Pinnacle’s Performance Fee Slump Raises Questions Amid Aggressive Expansion

Financial Results Reflect Mixed Performance

Pinnacle Investment Management Group Limited (ASX – PNI) has released its interim financial results for the six months ending 31 December 2025, revealing a nuanced picture of growth and challenges. The group reported a net profit after tax (NPAT) attributable to shareholders of $67.3 million, marking an 11% decline compared to the prior corresponding period (PCP) of $75.7 million. This decline was primarily driven by a significant reduction in performance fees, which fell to $13.4 million from $36.4 million in 1H FY25, reflecting the absence of an exceptional contribution from Hyperion in the prior period.

However, when excluding performance fees, Pinnacle’s NPAT was 37% higher than the PCP and 11% higher than the second half of FY25, underscoring strong underlying earnings growth. Diluted earnings per share (EPS) followed a similar pattern, down 18% to 30.1 cents but up 27% before performance fees.

Record Inflows and Growing Funds Under Management

The group achieved record net inflows of $17.2 billion, distributed across domestic retail ($6.8 billion), domestic institutional ($7.0 billion), and international markets ($3.4 billion). This robust inflow pushed aggregate affiliates’ funds under management (FUM) to $202.5 billion, a 13% increase from $179.4 billion at 30 June 2025. Retail FUM grew 18% to $46.7 billion, while international FUM rose 12% to $57.8 billion, reflecting Pinnacle’s successful diversification and expansion strategy.

Chair Alan Watson highlighted the strength of Pinnacle’s broad affiliate platform and its increasing presence in larger addressable markets, crediting these factors for the strong net flow outcome. Managing Director Ian Macoun emphasised the deliberate diversification efforts over recent years, which have enhanced the group’s resilience and growth avenues.

Strategic Acquisition to Cement International Footprint

In a significant strategic move, Pinnacle announced an agreement to acquire the remaining 79.2% stake in Pacific Asset Management LLP (PAM) for approximately A$418.8 million. This acquisition, expected to complete in the first half of calendar year 2026 subject to regulatory approvals, values PAM at 15 times its run-rate EBITDA of £17.9 million as of December 2025.

PAM, a UK-based growth-oriented asset management platform, brings a complementary distribution network, innovative managed account technology, and a strong growth outlook. Since Pinnacle’s initial investment in 2024, PAM’s assets under management have grown by 53% to around £14 billion. The acquisition is expected to be immediately accretive to Pinnacle’s earnings per share and enhance its global growth profile.

Dividend and Balance Sheet Strength

Pinnacle declared an interim dividend of 29.0 cents per share, franked to 80%, representing a 7% increase from the FY25 final dividend but a 12% decrease from the 1H FY25 interim dividend. The dividend payout ratio stands at 96% of diluted EPS, reflecting the company’s commitment to returning value to shareholders.

The group maintains a strong balance sheet, with cash and principal investments totaling $439.6 million at 31 December 2025, supported by a fully drawn $100 million facility from the Commonwealth Bank of Australia. After accounting for the recent $92 million acquisition of a 5% stake in Advantage Partners and the forthcoming PAM transaction, Pinnacle expects to retain approximately $110 million in dry powder for future growth opportunities.

Outlook and Growth Initiatives

Pinnacle’s growth agenda remains focused on expanding its multi-affiliate platform through organic growth, new affiliate incubations, and strategic acquisitions. The group’s Horizon 2 and Horizon 3 initiatives, which include investments in new affiliates and international expansion, have reached breakeven or better, contributing to margin improvement and resilience.

With 86% of affiliate strategies outperforming their benchmarks over five years, Pinnacle’s investment excellence continues to underpin its competitive advantage. The company is well-positioned to capitalise on large addressable markets across Australia, the UK, the US, Japan, and other regions, leveraging its diversified platform and strong distribution capabilities.