Shaun Ler: Now, imagine, a fund manager like Magellan or Platinum. A few guys come together, set up shop and run a couple of investment portfolios. Now, in that company, they need to do their investments themselves, they need to do their business development themselves, they need to do their own paperwork, operational work. So, that's your typical boutique manager.

Now, imagine, 15 of these boutique managers all together under one company, and that is Pinnacle. Now, Pinnacle is a multi-boutique growth incubator. In other words, it manages a portfolio of boutique fund managers. Now, what it does is that Pinnacle proposes to assist these fund managers with their back-office work, helps them with their operations, helps them with their distribution, helps them with their business development so many of these portfolio managers can go up there and run their own portfolios. And the model is also attractive to fund managers because Pinnacle apart from helping you do your business development and all this operational work, it also actively helps you to expand by, for example, seeding strategies, helping you expand into different countries, helping you create new product structures. So, that's just some quick intricacies between Pinnacle and other portfolio managers, companies like Platinum and Magellan.

We all heard about interest rate rises and inflation, right? So, when interest rates kept going up, what happened around the world was that investors were nervous, and they just rebalanced out of most asset classes and just kept most of their money in cash. Now, that has affected all portfolio managers, because all of a sudden, many portfolio managers are seeing redemptions and many of them are seeing huge declines in market returns. Now, we view this as a cyclical event, and we expect Pinnacle to get back its lost mandates, as well as the mandates of other competitors when investor appetite for listed assets return. Now, what's impressive is that most of its funds actually received new money over the last 12 months when many other fund managers faced massive redemptions.

Now, another thing is that some of Pinnacle's higher-profile boutiques, especially Hyperion, has not performed as well in the current environment. But many people are overemphasizing this and forgetting that other Pinnacle boutiques are performing very well. At a group level, most of Pinnacle fleets are outperforming more than its peers and are also outperforming more consistently than its peers, and this will help the group attract more new money. And at current prices, the market is pricing Pinnacle like a gradually maturing firm. Now, we think that despite its elevated multiples as compared to other ASX-listed fund managers Pinnacle has better investment appeal versus others who are more vulnerable to mandate redemptions, fee compression or loss of key investment staff.

Now, I should note that the risks facing Pinnacle are not unique to itself, but all other active managers as well. Two of the most notable ones are redemptions from institutional investors, so think about your typical Aussie super funds as well as competition from passive ETFs. Now, we believe Pinnacle can manage this risk better than most other active managers. Now, for example, the company can offset the downside from redemptions and fee compression through sourcing more high-margin, sticky retail money. So, its products are newer, better-performing and are more high-profile relative to other household names like Pendal or Perpetual. And unlike many of these mature companies, because Pinnacle is so new, its strategy is also quite nimble. Now, it's very active in product enhancements like creating active ETFs, performance, fee strategies and seeding new asset classes, and the company is also growing its (fund) from international investors, and we also note that the fee pressure overseas is actually less intensive than in Australia. And the last thing is that while many institutional investors, so think about your super funds, have in-house portfolio management, a lot of this tend to be centric on more vanilla asset classes like, say, Aussie equities or large cap global equities. Now, while Pinnacle may lose its Aussie equity mandates, it can certainly upsell more exotic strategies like emerging market equities, real assets and alternatives. Now, we are expecting inflows into its more exotic strategies to offset the redemptions from other plain vanilla strategies.