Pinnacle remains a “standout” fund manager, according to Morningstar, amid a challenging backdrop for active asset management and the addition of a new global equities affiliate from the UK.
The research house praised Pinnacle’s performance and product range expansion as the reasons it has upgraded the business.
This expanded range of strategies will lead to performance fees supporting revenue growth if affiliate funds outperform, particularly as newer affiliates such as Aikya and Longwave are nearing profitability.
“Strong relative performance and ongoing expansion of its product range and distribution footprint helped the firm attract robust client funds over the 10 months to April 2024 amid global investor caution towards risk assets.
“Pinnacle’s strong investment performance and competitive fees augur well for future business wins. A focus on increasing stickier, higher-margin FUM – notably through expanding its private markets offerings and broadening distribution among retail, wholesale, and international clients – is expected to mitigate downside risks from industrywide fee compression.”
It also noted Pinnacle’s private markets funds, which are harder to replicate via passive markets than other asset classes, has seen FUM grow from 11 per cent in December 2019 to 16 per cent in December 2023.
As a result, Morningstar upgraded pre-tax profit margins to improve by 50 per cent by 2028, up from 42 per cent.
It also discussed the newly announced affiliate to be formed from the global equities team at Royal London Asset Management, its first new addition in two years and its third offshore affiliate.
This will include head of equities Peter Rutter and portfolio managers Chris Parr, Will Kenney, James Clarke and Niko de Walden. At RLAM, the team was responsible for £10.4 billion ($20 billion) in assets under management across the firm’s global equity funds.
“The imminent addition of a new affiliate, led by global equities manager Peter Rutter – originally from Royal London Asset Management – marks Pinnacle’s first new boutique addition in more than two years. This move expands Pinnacle’s global equities exposure – around 20 per cent of FUM as of the first half of 2024 – and should deliver revenue synergies by enabling cross-selling opportunities, given Rutter’s distinct investment style to Pinnacle’s other equity managers.
“Morningstar Manager Research has noted that while at Royal London, Rutter’s team has adopted a diversified approach that aims to outperform benchmarks across multiple market environments. This contrasts with some other Pinnacle equity managers that may underperform in certain market cycles due to their relatively specific investment styles.”
