Ladies and gentlemen, thank you for standing by. Welcome to the Pinnacle Investment Management Group Full Year 2019 Results Conference Call. At this time, all participants are in listen-only mode. There'll be a presentation followed by a question and answer session, at which time, if you wish to ask a question, you will need to press star one on your telephone. I now hand the conference over to the speaker today, to Ian. Please go ahead.
Thanks, Miles. Thank you to everyone on the line for taking the time to join us this morning. Also with me here are our chairman, Alan Watson, and Adrian Whittingham, an executive director. I'd like to spend the limited amount of time that I have this morning by quickly covering off the financial and business highlights, elaborating a few of the significant points to assist shareholders in interpreting the financial summary, explaining how we use our strong balance sheet to assist with further growth, and making some concluding remarks about our performance and our funds flows and how well we are positioned for growth going forward. The agenda on slide one is straightforward. We begin on slide two with the financial highlights. Net profit after tax was AUD 30.5 million, up 32% from AUD 23.1 million in the prior year.
Basic earnings per share was AUD 0.183, up 28% from AUD 0.143 in the prior year. Our share of affiliates after tax net profit was AUD 33.1 million, up 33% from AUD 24.9 million. We've declared a fully franked final dividend of AUD 0.093 per share payable on the 4th of October, bringing the total dividend for the financial year to AUD 0.154 a share. This represents a 3.5% per annum fully franked yield, which is equal to 5% per annum grossed up for franking. AUD 0.1540 is 90% of diluted EPS or 84% of basic EPS. We'd like to remind shareholders that this business produces substantial cash earnings and that we can pay this level of dividend whilst retaining a strong balance sheet. We have cash and principal investments of AUD 51.2 million at the 30th of June 2019.
Slide three shows a little more detail on the full-year results of the top block. That is the top one-third of the slide shows aggregate affiliate numbers. Total revenue was AUD 236.8 million, up 40.6%. Total net profit after tax was AUD 89.1 million, up 44.6%. Our share of that AUD 89.1 million aggregate affiliate NPAT was AUD 33.1 million, which you can see in the upper part of the bottom block. That is the bottom two-thirds of the slide, which shows the numbers for the overall Pinnacle Group. Slide four sets out the 2019 business highlights. Funds under management were AUD 54.3 billion at the 30th of June, which includes AUD 6.8 billion acquired in July 2018. This was up to AUD 7.6 billion, 16.3% from the 31st of December, and AUD 9.5 billion excluding acquired funds for the full year, and that was up 25% on FY 2018.
Retail funds under management are now AUD 11.6 billion, 37.9% up excluding acquired funds. Net inflows were AUD 6.5 billion for the year, including AUD 2.9 billion retail, of which AUD 1 billion was in listed investment companies or listed investment trusts. We had large institutional flows into Firetrail, which is now close to its institutional capacity. That was in the first half of the year. Significant progress has been made in Metrics following our acquisition of a 35% interest, including AUD 1.1 billion of net inflows, of which AUD 845 million was new closed-end capital. We're very pleased with our Metrics acquisition. It is proceeding very much as we had hoped when we made that acquisition about a year ago. We've established two new affiliates during the year, Longwave and Riparian, and PNI was added to the S&P/ASX 200 index in March 2019.
That was about five months ago. Slide five has some further detail on our funds under management growth, including in graphical form. Slide six has the funds under management by affiliates. You can see there, along the top line is the affiliates fund individually at the 30th of June 2019. All of our affiliates' funds has grown during the year with the help of equities market. People would be aware that the ASX 200 is up 6.8% and the MSCI World was up 3.6% overall for the year. The only additional information on slide seven really is the amount of performance fees. These were very modest, other than in Palisade as I think was well signaled through the year. Slide nine sets out some of the significant points to assist in interpreting the financial summary.
The main one that I would call out is the second point, and I want to reiterate this. As we've consistently stated, we will continue to invest in activities which we believe will bring substantial benefits over the medium term, while recognizing that such investment may restrain our profits to some degree in the short term. Not only have we added to the resourcing within Pinnacle Parent as we've grown the number of strategies offered by our affiliates and enhanced the overall quality and strength of our services, but we've invested in additional resourcing ahead of planned further growth. These costs are all expensed outright on the Pinnacle Parent P&L, and they're what we call Horizon 2 costs. This includes, firstly, servicing new affiliates without charging them for the services prior to them reaching profitability.
This includes Firetrail through the first half and Two Trees, Longwave, and Riparian, which are still in Horizon 2 state. Secondly, launching active ETFs and other initiatives towards direct-to-retail consumer capability, including expanding our marketing capability very substantially. Thirdly, offshore distribution. All of which has added to Pinnacle Parent's costs and not added yet to our revenues. There's further detail on Horizon 2 investments on slide 15, 16, and 17. Look, I'd like to emphasize that this is a very conscious and deliberate strategy. We make extremely high returns on our Horizon 2 investments over the medium term, but it can take up to three to five years from incurring the costs for the benefits to come fully through. I mentioned these costs are expensed straight out as they're incurred on the Pinnacle Parent P&L.
We are comfortable doing this, believing that Pinnacle shareholders are readily able to understand the impact and make adjustments to broadly assess what our true profits are. I mean, clearly, profits are effectively higher and substantially higher than what we report. Although, as I said, Horizon 2 investments are lucrative over the medium term, we discipline ourselves to not exceed what we consider to be a reasonable level of P&L drag each year. Slides 10 and 11 demonstrate what we call a strong and flexible balance sheet, including cash and principal investments of AUD 51.2 million at the 30th of June. This surplus capital is valuable to us. We deploy it very effectively by investing in the funds and strategies of affiliates, particularly in seeding new strategies where it is very valuable and helpful.
We usually rotate out once a strategy has gained traction and deploy it again in new strategies. At the 30th of June, we had an unusually high level of cash and low level of principal investment. We've since deployed AUD 5 million into the Plato Market Neutral Fund, which is Dave Allen's new strategy, and we've got AUD 8 million of cash ready to deploy into our new Hyperion Global Fund offshore, actually in the U.S., the U.S. '40 Act Mutual Fund. I don't really have time to go through how we've deployed the rest of that PI money and what we're going to do with the cash. I do want to emphasize that the cash and principal investments also play a very important second role, which is as dry powder that we can use in the event that we find attractive Horizon 3 opportunities.
Most of the rest of this slide deck, slides 40 to 45, provide a lot more supporting detail about our results and our strategy. I'll skip over most of these and leave it to shareholders to review for themselves. Slide 40 shows that our medium-term performance remains strong. Slides 41 and 42 show that many of our affiliates have continued to perform strongly, but over the past year or so, a few have underperformed their benchmark. This is mainly style related or just related to particular short-term circumstances, we believe. We're happy to discuss this further in individual meetings. Suffice to say, we are not concerned about the short-term performance of our affiliates. Our affiliates are very high quality, the leaders are very experienced, and there is an excellent long-term track record in all of them. Slides 43 and 44 talk about the Pinnacle Charitable Foundation.
We're very proud of the foundation and its work. I won't have time to go into that in more detail. Finally, to slide 46. In concluding, I'd like to remind shareholders that Pinnacle remains a high-growth company with substantial initiatives underway and plans to continue to grow strongly by way of each of Horizons 1 and 2, and possibly Horizon 3 as well, as we promised three years ago when we became a pure play funds management company. Alan, in his chairman's letter, has elaborated on this a little. There's quite a lot in Alan's chairman's letter that I would refer shareholders to that give great background on our recent performance and so on, and prospects. I haven't got time to go into all of that. As I mentioned, we will continue to invest significantly as part of our initiatives to achieve this growth.
We are very focused on sustaining growth over the medium term. We think we're one of very few ASX 200-listed companies that are forecast by analysts to continue to grow at well in excess of 20% per annum, and we're delivering a yield of 3.5% per annum, fully franked. Especially if you exclude resources companies that are very different from us. Not many companies growing at more than 20% with a yield of more than 3.5% fully franked. The overall level of institutional net inflows this year, other than the extraordinary Firetrail inflows in the first half, reflects a particular set of circumstances prevailing during the 12-month period under review. We have a strong institutional sales pipeline going into the 2020 financial year. We expect our institutional inflows to be substantial again this year.
Although we can't predict what equities markets or investment markets generally will do over the coming year and beyond, we believe our company will continue to prosper through all market conditions and is increasingly diversified. Diversified in asset classes, in sources of funds under management, in the greater range of high-quality investment teams. Therefore it is strong, robust and resilient. We have a business model that is extremely well-regarded and designed to prosper in the evolving market environment that we address, both in Australia and overseas. That's all I wanted to say initially. I'd like to invite questions now. Miles, the operator, we're ready for questions. Thank you.
Thank you, Ian. Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press the pound or hash key. Once again, ladies and gentlemen, to ask a question, it is star one and wait for your name to be announced. Thank you. Our first question is from Scott Murdoch from Morgans. Please ask your question.
Morning, Ian. Just wondering if you can just give us a few more thoughts around the net flow environment, looking out into the year ahead? Just any commentary would be appreciated on the areas of strength that you see. Also, if you can just touch on what sort of outflows you've seen in the year just gone, including any risks of any large mandates there that are out with super funds, given the environment we're in?
Yeah. Okay. Thanks, Scott. Look, I'll probably just summarize this briefly by saying that, well, as I mentioned that in institutional, we have a strong pipeline and we're confident that we'll have good institutional flows in the year ahead. We've had a much poorer-than-expected institutional flow environment for the year. We think it was just some particular circumstances in this year. You know that institutional can be very lumpy. We actually had some very large inflows indicated to us that just didn't drop during the year. It's one of the challenges of measuring over point to point. We did have some quite large outflows in two or three of our major affiliates. I'd probably call out, I'm sure Andrew Parsons wouldn't mind me saying this, that in Resolution Capital we had some quite large institutional outflows. As everyone knows, ResCap is a fantastic fund manager.
Global REITs especially performed extremely well and the asset classes performed very well. What happened during that period, quite a few of large clients took the top off their allocation and it was actually roughly AUD 1 billion of net outflows in institutional and listco. Do I think that's a fundamental problem? No. Listco has some quite a large pipeline, but it was just one of those things in the circumstances. Retail is a different story. We were pleased with our overall level of flows. They are market-leading flows, AUD 2.9 billion. AUD 1 billion of that was listed in listco. AUD 1.9 billion normal, but that was roughly AUD 1.2 billion in the first half and only AUD 600 million or so in the second half. It was a weird period, the second half in the retail market. As you know, the market was down in the December quarter.
We had an election in May with all of the threats of losing franking credits and so on. We've had the Royal Commission. There have been some outflows from major platforms. I think it's way too early to say how that's all going to settle in the retail market. Obviously, the performance relative to benchmark of Firetrail and Antipodes has been lower, and that's probably impacted retail flows as well. We don't like to make forecasts, but going forward, I would say nothing fundamentally has changed for us. We're confident about Insto. I might ask Adrian to comment briefly about retail, but my overall comment on retail is it's way too soon in this kind of changed environment post-Royal Commission to start predicting any major trends.
Thanks. Back to the question, Scott. If I can just bring out a few other points to elaborate on Ian's reply. If you look at slide 23, particularly as it relates to the institutional market, what we've wanted to provide is greater clarity as we've seen this financial year just gone. There's been more than 15 industry funds that have been mentioned as potentially merging. We've had a very clear and complete analysis of our institutional client base, and you can see from that slide we have 78 institutional separate account clients. Now, what that means is that we are very well diversified as a business, and we are less reliant on one or two large institutions for support for our affiliates and ultimately for support for Pinnacle. Now, clearly, we want to stay on top of that.
The rebalancing that occurred with Resolution Capital and Equity Managers perhaps maybe is now behind us with where markets may end up. From an institutional domestic perspective, we're very comfortable. As Ian mentioned, the pipeline is looking very strong for this FY. As it relates to retail, if I can point you through to slide 25. What I want to focus on here is really looking at FY 2018 versus FY 2019 flows. Yes, we've seen a pickup in the last financial year, although it's been weaker towards the second half. The key point I want to make, and it relates to really Horizon 2 and Pinnacle investing ahead of growth. In FY 2018, 70% of our net flows are related to Antipodes, whereas the financial year just gone, it's circa 30-odd%.
The key thing to notice with this is that with our Horizon 2 ambitions around listed, by building out a listed capability and a listed team, by doing the Metrics acquisition, we are always thinking ahead of where the market may shift to protect ourselves should we go through a cyclical period of underperformance for our managers, and to also make sure we're accessing new distribution channels like the direct-to-consumer part of the market. With retail, clearly the intermediated channel has faced its challenges with the Royal Commission, et cetera. We are seeing even greater disintermediation, and we are seeing growth in our direct-to-consumer part of our business. You can see on the slide that actually covers all the Horizon 2 initiatives, which is on slide 18. Direct to retail is that first row.
The important thing to mention here is that it actually excludes the direct-to-consumer allocations out of LICs, LITs, and what will be EPS, because it's very hard to get that information from the register. Overall, as Ian mentioned, intermediated has been challenging, but we've invested ahead for direct-to-consumer. Institutional wasn't the best year, but there were some reasons for that and we're comfortable looking forward. That's a very long answer to your question, Scott, but I wanted to make sure I covered as many bases as possible.
Yeah. Just to cover off on your last question there, Scott, you said, Can I comment on the risk of large outflows? Look, this has been pretty topical, and there have been some kind of rumors floating around and so on. Adrian mentioned. I don't think we are at risk of these kind of large outflows that we've seen from some managers, from a few big industry funds that have got particular things going on. Adrian mentioned we have an extremely diversified institutional client base. That is deliberate. We have been at great pains to make sure that we don't have any of our affiliates exposed to just a small number of very big clients. Those particular industry funds that have gotten a lot of press about insourcing and terminating managers and so on, we do not have substantial exposure there.
I think we can feel comfortable. Look, there was a rumor went around a little while ago that we're about to lose substantial mandate. It was total rot, and we know who started it. It was total rot. If people want to talk about outflows from Firetrail stay in very close contact with their institutional clients, who they've known for a long time. Firetrail, that team, has a 15-year track record, including with many of those clients. They've got a large waiting list of people who'd like to become Firetrail clients, but they're closed. I do get, if you can hear, a little bit annoyed at these kind of rumors that people start. No, we are not at risk of kind of large outflows.
There's always some movement in the institutional market as people reposition and rebalance and so on. If we ever get a significant outflow, in most of our strategies, that can be replaced very quickly. We have a waiting list on quite a few of our strategies. Sorry to go on, but it's a very important point, and I do wonder whether some of our shareholders have been taking some notice of these rumors, which do annoy me.
Okay. Thank you, Ian. That's pretty clear. Just another couple of questions if I can. I think your message around the cost growth in PNI Parent is pretty consistent and well heard. I'm just wondering sort of, I guess, forward-looking, I know you're not going to give cost guidance per se, this year was a big step-up in costs. You've explained that. Just the incremental sort of acceleration in that cost base that we should see going forward. Obviously, it's going to grow a bit, is there a large part of that cost in now that are going to drive the revenue, for example, the ETFs strategy and et cetera, that you've bedded down now?
Yeah. Thanks. We tried to signal fairly clearly that this year would be a very big step up. We said we were adding substantially to our resourcing, including in the areas like ETFs and marketing and direct consumer, et cetera. What has come through is exactly what we had planned. You're right, Scott. There will be some further flow-through, kind of full-year effect. I also said earlier that we discipline ourselves, and we're not going to let that Horizon 2 net cost balloon out. It's going to be ongoing. You will see the cost of Pinnacle Parent continue to grow and our revenues continue to grow. No, not at the rate of growth that we experienced in FY 2019. That was a big step up.
Okay, thank you. I'll just take one last one while I've got the line. Just any commentary and outlook that you can give us on the pipeline of new affiliates that you might be talking to?
We've always said we'll probably add a couple each year in what we call builds or Horizon Two. I don't see anything to change that. I'd have to say, I reckon the rate of good people approaching us is as strong as it's ever been. I think as we just continue to move forward and demonstrate success, we are more and more in demand in that regard. We've always said that we are extremely selective, and we're going to continue in that regard. Yep, it's all part of Horizon Two. We will keep adding probably a couple a year.
Okay. Thank you very much. I'll give someone else a go.
Thank you. Our next question is from Tim Lawson from Macquarie. Please ask your question, Tim.
Hi, gentlemen. Thanks for taking my question. Just trying to link your general comments on the pipeline to slide 18. Can you just talk a little bit about where you think those opportunities are specific to the lines you highlight on that slide 18?
Yeah. Slide 18 is Horizon 2, I should keep reminding everyone, Horizon 1 is still the main game. Our really big inflows will come from existing affiliates filling out towards capacity in a whole range of strategies. When we talk about our pipeline and so on, it's more Horizon 1 than anything. To look at slide 18, certainly, we have significant confidence in Hyperion Global, Longwave, Solaris ongoing-
I think to add to that, Tim, is y eah, is global distribution. One thing we haven't really elaborated on much is that the pipeline for offshore clients has grown significantly as well. That is a key pillar. When we talk about incubating new affiliates, and of course, for Horizon 1, for our existing, we're generally looking to have them accessible in direct-to-consumer, accessible in intermediated, accessible in domestic, institutional, and global distribution. Those four channels we talk about. Not every affiliate can actually tap those because it just depends on their strategy. In regards to global distribution, clearly it's our most underrepresented. The one we've been going for a short period of time and fully committed. Further to Ian's comments, we would see global distribution potentially being significant opportunity for us.
As for that AUD 3 billion that we've got from offshore at this stage, we expect that to grow quite substantially. Part of our Horizon 2 costs that I called out was our London office. We have two very experienced and capable distribution people over there and office accommodation and so on. That's all there for sales offshore, which we are confident we're going to get. That is. Sorry. You go.
No, I'm done. That's fine, thank you.
Okay.
Next question is from Glenn Cummins from Wilsons. Please ask the question.
Morning, gents. Thanks for taking the questions. Look, firstly, Ian, just picking up a comment you made around the institutional inflows for FY 2020. You're saying that there are a few things that didn't drop in FY 2019. Could we get maybe a feel for how much of FY 2020 is just delays from FY 2019 versus new interest?
Look, it's always hard to say, Glenn. The insto market, I talk about it being lumpy, and it sort of moves around. Maybe I'm showing my age, but I remember when in the days where you want an institutional visitor, it wasn't to arrive, and it didn't take long to arrive. These days, you're winning it, and time goes by, and things change.
Yeah
Sometimes it comes, and then all of a sudden, you will get very large mandates pop.
Glenn, probably in prior years, if we had a thought that, either obviously we've never really forecasted a number out there.
Yeah
in the prior year, we'd probably receive more than what we expected. The lumpy nature of institutional flow, it probably wouldn't be appropriate if to sort of gave you a number like that.
Okay.
We did say that AUD 7.9 billion last year was extraordinary, that we shouldn't expect that rate to continue. Yeah, look, I know 12 months seems like a fair period of time, but really in one 12-month period or another, it can be particularly large, or it can be particularly small. We just don't know. We wouldn't be making these statements if we didn't have significant pipeline. We've got visibility for that. That's sort of a few months out. Who knows beyond that?
Yeah.
We've certainly got a range of very good capabilities that are still available. Some of the things that brought us good sales last time, like Solaris, is largely closed to insto now. It can move.
Got you. Maybe on slide 25 on the retail flows piece, I'm interested in Hyperion. Obviously, they were shut for most retail strategies. Obviously, there's a negative number there. This year it's switched to a plus 2% of your inflows for 2019. Can we get a feel for how much marketing effort's gone into Hyperion Global Growth Companies Fund to date, and what you expect that number, if you can I mean, obviously not going to get a number, but if you can give us a feel for where that number could potentially go to, maybe what capacity the fund could run at?
Yeah. I would say a lot of effort and not a lot of sales so far for Hyperion Global in retail, but things are looking good. They've got good ratings. All the work's gone on to get them onto all the slots and so on. That's looking good. The capacity of the strategy is like AUD 10 billion or more, but getting traction in this strategy is hard work. I don't think we'd like to put numbers on it. It's too hard to forecast. There's a lot of things going on out there that will impact it.
Yeah. Also what I would say, if we execute well and we're getting momentum, you can see that in the flow numbers. If we execute well, that strategy should be in the, let's just say top five of net flows for global equity.
Right.
We're well-positioned to do that. Obviously, this year, we actually have to get significant results. It's a focus for us. That being said, it's just one of the global equity strategies we have in the marketplace. We have Antipodes, as you're aware. Hasn't been their market. They're very well positioned, lower beta. Clients understand their positioning in the marketplace, so we naturally have a lot of success as it relates to Hyperion.
Look, Antipodes. People should be aware, it's underperformed its benchmark for the last year or two. First of all, since inception, it's still significantly ahead. Over this period, they are still one of the top performing value style managers in the world. Their style has been out of favor, but they've performed well, very well relative to their peers. People need to have diversified portfolios, including by manager and style. People ought to be putting Antipodes into their portfolios. Yeah.
Agree with that. Maybe as a half a follow-on to that question, where the sort of the, I guess, the tone of conversation is, with the main retail clients around Antipodes, because as you said, I would have thought in an environment where things are starting to get tippy, you would have expected flows to be reasonable into that strategy. I'm just wondering maybe how direct the correlation is between outperformance numbers on a short-term versus flows you'd expect to see rather than people looking further ahead?
Yeah. I'll let Adrian answer that. There's no doubt that Firetrail retail flows are lower than they were. They were extremely high. As I said before, there's so much been going on in this retail market. We are still one of the largest net sales success organizations out there. It's just that the retail market in the last half overall has had low net inflows. Look, it is hard to say. Look, Glenn, there's no doubt that there are quite a few retail investors who are impacted by short-term performance.
Yeah.
They shouldn't be. That's easy for us to say, but.
Yeah
Yeah, we've been very focused on, even when we take a new manager to the marketplace, clearly we're not focused on selling just purely off performance or historic performance. For Antipodes, through that very rapid adoption of their strategy by clients, we were very clear in talking, particularly for long short, it has a role to play in portfolios, for portfolio construction, relative to higher quality or growth managers. Just overall, in periods when markets sell off, you should expect to get some protection from Antipodes. We've just been very focused on making sure our clients understand that. I'm sure at the edges there will be some that perhaps may be more performance-centric. However, when ultimately the market does move from the biggest divergence from growth and value in more than 50 years, if they're not positioned in a value strategy.
Yeah
they are clearly, as you would know, are going to be impacted by that.
Yeah. Got you. Maybe one last one from me before I jump back in the queue. Can you just give a quick update on how you see the LIC market at the moment? It's obviously felt like it's pretty well shut late last calendar year, but there's obviously a few more things happening at the moment. Maybe your view on where the appetite might be in that channel?
We will keep watching it. Clearly, it's moved in favor of income, and we've had great success with Metrics, which has just done a fabulous job for its investors ever since the first day that MXT was launched. We think demand for income is extremely strong. We have a range of candidates within our stable for listing LICs. We like the market. We think it serves a particular investor group, and we want to keep servicing that. As to what we bring to the market at any point in time depends on market circumstances. There's a few big ones out there at the moment. We'll see how they go. We intend to remain a participant. Look, everything we do, we want to be good for investors.
I think the key thing is, yes, there's the IPO and the definition of success is getting a significant IPO away. Ultimately, it's about the client journey and it's about ensuring you can do your best possible to make sure that a strategy doesn't trade at a big discount or significant discount to NAV. That's very much in our focus and our planning, when we look at new strategies for new managers to bring to the market into play, because we want to make sure that all of our clients have a good experience, not just the initial benefit of getting a new strategy away.
Understood. Thanks, guys.
Once again, ladies and gentlemen, that is Star One, and our next question is from Nick from Ord Minnett. Please ask your question, Nick.
Hi guys. I was wondering if you could provide a bit of commentary around performance fees, maybe even some sort of guidance around by manager, what that looks like. Then maybe just a foray into asking about Palisade, given some of the ructions that happened there over the last 12 to 18 months, whether that would have been pretty strong in terms of revenue margin and everything. Just some comments on those two things.
Yeah. What was the first one?
Performance fees.
Yes. The largest part of performance fees was Palisade, as expected. Overall, Nick, this is a very low performance fee outcome. I think people are generally aware of why. We do have large performance fee potential now, something like 30% of our total sum attracts performance fees, with large increases in the Antipodes and Firetrail sum attracting performance fees. Palisade was just slightly down on last year's performance fee. Looking forward, Palisade is absolutely fine. Palisade keeps continuing to do the job for its investors that they expect of it and produces very good returns, and therefore, healthy performance fees. Their challenge is getting their sum to grow and finding the assets, but they are working very hard on continuing to do that. Nick, to your question about the composition, besides Palisade, there were performance fees from ResCap.
Remember, it's mainly ResCap funds, it's retail funds. Metrics had some performance fees, Hyperion Global had some, Solaris had some, and there was some in Spheria. So that's more or less the FY 2019 breakdown.
Attention, attention. We are now detecting a few points.
Just pause that.
The tone will be your first tone. The second tone will be evacuation tone.
Sorry, just to check.
You are not replying to evacuate, the tone will start now.
All right. Leave it, I think, then.
I'm aware you're having a side ear, but I'll ask you a question. I thought there might be some one-off expenses in relation to the acquisitions that you did early in the financial year that stood out.
Sorry, just a sec. Yeah. Nick,
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Yeah, look, we have had quite a few one-off costs during this year. Yeah, a little bit related to our acquisitions, but quite a lot of them really relating to Horizon 2 growth. We expanded our office accommodation in Sydney and Brisbane. We had quite a few search fees. We had some legals related to new affiliates and so on. Yeah, it was a fairly big year. I would say those costs relate to our growth, our Horizon 2 growth, in particular.
There's nothing that you'd call out as one-off being attached to that acquisition because obviously doing those over a year, so there's nothing to sort of normalize for in that number.
That's right. Look, I'd like people to get used to the idea that it's the net cost of Horizon 2 in Pinnacle Parent. Get used to us to spend AUD 5 million or so each year. That's not a growing amount, but it's a consistent amount each year.
Just in terms of the profitability of the groups, you obviously give us Hyperion, ResCap, Palisade, Solaris. Adding them up, they did really well. In terms of the materiality of the profit maybe at Firetrail, is that still in its early stages of the monies are in that one for a full year, just in terms of thinking about the profitability of the groups outside those main four?
Every year, along with our auditors, we look at each affiliate and they have criteria as to what is material. I think it's likely that one or two extra affiliates will pop into the criteria, and you'll see some more that are shown separately in that table that you're calling out there, Nick. Obviously Firetrail turned from being loss-making last year to profitable this year. Antipodes' profitability keeps growing. We've got Metrics now that is quite substantial and so on. None of those met the criteria in the year just gone, but they're getting towards it.
Maybe just one last one from me. The retail flow in the second half there was AUD one and a half bill, which is a nice number. You obviously can work out the Antipodes flows if you do a bit of work. If you backed that out and the Metrics flows, where do you think the growth in that retail business is going to come from into next year? I guess after full year, which managers potentially are going to look at doing some LRPs or ERPs?
Yeah. Nick, I'll answer that if that's Adrian. Clearly I think flows for this year or for the year just gone were more diversified. I would say we should expect to see continued good flows around Metrics
Not only in the listed environment, but they will be releasing a wholesale trust, which a number of clients have expressed interest in. We can see demand there in the retail channel. There's also been a number of high-net worth groups who have invested in some of their sub-trusts, some of the specialized sub-trusts for their significant clients. We'll see growth with Metrics in that channel as well. I think furthermore, we will see Solaris continue to grow. They were just upgraded yesterday by-
Retail, yeah.
in r etail by Lonsec. They're highly recommended across all strategies. We've got fantastic momentum around that for Longwave, but also in regards to their performance fee-only strategy that's in the marketplace. Hyperion, we touched on, and also Resolution Capital continues to be the dominant player, and we still think there's growth for Global REIT in the client portfolio. Finally, I think you will see Plato. Clearly leading up to the election, there were headwinds around franking credit. Very pleased with certainly the support they're getting post the election. You will see further demand and support for Plato. Income is obviously the theme or one of the bigger themes in the marketplace. Finally, there are some other affiliates such as Two Trees.
While we haven't really made much progress on the retail perspective, if you look at their performance versus their hedge fund peers over the last 12 months, they're in a really strong position. I would say we actually have quite a lot of options for flow from a retail perspective, but it'll be a matter of making sure we get momentum. As you know, retail flows are very much about momentum. It's one thing that I'm very proud and pleased about as a business and the team that we've been very focused on getting momentum and supporting our clients strongly. This year's no different.
Yeah.
It's just different managers, more so, compared to what we've had in the past.
Nick, in terms of your liquid question, all I can say there is watch this space. Obviously, we can't announce a new LIC until it's ready. I think we've indicated we want to continue to be a player in that space.
Thanks.
There's no further questions at this time. I would like to hand the call back to the speakers for any closing remarks. Please go ahead.
Well, I think if there are no more questions, we look forward to the one-on-one meetings over the next several days. I think we've covered most things pretty well. I could go on and talk about the fact that our industry continues to have strong tailwinds with super funds growing and so on. The need for high-quality active fund managers is as great as ever. Everyone can form their own views, but I think in the kind of environment going forward, just the beta of markets will struggle to produce the kind of returns that investors need. High-quality active managers, we think they're going to be in demand as much as ever. We are continuing to grow strongly, and we're working hard to continue the sort of rates of growth that we've experienced and that people are forecasting for us.
I'd say thanks very much to everybody. We're happy to take questions and have discussions one on one.
Ladies and gentlemen, I do believe that's the end of the call today. Thank you to all participating. You may all disconnect. Thank you and goodbye.