Okay. Good morning, everyone. It's now 09:00 according to, my iPhone. So, good morning to you all, ladies, gentlemen, fellow shareholders, colleagues, and visitors. Welcome to our twenty twenty Annual General Meeting.
We hope that you're all staying well and safe, obviously. Thank you for taking the time to join us virtually today and for your continued support of the company in what has been an unprecedented and challenging year. By way of introduction, my name is Alan Watson, and I'm the chairman of Pinnacle Investment Management Group Limited. Ian McCown, our managing director, has joined me in person at the Sydney office. Although, as you can see, he's in an adjoining room, so we are socially distanced appropriately.
Alvin Quoc, our company secretary, is also in attendance today, as is Dan Lonigan, our chief financial officer joining us from Brisbane, and our auditor, Ben Woodbridge, morning, Ben, from PwC is also joining us by video conference and will be able to answer any questions shareholders may have in relation to the twenty twenty financial statements. Registration to attend the meeting and vote has now closed. The next slide contains important information and disclaimers in relating to the in relation to the presentation, which I encourage you to read and note. Okay. Perhaps I may now turn to the agenda for today's meeting, which is as shown on the screen.
The meeting will commence with the formal business of the Annual General Meeting. After that, Ian will provide an update from the Managing Director, followed by Andrew Chambers, executive director and head of institutional and international distribution, and Ramzin Jaju, head of retail distribution. Both will provide an update sorry, an update and outlook on the institutional, international and retail markets. I have been informed by the company secretary that we have a quorum present, and therefore, I now declare the meeting open. I'm also advised there are no other apologies recorded prior to the commencement of the meeting and that the notice of annual general meeting was sent to all registered members within the notice period required.
I now table the notice of meeting. And unless there are any objections, I will take the notice convening this meeting as read. I will now proceed with the formal business of the meeting in the order that it appears in the notice of meeting. There are four matters of ordinary business to attend to, being the formal tabling of the 2020 financial statements, adoption of the remuneration report, reelection of two of the company's directors, and issue of securities to nonexecutive directors or their associates in lieu of directors' fees under the Pinnacle Omnibus incentive plan. Shareholders may ask questions prior to each resolution being put to the vote using the q and a box displayed at the bottom of your screen.
I request that shareholders limit themselves to two questions each and only ask questions in respect of matters relevant to the item of business being considered. Questions may be moderated or amalgamated if there are multiple questions on the same topic. Remember, Ian will be providing a full update after the formal business of the meeting has been dealt with, and there will be an opportunity for shareholders to ask general questions after that presentation. With regards to voting, people that are entitled to vote are shareholders, representatives and attorneys of shareholders, and proxy holders. As noted in the notice of meeting, resolutions will be decided by a poll, which I now declare open.
A voting card should appear on your screen now. This voting card can be repositioned on your screen.
I
will put six resolutions to the meeting shortly. In order to cast your vote on each resolution, please select for, against, or abstain. There are a number of voting exclusions that apply to some of the resolutions, and these were outlined in the notice of meeting. All open proxy votes directed to the chairman will be voted in favor of the relevant resolution. However, any such proxies in relation to the remuneration report appointed by any key management personnel will be exclude excluded from the chairman's proxy dose, and any such proxies in relation to the issue of securities appointed by any person who participated in such an issue or an associate of those persons will also be excluded from the chairman's proxy votes.
All valid proxies received have been recorded, and these will be reported to the ASX after the meeting. For shareholders' information, we will display on the screen prior to the consideration of each resolution, the proxy voting for each resolution. The first item of formal business on the notice of meeting is to consider the financial statements of the company for the year end 06/30/2020, together with the directors report and auditors report as set out in the 2020 annual report, which have been made available to shareholders. I formally table the financial statements of the company for the year end June 2020 and the related directors' reports, directors' declaration, and auditors' reports. I will take all of these reports as read.
If anyone has questions in relation to the financial statement, the content of PwC's audit report for the year end 06/30/2020, the accounting policies adopted by the company in relation to the preparation of the financial statements, or the independence of the auditor in relation to the conduct of the audit, please submit them now. Okay. We currently have no questions on those. So the next item of business is to consider the hang on. The next item of business is to consider the adoption of the remuneration report for the 2020 financial year.
The remuneration report is contained within the 2020 annual report and forms part of the director's report. The remuneration report incorporates information required by section 300 a of the Corporations Act, which sets out the remuneration policy for the company, reports the remuneration arrangements in place for key management personnel, including all directors. Section two fifty r, open brackets, two closed brackets of the Corporations Act requires companies to put a resolution to their members that the remuneration report contained in the director's report be adopted. If anyone has questions in relation to this resolution, please submit them now. There are no questions.
So I will now put the resolution shown on the screen to the meeting. The number of proxies received by the company as at forty eight hours prior to meeting their resolution resolution are are now now shown shown on on the the screen. Screen. Please cast your vote on the voting card. Okay.
We now move to the reelection of directors. The board comprises seven directors, four of whom are nonexecutive and three of whom are executive directors. All directors own equity in the business. The audit compliance and risk management committee and the remuneration and nominations committee both fully comply with the ASX corporate governance principles and recommendations as follows. The audit committee comprises three nonexecutive directors, all of whom are independent and is chaired by an independent director who is not chair of the board.
And the remuneration and nomination committee comprises four nonexecutive directors, all of whom are independent and is chaired by an independent director. The meeting now needs to consider the reelection of a number of directors in accordance with the Corporations Act and the constitution. The constitution requires that one third of the company's directors eligible for rotation, being all directors other than the managing director or and any director appointed as a casual vacancy, stand for reelection every three years. The directors to retire by rotation at each AGM are those that have been longest in office since their election or last reelection. As the company has six directors eligible for rotation, two directors are required to retire from office at this year's AGM.
Therefore, Andrew Chambers and myself are retiring from office and offer ourselves for reelection. As the next item refers to myself, I will hand the meeting to Ian to chair this item. Ian?
Thanks, Alan. And I thought it might be just worth mentioning that all directors of the board are on this call virtually. So the explanatory statement attached to the notice of meeting provides information in relation to Alan. Alan joined the board in July 2013 and became chairman in October 2015. He has thirty five years of investment banking experience within various global equity markets.
During this period, he established, directed, and was responsible for the conduct of securities business both in Europe and Asia, advising many companies on capital structuring, IPOs, takeovers, mergers and acquisitions, and investment relations strategies. Alan has held positions as managing director of BZW, DLJ, Lehman Brothers, and as head of securities Europe for Macquarie Capital. So I guess I'll just ask at this point if anyone has any questions in relation to this resolution for the reappointment of Alan Watson, please submit them now. Calvin, do do we have any any questions in the queue? I can't see any.
No. We don't, sir.
Yeah. Okay. Thanks, everybody. So I'll now put the resolution that's shown on the screen to the meeting. The number of proxies received by the company as at forty eight hours prior to this meeting for this resolution are now shown on the screen, But please cast your vote on the voting card now.
Okay, Ian. That's done.
Yeah. If everyone has has voted. So, Alan, you may now resume the chair.
Thanks, Ian. Turning now to Andrew Chambers. The explanatory statement attached to the notice of meeting provides some information in relation to Andrew. He was appointed as an executive director in September 16 and has been a senior executive with Pinnacle since he commenced with the firm in March 2008. Andrew has extensive multichannel, I.
E, retail, wholesale, and institutional and multi jurisdictional distribution experience and is currently responsible for leading the firm's institution and international distribution divisions. Prior to joining Pinnacle, Andrew worked for Legg Mason, one of the world's largest multi affiliate investment management firms. Andrew is also a director of a number of our affiliates being Metrix, Omega, Riparian, and Tutris. If anyone has any questions in relation to this resolution, please submit them now. Okay.
There are no questions in relation to Andrew. I will now put the resolution shown on the screen to the meeting. The number of proxies received by the company as at forty eight hours prior to this meeting for the resolution are now shown on screen. Please cast your vote on the voting card. Thank you.
The next item of business is to consider the approval of the issue of securities to nonexecutive directors in lieu of directors' fees under the Pinnacle Omnibus Incentive Plan. The board considers it highly desirable that the interests of executive and nonexecutive directors are aligned to the interests of shareholders through grants of equity securities to them. Accordingly, nonexecutive directors have agreed to apply a portion of their director fees currently set at a minimum of 30% towards the acquisition of performance rights granted by the company via the omnibus incentive plan or the purchase of shares in the company on market at their own election. It is noted that Lorraine Behrens has elected to acquire shares in the company outside of the omnibus incentive plan. The explanatory statement attached to the notice of meeting provides information in relation to the proposed issue of securities.
The issue of securities to each director will be considered as separate resolutions. As the next item of business relates to the issue of securities to myself, I shall hand the meeting to Ian to chair this item.
Ian? Thanks, Alan. If anyone has any questions in relation to this resolution, please submit them now.
There are no questions in.
Okay. So I now put the resolution shown on the screen to the meeting. The number of proxies received by the company as at forty eight hours prior to this meeting for this resolution are now shown on the screen. Please cast your vote on the voting card.
Okay.
Alan, you you you can now please resume the chair.
Thanks, Ian. The next resolution relates to the issue of securities to debt deal. If anyone has questions in relation to this resolution, please submit them now. There are no questions in the queue. Thank you.
I'll now put the resolution shown on the screen to the meeting. The number of proxies received by the company as at forty eight hours prior to the meeting for the resolution are now shown on
the
screen. Please cast your vote on the voting card. I now move to the final resolution, which relates to the issue of securities to Gerard Bradley. If anyone has questions in relation to this resolution, please submit them now. There are no open questions.
Sorry. There are no questions in the queue. Thank you. I'll now put the resolution shown on the screen to the meeting. The number of proxies by the company as at forty eight hours prior to this meeting for the resolution are shown on the screen.
Please cast your vote on the voting card. Thank you. Please ensure that you've cast your votes on each of the six resolutions by selecting for against or abstain. Once you have cast your vote on each of these resolutions, please select submit to complete your voting process. Also, please select the raise hand icon on your screen if you require more time to complete your voting card.
Thank you. I now declare the poll closed. The results of the poll will be announced to the ASX as soon as they are available. That concludes the formal business of this meeting. And so I will now hand over to Ian for an update on the managing director.
Thanks, Alan, and good morning again, everybody. What I would like to do today is firstly to review the key themes and outcomes for our company for the 2020 financial year, then to provide an update on how we have fared during the first quarter of the new financial year, to briefly review the financial highlights for the 2020 financial year, to elaborate on the progress we've made during the past few years in increasing the diversity and robustness of the business and why this is so important, and to explain why we remain confident that we are poised to resume growth, to react to any further external adversity that may arise, and to take advantage of opportunities that may materialize. As Alan has mentioned, the 2020 financial year was a very challenging one. The second half of the financial year was a shocking period for the entire world as we know. Our company was impacted by the drop in equities market valuations, particularly in March, and the reduction in net funds under management inflows, all of which reduced our revenues relative to what would otherwise have been achieved.
These negative impacts were, however, less than experienced by many, both in Australia and around the world. Our people rose to the occasion and performed superbly, working hard to ensure a business as usual environment, supporting our clients and their advisers throughout this period when their needs were greatly heightened. Our people demonstrated resourcefulness and adaptability in a very difficult very different working environment. The result was that our revenues, funds under management, and profitability for the 2020 financial year, in fact, increased relative to the preceding financial year. The slide now showing on your screens has been extracted from our annual results presentation of the August 4 and sets out how we summarize the key themes and outcomes for our company for the 2020 financial year.
I believe it's fair to say that shareholders and analysts broadly agreed with this assessment. We think it was a solid outcome in the prevailing circumstances, although below the expectations that we held at the start of the year. I'll provide further detail on that shortly. We believe the result provided early evidence of the benefits of increasing diversity of asset class and investment strategies of our affiliates, of client type and domicile, and of performance fee potential. Although we are only partway through this diversification process, the inflows from both retail and offshore investors, the growth of our funds under management in a range of asset classes, a greatly greatly expanded beyond just Australian equities, and the receipt by our affiliates of $26,700,000 of performance fees, Pinnacle's share of which after tax was $6,600,000 in the 2020 financial year were all very helpful in a year when markets experienced major volatility and our clients were challenged in a variety of ways.
And we expressed the view that we are that we were entering the 2021 financial year poised to resume growth, to react to possible further external adversity, and to take advantage of opportunities that may materialize in this type of environment. Now as as elaborated in the next slide, happily, we have indeed experienced a resumption of growth so far in this new the 2021 financial year. The aggregate of our affiliates funds under management stood at $61,700,000,000 at the 09/30/2020. This was up $3,000,000,000 or 5% from $58,700,000,000 at the 06/30/2020. Total retail funds under management at first September twenty twenty stood at $13,800,000,000, which was up $700,000,000 or 5% from $13,100,000,000 at the 06/30/2020.
Total net inflows were $2,300,000,000 for the three months, of which 600 and mid $618,000,000 was retail, and we are quite proud of those inflow numbers for that three month period. All of this is very pleasing, and we are delighted that our funds inflows in both the retail and institutional markets have returned to more normal levels during this new financial year to date. The retail net inflows of $618,000,000 for the three months, an average of a little greater than $200,000,000 per month, compares with just 19,000,000 of net inflows for the second half of the 2020 financial year and $900,000,000 for the entire 2020 financial year. Institutional net inflows of $1,700,000,000 for the three months of the September compares with $900,000,000 for the second half of the 2020 financial year and $2,100,000,000 for the full 2020 financial year. We are pleased to find substantial evidence that what occurred during the second half of the last financial year represented a deferral of demand from clients rather than the permanent loss of demand from them for increased access to our services.
We had felt that this was likely to be the case, but it was very pleasing to have this confirmed and substantial net inflows realized during the early part of the new financial year. And in addition to the arrival of some deferred funds, we've enjoyed significant new client demand. So there was deferred and there was also new client demand. Now overall, equities markets did not impact fund levels very much from the beginning to the end of that three month period. The S and PASX 300 index was in fact down 1% over the three months ending 09/30/2020, and the Miski World Index was up 7.7%.
Market movements and investment performance accounted for just $700,000,000 of the $3,000,000,000 increase in funds under management or 1.2% of the amount under management at the beginning of the quarter. Shareholders will recall that over the course of the 2020 financial year, total funds under management rose $4,400,000,000 or 8% from 54,300,000,000 to $58,700,000,000. Although this was down $2,900,000,000 or 5% from $61,600,000,000 at the 12/31/2019, which was the halfway mark of the financial year. And that was prior to the sharp drop in equities markets in late February and in March 2020 driven by the COVID nineteen crisis. Overall, the Australian equities market was down 10.8% over the financial year, having dropped 11.9% in the second half of the financial year.
And world markets overall were essentially flat over the course of the financial year, having dropped 7.1% in the second half. New slide. So this slide summarize summarizes the highlights of the 2020 financial year. The financial highlights. Net profit after tax was $32,200,000 up 5.6% from $30,500,000 in the 2019 financial year.
Diluted earnings per share was 17.9¢, up 4.7% from 17.1¢ in the 2019 financial year. Our share of the net profit after tax from Pinnacle affiliates was $38,000,000, up 14.8% from $33,100,000 in FY '19, including Pinnacle share of performance fees after tax earned by Pinnacle affiliates of $6,600,000 in the 2020 financial year, which was $3,200,000 compared with $3,200,000 in FY '19. We had a healthy balance sheet. Our $30,000,000 CVA loan facility was fully drawn in December 2019 and used to fund the acquisition of 25% of Coolabah, and we paid a fully franked final dividend of $0.85 per share on the 09/11/2020, taking total dividends for the year to 15.4¢, the same as the previous year. Shareholders will be aware that we have for some time now been describing how Pinnacle has continued to evolve as a business that will be well positioned irrespective of market conditions.
And though it will not be immune from challenging conditions, it will be increasingly resilient in the face of such conditions so that shareholders may benefit throughout the whole business cycle. As I indicated earlier, we believe the 2020 financial year result provided evidence of the benefits of this increasing diversity, And this resilience has been enhanced by the progressive diversification of asset classes, client type, client domicile, and the percentage of funds exposed to performance fees. The next slide, '26, shows the current extent of our affiliate platform comprising 16 affiliates across a substantial range of asset classes and styles. I'll move very quickly through a few slides. These are all available on our website, and shareholders can refer to them at your leisure.
So this will be very brief. So now this next slide, 27, shows how our diversification by affiliate has increased from the 06/30/2016, Hyperion was the largest with funds under management of $5,600,000,000, representing 28.5% of the total fund. Total fund was 19,800,000,000.0 compared with now 06/30/2020 when Resolution Capital had become the largest of our 16 affiliates with fund management of $9,000,000,000 and that represented just 15.3% of the total of $58,700,000,000 under management. Slide 28 shows the greatly increased diversity by asset class over this period, the four year period from June 16 to June 20. Australian equities has become a smaller proportion of our funds, now representing about 46% of the total compared with 67% in 2016.
We have exposure to global equities, global REITs, private capital, fixed interest and credit, and liquid alternatives, all been added and grown substantially as a portion of the of the total. And, of course, Australian equities and global equities exposures are further diversified by style and by market cap segment. Slide '29 shows the increased diversification by client type that has continued to pace with retail and offshore having both grown significantly. Growth in the intermediated retail client base has been occurring for some years. The pace of growth from offshore clients is now starting to accelerate.
On slide 30, the growth in the importance of retail can be readily seen from this slide with revenue from retail clients having grown from 27% in 2016 to 43% in June 2020. We also have more than a 180 individual institutional clients now compared with 60 at June 16. Slide 31 shows how retailers increased 14.6 times over this period to represent 23% of our total fund compared with a 5.4 time fold increase in the total fund over this four year period. Slide 32 illustrates a significant growth in both the absolute and percentage of our funds under management that is potentially eligible to earn performance fees. Performance fees adds diversity to our revenue sources, being uncorrelated with market movements and each affiliate's performance being uncorrelated with the others and with other revenue.
And other than in Palisade, but now Metrix and Koolabah, performance fees will be additional to budgeted or forecast revenues. So I mentioned earlier, our affiliates performance fees after tax increased from $3,200,000 in FY 2019 to $6,600,000 in FY 2020. Slide 33 illustrates the growth of our fund, institutional and retail over the past thirteen years. Slide 34, the fund growth history of our bio affiliates, which shareholders like to look at. Can we just get that next slide, please?
And then slide 35 shows the performance of of our affiliates with a track record of five years or more. Difficult to read on the screen, but as I said before, this is all up on our website and shareholders can read at leisure. So this is in keeping with industry best practice. We continue to report our proportion of affiliate strategies that have a track record of five years or more that have exceeded their benchmarks over the past five years. This is the classic measure of medium term performance, consistency, and excellence, and it's pleasing to report that 90% of such strategies have exceeded their benchmark to the 09/30/2020.
Slides thirty six and thirty seven show our affiliates investment performance over one, three, five, and ten year periods and since inception. So although some strategies will inevitably underperform their benchmarks over the short term, our affiliates medium to long term records remain very strong in what have been challenging recent conditions. Slide 38 shows that Pinnacle and our affiliates have continued to receive recognition from independent experts for the quality of our investment offerings. Number of our affiliates, including Pinnacle itself, are nominated for the Zenith Awards, which will be announced tomorrow evening. It's a significant achievement just to be nominated.
So best of luck to everyone for those awards. Now slides thirty nine and forty, I'm almost finished. Just point out that Pinnacle is passionate about enabling better lives through investment excellence. Our charitable foundation has continued its commitments to existing partners. Together with our affiliates, Pinnacle and the affiliates have made jointly donations of $450,000 during FY '20.
This reflects a strong recognition of the need to provide stability and security to our charity partners given the increased enormously increased demands on the not for profit sector in the past, you know, months. And this has occurred at the same time as the ability of many organizations to generate funds and engage volunteers have been severely impacted. Our major focus remains on mental well-being and early prevention of strategies to reduce mental illness and suicide, especially in young people, and on strategies aimed at both preventing domestic and family abuse and aiding the long term recovery of sufferers sufferers. Thank you everyone for listening. I'm sorry I went on a little bit long.
I will now hand over to Andrew Chambers. Thank you.
Thank you, Ed, and good morning, everyone. Thank you for your attendance and your interest. Over the next few minutes, I'll summarize for you the financial year to date, in particular, what's driving our institutional and international flows. I'll then cover the investment themes in the Australian and global institutional environment before concluding how Pinnacle is placed to navigate and take advantage of these both secular and cyclical trends. So let's begin with the financial year so far.
All we've observed since the the significant drawdowns in the March has been the steady origination and crystallization of our sales pipeline. This has been really the conversion of allocations which were coming close to closing out prior to the pandemic, you know, instead of the pandemic. These are now actually crystallizing in the form of sales. We've seen the resumption of suspended search processes by investors fully across the board without exception, and we've seen the origination of new search activity, and some of that is in response to the experience of the drawdown during the March period. Certain asset classes didn't provide either the liquidity or the diversifying characteristics that investors were looking for.
And we've also seen a meaningful contribution from international channels. I'd highlight in particular The Americas, The United Kingdom, Korea as well as New Zealand as being major channels where we've raised capital. And the two affiliates of which probably have been most raised the most capital from those channels has been Resolution Capital and Antipities Partners. The second major driver of our flows has been really active portfolio rebalancing by investors. It comes in two forms.
The first is tactical or systematic, and the second is strategic. On the tactical side, investors are very actively reweighting between asset classes based on their future expected returns of those asset classes and in response to portfolio performance of those exposures. So it's been impacted in the asset class returns, so we're seeing increased weight into Australian equities and also into global real estate securities and money coming out of global equities and also out of direct property. On the alpha side as well, we're also seeing very active rebalancing. We've had a number of managers which have spectacularly outperformed during the course of the crisis, and the investors have actually actively rebalanced those investors back to a strategic weight.
So what may might be construed as a negative outcome in terms of outflows from manager is a simple systematic rebalancing of a manager debt back to a neutral weight. We're also seeing strategic or secular gravitational allocations in portfolios, which have been occurring for the last ten years. This has been a shift away from traditional asset classes to alternative asset classes, public markets to private. And what we're observing in the market is that traditional asset classes are subsidizing those of alternatives because of the fee load. In fact, alternative asset classes globally comprise about 15 of global allocations, but 45% of the fee load, to give you a sense of proportion there.
Industry consolidation is also impacting the timing, the magnitude, and the probability of flows. So what we tend to find is consolidating entities a reluctance to make new manager allocations during the courtship and consolidation phases. This can take anywhere from twelve months up until around three years for some of these consolidations to actually materialize. And consolidation typically benefits incumbent managers over new managers as part of that process. It's really important to note that asset owners very quickly need to demonstrate scale benefits, so inevitable tension tends to occur with our asset managers over fees and capacity.
Really important to highlight to everyone here that managers may actually willingly and quite rationally forego in large mandates to repurpose that capacity into higher fee margin investor channels such as international and also retail. So let's talk about the domestic themes in the Australian market. We talked a little bit about the pursuit of scale benefits on the previous slide through the merger processes. So this is an unending trend seemingly here in Australia. Consolidation is occurring across all major investment segments.
Profit to member funds, which are the industry funds, wealth management funds, and we've seen, of course, I double left acquire ANZ OnePath and now MLC, and public sector funds where we're where I could really highlight something like T Corp New South Wales, which has rolled up effectively the state owned entities of New South Wales to aggregate them together. There's great regulatory pressure to demonstrate scale benefits. The mantra is do more for less, deliver large capacity, a level alpha, heavy customization, and competitive fees. This interestingly for us as a manager to back startups is a very attractive environment for startup managers to raise FUM because they because we can offer large capacity and have discounting flexibility as well relative to more mature managers. It's also an opportunity for mature managers to liberate and redirect low margin institutional capacity, which was very helpful in the early stages of that boutique's life, into higher margin and more diverse retail and international channels.
The next key theme I wanted to highlight to everyone is really this concept of building defense without bonds. Think everyone here would be well and truly aware of the sustained low returns on both bonds and cash. And so risks are really to the downside. So when the next equity market correction occurs, will you be protected by fixed income? With the yield cushion gone, capital losses will no doubt be magnified.
And so we're seeing this gravitational trend away from fixed income to alternative assets to supplant them. And that comes in the form of private markets, which is infrastructure, real estate, and agriculture, and, of course, we're represented by Palisade and riparian in those asset classes. Alternative credit, by public and private, and we have Koolabar and Metrix Credit represented in alternative credit. And then also in the hedge fund category. So we're talking about macro equity market neutral, and our managers such as Reminiscent Capital, Two Trees, Plato, Firetrial, and Koolabah all provide those types of strategies to investors.
Finally, I want to touch on the awakening of the engaged investor, which has been occurring over a number of years here in Australia. But there's increased focus on explicit integration of ESG, increased advocacy and active engagement with companies, the expectations of of our of our own plan sponsors of us as investment managers, increasing focus as well on decarbonization. And I use this concept as institutional herding on green pastures. And what I mean by that, if you have enough institutional investors moving on mass, it starts impacting asset prices, so you ignore it at your peril. Sorry.
Excuse me. Bear with me one moment. Okay. Would you just provide some assistance if that's okay? Just very quickly.
Okay. So sorry about that, everyone. So now turning on to global themes. So the question is, for many people, we've got this concept of loss for longer, but the question is how much longer? I think all of us have observed the beating up of long duration assets globally and also the compression of yields.
This is encouraging investors to take greater risk taking to meet ultimately meet their liabilities. And it's also driving extreme asset class and style performance. And the most obvious example of that is the difference between growth and value investors globally, which is an all time high. I saw a stage just the other day which suggested that that this current value drawdown relative to growth is the worst in two hundred years. In addition to that, we're seeing this great migration from public markets to private, and I alluded to this a little earlier.
There's $6,500,000,000,000 in private markets as of the December, and global private markets over the last decade have grown at a much faster rate than public markets, 170% versus 100% over that period. 2019 was the largest fundraising year on record. Important to note that private credit, where we have obviously Metrix Credit Partners as part of our managers, have exceeded a $100,000,000,000 for the last five years in a row. And the reason for that is it offers high yields, high yields in public debt, and attractive risk adjusted returns in a low rate environment. And, of course, we're seeing the wholesale withdrawal of bank capital from from lending as well globally for regulatory reasons.
Infrastructure as well has grown substantially, 17% annually over the last decade, making it the fastest growing of all private asset classes. Of course, we have Palisade in our stable there. Also wanted to highlight a theme of globalization and specialization. They seem somewhat diametrically opposed, but the thing they do have in common, the common thread is that is that investors are following the alpha. So on the globalization side, we're seeing the migration of North American portfolios, particularly The US, which is contains half of the global capital in terms of long term savings, from the partitioning US and international equity portfolios and transitioning those to global equities.
Important to note what underwrites this is global equity managers have underperformed US and international equity managers on average. On the other side of the spectrum, we have specialization. And an interesting one for everyone to note here is the is the growth of China. China is very well underrepresented in in investor portfolios. The average weight held by foreigners in China is equities and bonds is around 3%.
The neutral weight is more like 15%. So we're now seeing a lot of dedicated specialist allocations to a country like China to get much more to a benchmark neutral weight. The China ratios market in particular is now the second largest equity market in the world, has large retail ownership or or therefore a lot of institutional ownership. Is around about 80% of volumes are traded by retail investors, and therefore, the market is highly inefficient and ultra rich. So it's a great environment for active stock tickets.
Gonna finally touch on fiduciary consolidation globally as an important theme. Not enough people talk about this, but fiduciary consolidation is occurring on three levels, at the asset management level, at the asset consulting level, and also at the asset owner level. On the asset manager side, about 80% of global M and A is occurring in North America and in Europe, and I believe this highlights the inorganic growth ultimately of both markets. The middle sized managers in particular are hard finding it harder to distinguish themselves from the large scale players in the big the boutique sharpshooters, of which Pinnacle typically backs. Roger Irwin of Willis Towers Watson made the recent observations of top 500 global asset managers for the last ten years, half of those have now disappeared, both brands.
There's an urgency to boost scale, diversify product lines, and increase geographic reach of those managers. And it's important to note that that post merger integration is fraught with danger and a lot of friction. It typically occurs around corporate culture and capacity limits associated with those those those particular strategies and overlap of our competing strategies. This typically sows the seeds for team walkouts. In fact, a number of our most successful boutiques have been a result of this exact dynamic.
Now let's talk about asset consultants. Globally, we've seen extensive insurance broker consolidation, and embedded in most insurance brokers is our asset consulting businesses. And the most recent example of this is the world's second largest asset consultant or insurance broker in in Aion, acquiring now Willis Towers Watson, which is expecting to close early next year. It's the third largest asset consultant insurance broker. That will be to compete head on with with Mercer.
We're also observing founder owner succession events in these asset consulting businesses. Many of these were established in the nineteen eighties and nineteen nineties, and the original founder is looking to retire and is thus selling either to other asset consultants if they're a specialist player or to private equity. And we're seeing both Russell Investments and Wilshire, for example, been acquired by private equity in recent times. Important to understand the dynamics in terms of the economics of ASK consultants. Traditional nondiscretionary consulting business is very low margin and not really scalable.
The biggest growth area for for RASK consultant being in what they call discretionary outsourced CIO, where they hire and file managers on behalf of plan sponsors. It's scalable and offers asset management style fees. They typically charge somewhere between 30 basis points to a 100 basis points to provide this outsourced service. This occurred in Australia over ten possibly twenty years ago now where we had 4,000 plans in Australia on the corporate side. We now have less than 20 today.
This is now happening as a global phenomenon. The race is on to scale these OCIO businesses very quickly. It's 2,400,000,000,000.0 US dollar industry with 19% year on year growth, so it's a very fast growth market. And most of the the people outsourcing are those participating in the endowment and foundation market and the defined benefit contribution market. We believe this creates enormous opportunities for high quality startups to partner with these OCIO platforms because like the very large super funds in Australia, they need low fees and they need high scale scalable relationships with their preferred partners.
Let's finally touch on asset owners. And this relates to the the points I made above around ask consultants and OCIO. We're seeing enormous amount of corporate and nonprofit outsourcing, particularly over The United States, and this is really for a variety of reasons, but mainly because of performance. It's now very challenging for DB schemes to meet their actuarial assumptions, and the litigation risk for trustees associated not associated with not meeting those targets mean that outsourcing is a very good option for many people. Also, price is a key factor.
For a smaller fund, it's cheaper simply to outsource. It's less complex, and particularly if it's a noncore function as well. I want to turn my attention to sovereign and public pension plans who are consolidating, insourcing, and globalizing. We continue to see the large build out of teams located in all regions of the globe for the world of these very large sovereign wealth funds and public pension plans. Even the Australian super funds are doing this.
If you were to take something like the PIFO Saudi Arabia, for example, 350,000,000,000 US dollars, you had a staff of 40 people back in 2016 and has over 1,000 today. We're also seeing the capital increasingly allocated outside of their home markets. The PIF, again, had less had had zero allocation outside of Saudi Arabia only in 2016 and has 20% today moving towards 25%. And that's just a tip of the iceberg for what other sovereign wealth funds, such as the Norwegian EPF, the Thai pension funds, and others around the world are now doing. But there's an ongoing role for independent boutiques with scarce expertise to complement the internal skills of a lot of these groups.
And so there's still a very strong role for independent sharpshooters to partner with these very large plans. So let's all bring this all together into conclusion. Pinnacle, I believe, is very competitively positioned to partner with talented teams disrupted disrupted by Global M and A as described on the other page. Pinnacle is very well placed to partner with the winners in this consolidation race. Supported startups can offer capacity, fees, viability, and alpha potential of the large growing investment demand.
Our strong international retail distribution allows us to redirect liberated capacity from Australian institutions into more diversified and high margin client base. And our broad suite of alternative asset classes make us more relevant to the secular change in investors' portfolios. Global investment solutions, which is the asset management function, infrastructure, and distribution, fundamentally mean that we are more relevant to more investors more often in more markets. This enables us to substantially grow and diversify our business by asset class, by investor type, and geography well into the future. Thank you for your time.
I'll now turn it over to Ramsan Jarjoo to lead off on the retail distribution side.
Andrew, thank you for that very in-depth overview of the institutional market trends. Good morning, everyone. Over the next ten to fifteen minutes, I will take a little bit of a different tack, and I'll briefly touch on some of the key trends I talked about at last year's AGM just for a few minutes, and then we'll get into what financial year '20 looked like for us and give a more quick update over the last three months what's happening. Let me see if I can control this slide. Here we go.
So, for those of you that tuned in last year, you may recall that I've touched on three secular trends that are impacting everyone in financial services. The first big trend that we talked about was digitization, the fact that technology was changing the way we're doing business. We touched on, ideas such as big data, artificial intelligence, machine learning. And, yes, some of these trends, have played out on the retail market this year, as well. We touched on regulation.
We mentioned last year that, you know, fiduciary obligations are on the rise. You heard Andrew talk about InstaSpace. Well, fiduciary obligations for advisers has been an area of focus for the last number of years. And there's been a greater focus on transparency across the value chain, and some of those regulatory headwinds, have impacted adviser businesses. And the third topic we talked about last year was personalization.
Basically, service providers, aren't really, personalizing their collateral, their point of sale material, of the service model. They will struggle to engage and grow their retail footprint when consumers are demanding a lot more personalization and high touch service. Now what we didn't predict last year was a global pandemic. So as you can see, in the first set of bullet points, we talked about how COVID nineteen conditions have simply accelerated some of those trends that we talked about last year. So adviser business models are under pressure.
They're struggling somewhat from productivity and profitability, because a lot of advisers are focusing on their, phase year requirements. They're focused on having to, like, get additional educational qualifications. And whilst the regulator has pushed some of those milestones out to 2021 up to 02/2025, advisers have been somewhat inwardly focused. What that essentially has meant is that the adviser market has shrunk somewhat in the last twelve months. Idea one is, it shrunk about 15%.
There would have been about 25,000 advisers, this time last year. Today, we're looking at the retail markets, or the intermediated retail market being around 21,000 advisers. What's perhaps a little bit more alarming was the quarter two of, this calendar year. So the, April to June period, about 21%, reduction, annualized reduction took place. About almost a 300 advisers left the market, and they left their authorization on the, on the ASIC register.
So, yes, initially, the good news from a pinnacle perspective, we have an ongoing relationship today with 16 and a half thousand advisers, and that number is growing in terms of what we're doing in the retail market. Some of the other headwinds that is really kinda shrinking the retail market has been corporate activity. You'll be seeing more recent times, and the MLC now is getting out of advice. Some of the other banks are already exited. Some retail businesses are switching from retail to wholesale advice so that they can bypass the additional compliance that's required of them to be offering personal or retail advice.
And the concept around personalization that we touched on last year is that, people, including clients, including advisers, are scrutinizing the value of service greater than any time in the history of mankind. Because in the advent of the digital age with the so much information in your fingertips, people are demanding, simply more value. And that scrutiny of value means that what's played out over the last twelve months is a trend towards passive strategies being beneficiaries of that trend. But it's been great news for a company like Pinnacle and affiliates where they've got very strong, capable, highly rated active managers that are delivering alpha. So if you're a strong performing manager, we've seen, as you've seen in touch on, we've had some strong retail growth, over the last, three or four months now.
In terms of the other big trend really is from a technology perspective, we've seen over the last three, four, five years, the rise of managed accounts and the rise of SMAs, separately managed accounts. This is where adviser businesses are using technology to basically operationalize their advice proposition and also reduce their risks so that you're getting all the advisers using a managed account service with scale. When they're using these managed accounts. They come to pinnacle in our boutiques, and they do negotiate some better margins than pure retail fees. But the good news is, as Ian touched on, the margins are still better than institutional market, and the margins are still better when you have these vertically vertically integrated business like AMP, like Colonial First Day.
You know, the INGs back in the day, they've been negotiating heavy volume discounts, whereas in the managed accounts, practices, our margins are getting better. So we do get scale. We're getting strong flows through these technology platforms, but the margins are a bit healthier than what they would have been three, four, five years ago. The other big trend really this year, and even with COVID nineteen period that's really accelerated this is what I've termed the analog to the digital distribution practices. In an environment where there is a lot of digital content being disseminated in the retail market, you know, all the fun company companies delivering digital webinars, content, Advisers are quite poor.
There is a little bit of fatigue that's settling in. We've had to really embrace staying ahead of the competition by collect creating content that's timely. It's shorter and punchier, and we've had a lot of success over the last six to twelve months in capturing adviser attention because the affiliates that we have are performing strongly and advisers do wanna hear more from boutique highly regarded managers. The other thing really is changing your distribution practices from moving around product selling to being consultative. So Ian mentioned that tomorrow afternoon is the Zenith Awards, and it'll be the fifth year in a row that we've been nominated.
We won the award for the last four years, and we're up for our fifth year for the awards. But, really, the retail distribution team has embraced consultative practices. We get to know our clients. There's 16,000 advisers on our CRM today, 16 and a half thousand. We're increasingly having some standard portfolios and explain how our affiliates and our boutiques fit within a portfolio context.
And we've been heavily focused on disseminating thought leadership. So, perhaps even two years ago or even last year, a lot of fun companies would be planning quarterly campaigns. You get your whole marketing area, your sales team, and your affiliates getting together, and you say in quarter two or quarter three, we'll go on the road. We'll travel the country and really touch advisers. Well, in the COVID nineteen, you know, working from home environment, we've had more than 60 webinars set by this year.
And instead of being planning these campaigns getting on the road, everything's being done in a nimble fashion, and you're doing it in real time. For instance, if there's a company doing a reporting, our sales team is, issuing short five minute videos into the marketplace on same day. And that really doesn't never used to happen back in retail, you know, a couple of years ago. We're having to embrace some of these more, short term in the moment, content creation. We've touched on we've touched on multichannel content application.
We've had to move all our, on the road content into the virtual world. And the good news has been that our webinars, last year would have had about maybe 80 people join some of these webinars, maybe a 100. We're seeing, some webinars having up to 800, maybe a thousand participants joining in. We've embraced podcasts. People are increasingly on the way to work or going for a run, listening to their digital content on devices.
And increasingly, our affiliates are producing punk podcasts, including hearing from Chris Joy Koolaba. You've got, you know, Antipodes creating some of those contents and even some of our emerging managers, Riparian on the agri sector and so forth. And the other real technology solution that's coming to market has been this concept of mark tech stack. It's marketing and sales working hand in hand to get digital content out. And the insight they're getting when you're digitally distributing content is a marked improvement of how we used to distribute in the years of of the past.
Such that we can see exactly who in our clients are engaging with our content. We can see where their lead scores are actually improving, and we're giving very focused list for our sales team to approach the right customers and really meet their needs. It's not really a sales tactic as opposed to understanding your clients, understanding your adviser. And if if you know that they have a hot interest in a topic, we're making sure that we're, we're using our automation tools to reach those customers. Something that we've built on in the last twelve months, and I think will be an increase in the Australian marketplace in particular is business intelligence.
Having spent two years, before I joined Pinnacle in Chicago, and in The US, I saw many fund companies in The US post GFC built to have these business intelligence teams. And this is where people in your organization are using the big data, all the marketing engines that we have to, again, lift the productivity and deliver superior outcomes for the business. Now our own business has set up this business intelligence team. We've got three or four people across the organization, couple of people sitting in marketing, couple of people sitting in sales, that are working on, delivering these, these insights to the distribution team. Now our vision over the next, few years and in future AGMs will be to demonstrate how business intelligence is gonna move into predictive analytics.
Already today, our sales team can see if an adviser is trying to get a little bit cold on one of the funds or a capability that we have, we wanna get ahead of that trend. But over the coming years, just by understanding the consumer behavior, we can get ahead of that trend and really predict what an adviser is likely to do from supporting or becoming detractors of any of our capabilities. Now I'm gonna move on to the next slide. I thought for those of our AGM attendees that might have a bit of interest in analytics, I reached out to the Morningstar Chicago data science team. Morningstar, 02/2015, had one data scientist.
Today, they've got about a 100 data scientists. And they are doing using big data, looking at their global database of 500,000 funds and trying to see what factors in in funds, what features of funds are likely to lead growth or what features of funds are likely to mean that some funds will shrink and ultimately be wound up or terminated. Now for the purpose of this AGM, I asked the head of that team to run analysis only on Aussie equity funds. Now Aussie equity funds, we're talking about global equities, Australian share funds, small cap funds, and, and they ran the analysis. And the funds had to be minimum a 100,000,000 fund size, so we don't have small funds, perhaps, creating noise for the analysis.
And the funds had to be five year in existence to look at those trends. We can see here is all the different features. For instance, if you're an ESG fund, if you run your eyes down the left column, you can see an ESG fund. If you're a yes ESG fund in Europe or US, we're getting a positive flow. In Australia retail, it's not really getting support.
So chamber, Andrew Chambers will talk about it. In Insta, there's demand. In retail, in Australia, we haven't seen that, that that demand, eventually. What has driven funds to get support in retail has been momentum, and this is what our retail team does. When we bring a new boutique to the marketplace, we slowly start finding the boutique the advice business that we initially support.
Then we will go and look at research houses. We will deal with platforms, and bit by bit build momentum. And what the analysis tells us is that momentum is a key factor in retail. Once you get the snowball effect, lo and behold, year in, year out, you're gonna get strong momentum around your offering. What is also telling is the biggest criteria for your front shrinking shrinking is, app lamentum.
If someone if a fund suddenly starts, losing fund, it's harder to turn that ship around. Couple other real quick, analysis is, looking at the second biggest criteria has been, five star rated funds. What essentially that's telling you is alpha generates strong month on month growth for your funds, and passive has been a strong retail phenomenon as I touched on earlier. So active being five star alpha producers, and passive have been the other key, drivers of growth. What's holding us back in terms of growing would be issues such as if your fees are one standard deviation more expensive, that's gonna be a headwind.
And this is where advisers are touched on or consumers are scrutinizing fees. Or if you're an older fund or if you're performing poorly, like one star rated, all those will be headwinds. Now what's interesting is the concept of age. At Pinnacle, with the boutiques that we're bringing to market, what essentially they're telling you is that there is an appetite for new managers, new strategies. Some of the legacy products that have been around for ten, fifteen years are less likely to get that support than what Pinnacle and our boutiques bring to market.
Now if we go to the next slide, Morningstar ran the analysis over the last decade, and you can see that there is persistence on these factors since the GFC. Essentially, what's this telling you is that momentum continues to grow your retail funds, and index fund has been strong momentum. Alpha has been a marginal, positive, but fees and outflows have been, holding back success in the retail market. What these essential insights do is enable our sales team to hone in on some of these buys in the marketplace and make sure we're bringing the right products, the right strategies to the right adviser, which essentially brings me to my last slide, which is a quick glance on what are some of the funds in our retail, suite of products that are delivering some of these, features. You can see Hyperion, Resolution Capital, Solaris.
Some of these names on this list, not only are they some of the best performing funds on a three year return basis in the categories, they are that star ratings that are high, four or five star rated, meaning risk adjusted return has been strong. They're highly regarded from a, ratings perspective being gold, silver, bronze medalist. And you can see their fee level versus competitors in their class, many of them are below average or low. In some cases, when they're a little bit high, you gotta turn your attention to the star ratings actually a bigger predictor. If you're generating alpha post fees, that's actually a stronger factor than having perhaps a higher fee.
So I hope you found a little bit valuable, from a big picture trends update. And, at this stage, I'll hand over back to Alan to continue the meeting and take questions later on.
Okay, Ramsden. Thank you very, very much, and thank you, Andrew, and also to Ian. I think that's very fulsome presentations. Let me just see whether we've got any questions as we speak. If you want to log any in, if you want to type them in as we speak.
Just give another few seconds. Okay. So we've got no follow-up questions at this stage. I think it's a complement to the fulsomeness of the presentations. So with that, I would like to thank you all for logging on and tuning in and and again for your ongoing support of the company as shareholders.
Hopefully, next year, we'll be able to meet everyone in person at the next AGM. But until then, perhaps we could declare the meeting closed and wish you all a very successful day. Thank you.
Thanks.