domains of banks, but they're just new areas of origination where we can package up products for fund management distribution and also for the distribution to real money investors like insurers and others, which might buy a rated, variable bond or something like that, which we sell directly to asset managers and insurers, rather than necessarily package this fund product to chain sponsors. That's a great opportunity, is taking that business and consumer segment of the market and packaging that up for investors. Just a, a little bit of a more general comment about Metrics. We, we are delighted with our investment in Metrics and our partnership with them. They have very big ambition, really very big, and we are very supportive of that. It's screwing with our P&L at the moment, so the short-term impacts, you know, we have to wear it. Just remember, we've been out there looking at buying things all over the world, and we've looked at some private credit managers. They are unbelievably expensive. Everyone wants some, and we're building something, you know? It's, we're getting a lot better value out of building Metrics than we would be out of buying something in the space, we're very happy with it. Remember when, when we decided that Pinnacle would become listed, we had to think about short term versus long term, and with being listed, put pressure on us to do things to benefit the short term. We always said, "We're going to build this business for the medium to long term. That's the smart way to operate, and from time to time, that will impact our short-term profits." We're happy to do that when it's money well spent and when the return is large. We are very confident that this money that Metrics is spending, Horizon 2 money, will produce very large returns and a very valuable business with much larger capacity than their current sum. Yeah. Thank you. Just on the PI, this year, you mentioned on the call, it's obviously a measure of core earnings, and it's down about 13% year-on-year, I think. Are we right in thinking that you made about a 14% return on that investment in FY 2023? Where was that invested, and how much do you expect to be invested in 2024? Yeah. One comment- How do we think about the returns from those instruments as well? Okay. Most of that money is what we call dry powder. We borrowed AUD 100 million. It's actually AUD 120 million just for the moment, but we'll be repaying AUD 20 million. That was for a specific purpose. Basically, what we do is, we borrow that money. It's there for if and when we find a Horizon 3 that's attractive. In the meantime, it's largely parked in sort of Metrics and Coolabah. That's where most of it is. Besides that, there, there is a reasonably significant amount that are seed. It's very valuable for us to use our balance sheet to seed funds and strategy, new funds and strategies for affiliates. There's some of it in those, and some of that is equities. It's. Fair part of it's hedged, but not all of it, so it does move with equity markets. Dan, do you want to just talk a little bit more about those, that balance sheet? Sure. The way we think about it, John, and Ian sort of touched on this, is that AUD 100 million is the line that we've been provided by the CBA. We really think of it in terms of a net return, the net return of PI, less the debt cost in the year, was AUD 8.1 million. That's about a 7% return on that line. Now, obviously, the debt cost has gone up quite significantly in the year, with base rates having risen. Where we put that money is in Metrics and Coolabah. They're floating or zero duration credit. The returns on those have also risen. That portion of the book should also be broadly cost neutral, if not picking up a small carry on it. The remaining portfolio, as Ian said, is in seed positions. In the last year, we have been in strategies managed by affiliates that have done very well. On a long-term view, we'd expect that to recur. Quite what's going to happen in a 12-month period, we don't know. We tend to hedge, we try to hedge out the market risk. We just take index futures in the markets in which we're providing seed. Any return on top of that is the alpha generated by those strategies. In terms of modeling purposes, we tend to think that the returns on that should be slightly better than neutral at the debt cost. Right. Thank you very much. That's helpful. Last one from me, if, if I can direct it to Kyle, if that's all right, given, I, I think he's on the call. I'm just interested to know how your first couple of weeks are going, if there are any near-term projects on the horizon, and how you're thinking about angles of growth in this, in this market, which is obviously still a bit challenging for retail, at the moment. Yeah, for sure. Thanks for the question, too. It's been an exciting start for me. It's been four weeks in the role, but obviously, I've known the retail team for a very long time, given my affiliation with Firetrai l, working directly with the retail team. I've been really, really pleased with the efforts and the focus of the retail team since I've started. I'd echo some of the comments that Ian and Andrew have made with regards to taking market share. While there's been a challenging environment, given the uncertainty and the market conditions, it's been really pleasing to see that our affiliates have been taking share and holding share in their key products. Some areas that I've been really excited about since I've come in have definitely been in the wholesale space. You know, this market is evolving very quickly. We've been innovating with products that we think are really investor-friendly. I think that's going to be something that you continue to see driving growth in flows in the retail market over the next 12 months. We've obviously spoken to Five V, we've spoken to Metrics. In addition to that, we're expecting some of our other Pinnacle-affiliated private asset managers, such as Palisade, to come to market with some attractive funds that have really good access points for investors. That's one area. You know, just looking at some of the high-frequency data, we have seen demand for fixed income obviously pick up, particularly in high yield and longer duration assets. That has been an area of focus for the team. Obviously, you know, what we're doing at the moment is making sure we're getting in front of our clients, leveraging the breadth and the depth of relationships that we've got, so that when you see FUM and flows returning to the Australian wholesale and retail market, you know, we're going to be really well positioned to continue to take share. Yeah, it's been a good start. Obviously, you know, as conditions return, we want to make sure we're in front of clients now so that we're well positioned for that market environment. Great. Thanks, Kyle, and thanks, Ian, Dan, and Andrew. You're welcome. Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. Your next question comes from Dylan Jones with Ord Minnett. Morning, all. Thanks for taking my questions. Look, just following up on the employee expenses, I think you described the STI considerations quite well. Are there, are there any other considerations, I guess, in the employee expense line we should be making to FY 2024? I guess any, any sort of comments, maybe more specifically, you can sort of provide around headcount and capacity there? Yeah. Look, we're well resourced for the job we had to do. We have deliberately maintained very strong capability in all areas. Look, I'm very aware that there are quite a lot of institutional funds managers cut costs when, when revenues are down. We don't, we don't do that. We maintain our capability strong, and we, we make sure that we're ready when conditions improve. We, you know, there are areas we want to grow, and we could grow more if we, if we had better conditions. We've added a very key person on the West Coast of the U.S. The U.S. has so much potential for us. We would like to add some more people, but we're being pretty restrained and, you know, obviously, while our revenues aren't growing strongly, we're going to be very careful with our costs. You'll see that all of our ex-executives, 50% STI and no salary increases going to the new year, at the time when normally salary increases will be looked at. We're, we're very cost conscious, and that will continue. We don't see that we have major areas to add. You know, we've added in risk and compliance and, and various ops areas to be able to do more overseas and so on. I think it should be reasonably steady as she goes. I mean, our, our employee costs will float up over time as we grow, but there is some operating leverage in our functions as well. Nothing big to call out. The one thing I would say, we have, we have some LTI vesting later this year, we will issue some new LTI-... which will, you know, sort of maintain that non-cash P&L expense that we book for LTI. That may float up as we keep employing lots of good people, we have grown retail distribution a bit, just sort of modestly, progressively, as their task keeps growing more strategies to represent, nothing really big to call out. Got it. Thanks, Ian. Just, just maybe one quick follow-up on the parent revenue and expenses. i-is the expectation going forward that the parent will operate at around breakeven, or do you think, given the flex, particularly that you have around STIs and maybe some other areas, i-is the parent, just looking at a, on a sort of standalone basis, looking a bit more profitable now? Yeah, look, that's probably the case. We originally designed it to broadly break even, then we brought in a couple of affiliates where there was a bit of quasi-equity in our distribution arrangements. You, you know, broadly, they should be profitable. Performance fees in the right areas will add to our profit. We don't target a particular outcome for Pinnacle Parent. The main game is our equity interest in affiliates. Yeah, probably a little bit, I wouldn't go modeling large profits in Pinnacle Parent. No, got it. Thanks for that. Maybe, just lastly from me, maybe a question for Kyle, to have you put some comments across the board. I guess, retail flows, you, you sort of mentioned, Ian, I think that retail channel generally follows markets, we've seen markets sort of tick up towards the, the back end of the second half. You know, the retail channel obviously remains a little bit subdued. I guess my question is, what, what do you think it's going to take to sort of get retail flows sort of coming back to the market on that basis now? I guess, is it really a story around just sort of reaching peak interest rates before we see that? I guess, how would you, as the management team, sort of seeing that? Yeah, you... It's Kyle here. You, you are right that you've seen that strong recovery in markets. When we talk to our clients, you know, it's the underlying volatility that they're getting comfortable with. In addition to that, you know, you touched on this, the higher cash rates and cash being a viable alternative for investors at the moment has definitely impacted the retail market. I, I think you'll need to see a sustained period of stability in equity markets in order to bring confidence back to that wholesale and retail market. Now, you know, there's no doubt that we're having daily conversations at the moment, but we have not seen conditions turn in the underlying flows or numbers there, particularly across our equities products. That's, that's what we're seeing at the moment. The big issue really is, sorry, the big issue really is the equity space, and it's true of insto as is of retail. If you continue to have market rallies, like the way we had, people are selling into market strengths. They're actually taking money out of the market as it rallies. It's not just the fact you've got higher markets, the markets are at higher levels, but also you have higher discount rates, which impacts the value of equities, but also an uncertain earnings outlook. You know, with potential recession, we don't know, on the horizon, lower potential earnings from equities, is the thing that's really damping. It's those three things together for both insto and retail, which is giving people pause at the moment without putting new money into the space, impacting to rebalance and trim back to marketplace. Yeah, you know, the most pleasing thing from our perspective when we're talking amongst the retail team is that despite the fact that you've seen outflows across Australian equities, across small caps, what you've actually seen with our Pinnacle affiliates is you've actually seen a lot of resilience there, which tells me we are taking share. There are a number of large incumbent managers where we can continue to take share, given the high quality of our affiliates. That has really been our focus at the moment, because if we can take share now in terms of people's underlying portfolios, then that really puts us into a good position as those flows start to return across equity markets. That's really been our focus. I've got it. Thank you very much for that. I'll leave it there. Thank you. There are no further questions at this time. I'll now hand it back to Ian for closing remarks. Okay, well, we've gone a little bit over time, so, I think we just remains for us to thank everyone again, for joining the call. We have a hectic several days ahead of one-on-one meetings. I just encourage any shareholders, who have questions, reach out to us. We're always happy to talk. Thanks very much for joining, everyone.