The Pinnacle Investment Management Group Ltd (ASX: PNI) share price is in the spotlight after revealing details of performance fees for HY22.
Pinnacle Investment Management is a business that is invested in high-quality fund managers and aims to help them operate and grow.
Performance fees
Pinnacle revealed that four of its affiliates have crystallized performance fees for the six months to 31 December 2021, totalling approximately $18 million.
The ASX share’s net share of these performance fees, after tax payable by the affiliates on this revenue, is approximately $6.2 million.
Within the affiliates, there are 18 diverse strategies with the potential to produce significant performance fees each year, and 11 of those had the potential to crystallise in the first half. Of the 11, five strategies have delivered in the half-year.
In the second half, all 18 strategies have the potential to crystallise performance fees, though six are currently below their high-water mark.
Principal investments
Pinnacle also said that it was expecting the net return on its principal investments for the first half of FY22 to be approximately $2 million. This amount is made up of $1.9 million of dividends and distributions, as well as a net positive $0.1 million of investment returns (fair value gains/losses on financial assets at fair value through profit and loss). That includes the losses from hedging equity market exposures.
Funds under management (FUM) and net inflows
Pinnacle said that it will release details about funds under management as at 31 December 2021 and net inflows for the half year to 31 December 2021 will be released on Thursday, 3 February 2022.
My thoughts on this and the Pinnacle share price
Any performance fees generated is a bonus for Pinnacle and shareholders, though recent results may mean that good outperformance is often expected. It can’t necessarily generate huge outperformance every single year.
In the FY21 half-year result, Pinnacle said that it saw a $11 million share of performance fees earned by Pinnacle affiliates.
However, the Pinnacle share price has dropped by more than 25% over the past two months at the time of writing. I think Pinnacle has an attractive long-term future, so this could prove to be an opportunistic time to look at the investment business, if FUM can continue to grow at an attractive pace.
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