Ladies and gentlemen, thank you for standing by and welcome. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. I'd now like to hand the conference over to your first speaker today, Managing Director, Ian McKown. Thank you.
Please go ahead.
Thanks, Carla, and welcome to everyone who joined us on the call this morning. Thank you for your time And thank you for your interest in P and I. So this call is to discuss our results for the first half of the twenty twenty one financial year. So we posted with the ASX last night our formal results announcement, our audit review, financial statements, Appendix 4 d and importantly, our investor presentation, quite a detailed investor presentation. So we'll be speaking to the presentation this morning or at least to parts of it.
The colleagues with me on the call, Alan Watson, our Chairman Andrew Chambers, Executive Director, with particular responsibility For institutional and international distribution, Ramzan Jiaju, who leads our Retail distribution function and Dan Longan, our CFO. And besides finance and accounting functions, Dan is responsible for IT, middle office and back office, cyber, a range of other infrastructure functions. So you have 4 key executives and our Chairman on the line. So as is customary for our results I'll simply call out the main themes and highlights of our results, and I'll briefly elaborate a few aspects That we feel are particularly important for analysts and shareholders. The presentation starts in detail for us to cover Fully in the call at this duration, we've made it this extensive to enable people to review as much detail as they wish in their own time.
And of course, we'll go into more detail in 1 on 1 meetings with larger shareholders. We'll leave plenty of time for questions, which you're welcome to direct to any of the Pinnacle representatives on the call. As you can see on the agenda slides, and it's kind of obvious in any event, there are sections where The relevant executive will be Andrew or Ramzan or Dan rather than me. I'd be very surprised, to be honest, if we don't get quite a lot of questions focused on our retail And institutional and international sales, they've been so strong. And I'm sure people will be very interested in What caused that and how sustainable it is.
So to the presentation, Slide 1 is a disclaimer that is important, and we ask you to read at your leisure, please. Slide 2 is an agenda. Slide 3 is titled First Half twenty twenty one Financial Year Fees. So this sets out our opinion of the major themes for the half. Now we recognize and we strongly believe That is for our guests on this call, analysts and shareholders to form their own opinions of our performance And the outcomes that we're delivering.
And we always have feedback from you, by the way. But nevertheless, people do ask us for our view, Our opinion on how things are traveling. And we're happy to do this to the best of our ability and in good faith. So you'll see here that our view of the themes this half is very upbeat and confident. We are indeed very proud of what's been achieved this half, but We will strive to always be objective and fully realistic when we're giving this opinion on our things.
This half seems quite different From our opinion of the things just 6 months ago when we released our FY 2020 full year results, At that time, we said we felt we delivered a solid financial outcome in the prevailing circumstances And that it was below our expectations at the start of the year. Our profit was higher than in the previous year, but not by as much as we would have expected In the absence of the COVID crisis and the market downturn, we spoke of lower inflows, both in some retail And I hope that the pipeline of flows that have not materialized, particularly in March April of 2020, Was deferred, not lost. Now happily, that proved to be the case, and we've experienced very strong inflows, Both retails are in the first half of the twenty twenty one financial year. So our first half theme this year, As set out in Slide 3, strong financial outcomes, strong growth In terms of management and strong net inflows, I'll go into more detail on those inflows soon. Growth in the size and breadth of our affiliate base is delivering clear benefits to shareholders.
We've built greater diversification across different asset classes and investment strategies. We have Substantially enhanced our performance fee potential across a range of strategies and market conditions. The growing size and diversification by client type and domicile of our client base We've been able to further fund growth as well as resilience to any challenges within any particular client group. We've delivered continued strong investment performance And we are entering the second half of the twenty twenty one financial year with the business growing rapidly, ready to take advantage of opportunities that may materialize and prepared to react to any further external adversity, Noting that we have responded very well to date to the COVID-nineteen crisis. So those are the themes as we see them for the past that we're reporting on.
Slide 4 provides the financial highlights for the half year. Net profit after tax Of $30,300,000 that's up 120% on the prior corresponding period. Basic EPS, dollars 0.175 up 116% on the TCP diluted EPS, $0.167 up 117% on the PCP. So Our profits, our EPS, have a little over doubled on the PCP. Our share of the net profit after tax from our affiliates was $31,800,000 Up 80% on the PCP.
This includes our share of performance fees earned by Pinnacle Affiliates After tax of $11,000,000 in the half. It also includes our share of Coolabah's net profit after tax From December 2019, when we acquired a 25% interest in Coolabah, Cash and principal investments stood at $51,400,000 and we've declared a fully banked interim dividend Of $0.117 per share payable on the 9th March, and that is up 70% From the PCP. Now there are a couple of important footnotes that we should discuss. So we always net out the return on principal investments from our profit number. We sort of we don't think of that As part of our underlying profit, footnote 1 does that and excluding the principal returns Our NPAT is $29,500,000 still up 120% sort of rounded on the PCP.
But the second footnote is important. It also adjusts for our share of affiliate performance fees Post tax, that's the $11,000,000 that I mentioned earlier. Now if you eliminate all Of that performance fee, profit, then our after Tax profit is $18,500,000 up 39% on the PCP. So clearly, these performance fees, which were at a high level this half, are responsible for a lot of the profit increase On the PCP, so I would point out that the 39% increase is still a very healthy percentage increase. But we don't believe if you're seeking to determine what might be a normalized or a sustainable level Of profit for this half, we don't believe that you should eliminate all of these performance fees because the performance fee potential of our affiliate is now large And very diversified with 18 different strategies now having the potential to make a meaningful contribution to our profits.
So this is a big issue, performance fees. We have a whole section devoted to that shortly. Slide 5 provides a little more detail on the financial results in table form. Slide 6 sets out the funds under management highlights. So the aggregate affiliate funds under management rose to $70,500,000,000 number we're proud of, dollars 70,500,000 at the 31st December.
This was up $11,800,000,000 or 20 percent from the 30th June, so over the 6 months, And up $8,900,000,000 or 14% on the 31st December 2019, so a year earlier. Aggregate Retail Funds under management was $16,700,000,000 up 28% On June, on the 6 months and up 17% on the year. Equities markets rallied strongly during the period Increases due to Market Movement's investment performance was $6,300,000,000 $1,700,000,000 of which was retail. And importantly, increases due to net inflows were $5,500,000,000 A record $1,900,000,000 of which was retail. And more detail on these very big inflow numbers In the next slide, we emphasize that we have an increasingly diverse client base With more than 190 institutional clients at the end of December compared with only about 60 4.5 years ago, before what we call the pinnacle roll up into the listed companies.
So on Slide 7, something we're very pleased about, our funds inflows for the half. So Slide 7, We are obviously delighted to have achieved our highest ever level of net inflows, both in aggregate And importantly, in retail inflows. So our net inflows for the 6 months Total record $5,500,000,000 This compares with $1,000,000,000 in the 6 months to 30th June And $2,000,000,000 in the 6 months to 31st December for the TCP. Retail net inflows for the first half were a record, as I said, a record not $1,900,000,000 And this included no inflows from listed investment companies or listed investment trusts, which have helped with our retail inflow numbers in past years. The $1,900,000,000 compares with just $19,000,000 so just a very tiny net inflow In the second half of FY 2020, so the half immediately proceeding, and it compares with $900,000,000 Of net inflows for retail in the PCP, dollars 200,000,000 of which was licks and licks.
So this is an exceptionally strong result following the turbulence in the second half of last financial year. Now clearly, I think people are aware Hyperion has been a very strong performer in retail, But there have also been significant in flight contributions from Coolabah, Firetrail, Metrix, ResCat and Solaris. Institutional net inflows for the half were $3,600,000,000 Compared with $900,000,000 in the second half of last financial year and 1,100,000,000 In the PCP, as we previously indicated, a number of institutional allocators deferred decision making Last half, given the widespread uncertainty. Happily, allocations have resumed And the half we're reporting on and our institutional prospects remain strong. And these prospects are pleasingly from an increasingly diverse set of clients by geography and by client type.
Recognizing as we always say that institutional flows are lumpy, we are nevertheless encouraged By this inflow result for the half and for the prospects for coming months. Get the opportunity to ask Andrew Chambers about the Insta prospects in a minute. Slide 8 sets out some further business highlights. In the interest of time, I won't go through these now. Slide 9 has some further detail on the financial outcome.
Total affiliate revenues were past $200,000,000 for the half, including $45,000,000 in performance fees. And in the PCP, total affiliate revenues of $132,000,000 Which is obviously large growth. Slide 10, Pinnacle Parent, I won't go through this. Revenues have grown 26% on the PCP, driven by the strong inflows in the half, which impacts some distribution fees that we receive. Now look, I think the rest of the financial slides are self explanatory.
I'll move to Slide 13, our response to the COVID-nineteen crisis. Now you'll see a quote there. We've said in previous presentations that we believe that the reputations And future success or otherwise of investment management companies are often determined by the behavior and performance during periods of crisis. So crises tend to define some managers and their capacity to resume growth Emerging from a crisis depends on the strength of their capabilities, which would they emerge from such crises. So How you can go forward depends on how you emerge from the crisis.
So we are truly delighted with how our affiliates And Pinnacle people responded and coped with the crisis, truly delighted. This slide sets out the approach that we took. I won't go through it, but we have emerged from this crisis Stronger than ever. I'd like to spend just a little time on the crucially important topic of performance fees. And we have 5 slides devoted to this topic.
So may I highlight some of the points that we're seeking to make. On Slide 15, performance fees, repeatability and size. We want to emphasize But the potential aggregate performance fees are both sizable and repeatable each year. So in contrast to many fund managers who have only a small number of strategies subject to performance fees, Therefore, it can be sort of a bit significant year by year. And we currently have 18 strategies and growing.
So we for some years had a deliberate strategy to seek performance fee structures As an alternative to higher base fees, we just remind everyone that performance fees are direct substitutes For base fees, there are means of maximizing average annual revenue, especially In capacity constrained strategies, whether rationing our capacity or in strategies in extremely high demand, We're also attractive to many clients because they further aligned client outcomes with our performance. So we have a healthy mixture of base only fees and lower base plus performance fees. And this yields optimal overall business outcomes. So we have in the group ample consistent base Revenues, right. We've got heaps of base fee revenues.
But we believe That is maximizing average annual revenue by a diversified range of substantial performance fees as well. This gives you the best outcomes. And we are absolutely delighted with the mix that we have achieved Based on performance fees, and we've done this as a deliberate strategy. So whilst we recognize That it may be difficult to estimate and I kind of apologize to the analysts and fund managers. We know it's difficult to estimate our performance fees.
But nevertheless, we believe that a substantial quantum of performance fees should be included in revenue forecasts If we want to reflect realistic, even conservative expected outcomes. So I should say, we recognize this is counter To what sort of the perceptions and sort of, I must say, conventional wisdom of some of the analyst community And there's a belief that performance fees should somehow be valued less than base fees. But we believe That's not the right approach to performance fees in the case of Pinnacle because they're so diversified and they're becoming So large. So to Slide 16, these two graphs on this Slide 16 Help, we think, to illustrate how we have seen very large growth In both the volume of funds under management and the number of investment strategies that yield performance fees. Top graph is sum for the performance fees.
Bottom graph is number of strategies that have The potential to deliver meaningful contribution. So the number and diversity of strategies with significant performance fee potential continues to Improving the annual reliability of overall performance fee revenue. So we point out that the likelihood of performance fee success is not correlated to the level of the equity market. They are instead based on performance relative to individual hurdles. And the likelihood of performance fees is distinct Between each of our individual strategies.
So Slide 17 shows sort of The huge increases over the past four and a half years in the size and the diversity of our strategies that yield Performance fees. So Slide 17, I'll just let you type that in. It's graphically Illustrated that increase in size and diversity. On Slide 18, The amounts of performance fees delivered by our different affiliates over this period. I'm sure you can figure out who is who in the different colors.
So to Slide 19, So we would urge you to please consider the factors set out on this slide when you're estimating Future performance fees for Pinnacle. Now first point, the second half versus first half split, We point out that the potential and the liability of performance fees Are logically greater in the second half than the first half each year. This is because 7 out of 18 strategies That currently has the potential to deliver significant performance fees crystallized only in the second half of each year. So the 11 out of 18 strategies have the potential to deliver significant performance fees In the first half, but all eighteen have such potential in the second half. So that although, of course, the range of possible outcomes remains large every half, It's by no means guaranteed that in any particular year, the second half will exceed the first half.
Still that bias is there. Palisade, Redcap, Metrix and Solaris have annual fees That crystallized on the 30th June each year, only once a year in the second half. And the second half also includes some that are in what we call the sort of higher reliability category like Palisade and Metrix, higher reliability in the current environment that is. And you can form your own view about that Likelihood of achieving those performance fees. So secondly, the size of performance fees And that depends on 3 main factors.
Firstly, the size or volume of thumb, the performance fee potential. We've got 18 strategies at the moment that can deliver meaningful for these. Slide 40 elaborates this. Secondly, the size of Alpha, which is the outperformance of the affiliate versus their benchmark or their hurdle. And thirdly, the extent to which the strategy is currently at or below the high watermark.
The diversity of strategies greatly enhances reliability year by year. And the variety of strategies with performance fee potential is now large and growing. And the performances of virtually every strategy are uncorrelated with every Other strategy, because they derive from independent alpha sources. So and then look finally and very importantly, the last Point. Funds under management subject to performance fees are expected to grow.
Look at the points under there, Hyperion Global, ResCat Retail, for example, are experiencing strong growth. We'll have growth in the number of affiliates, Aetia, Longwave and Reminiscent new affiliates, new strategies In fire trials, Spirit Global, Solaris Aussie Equity Income, a few examples. And we have very large capacities In Antipodes, in both the credit affiliates, Metrix and Coolabah, very large additional capacity That hasn't yet seen performance fees. And a couple of large capacity, Antipodes and Fireflies Conviction Are yet to regain their high watermark. So look, thanks, everyone, for bearing with me on the performance fee topic.
I hope this section on the importance of performance fees in understanding Pinnacle's earnings potential was helpful And made sense to everybody. Now just quickly, running out of time, Some data that people look for in each of our reports. Slide 21 Shows the historical growth of our thumb up until this 31st December level of 70,500,000,000 Note that retail flows have been increasing even within this last half. It was $600,000,000 for the 1st 3 months, so $200,000,000 a month and then $1,300,000,000 in the last 3 months. So, that's averaging double the rate for that 3 month period.
Chamber, Andrew Chambers can elaborate But our institutional pipeline remains strong and diversified with large inflows from both onshore and offshore. Slide 22, People Look For, it shows the full detail by affiliate by 6 month period Of the funds under management of all of our affiliates, Slide 23 Is the classic 5 year and over long term performance that we always Produce pleasingly 86% of our affiliates that have a track record of our affiliate strategies And have a 5 year track record or more have exceeded their benchmarks over the 5 year period. The next two slides show Short term performance, 1 year performance, overall, our performance is good. There will always be a small number of affiliates, which For the time being, they are underperforming for various reasons, which we can go into in the 1 on 1 meeting. Now the final section What I want to cover very briefly is titled Growth and Resilience.
So, I'll leave it to you all To review these slides at your leisure, but they seek to make a couple of very key points. So In our recent previous presentations, we talked a lot about how we've been building resilience And robustness in the business, you recall that we talked about the diversification Of our affiliates and strategies, the increased diversification of our client base By type, by geography and so on, including offshore, you've heard us talking about the increased diversification Performance fee potential, which we've gone into a lot of details today. So we really hope that it's Yes, we've been very deliberately building robustness and resilience. But we've also had a deliberate strategy to at the same time build multiple sources of continual growth Based on an extremely strong platform, now the word platform is overused, but we believe we've built a platform with a reputation, a distribution capability and infrastructure capability that lends itself to Future major further growth. So just on Slide 28, we've summarized this.
We believe that we have now provided clear evidence of the success of our execution of this strategy. Growth and resilience have been simultaneously delivered, and we have an exceptional platform in place To enable us to move ahead with sustained growth from a proven business model and a proven business philosophy. So we just say to you, the outcomes you're seeing now are not just an accident. We've had a very clear strategy that's got us to this point, and we believe that it can take us A long way further from this $70,000,000,000 fund mark that we've reached. The following slides elaborate this.
I'll refer you to Slide 32 in particular, which tries to explain what we mean by our platform for further growth. Now look, there's more information in the slide pack. We'll cover probably some of these in questions, especially about institutional and retail distribution or in the 1 on 1 meetings All please read this at your leisure. Can we now please move to questions? And thank you so much for Bear with my monologue.
Certainly. Thank you, Our first question comes from Tim Dawson at Macquarie. Please go ahead.
Hi, gentlemen. Thanks for taking my questions. Just first question on the flows. Can you comment on the gross flows? Just to understand on the potential side.
Yes. So that will be a question for Andrew Chambers. I would just make the broad point, Tim, which I know you're very aware of and others are as well, Our market is a constantly moving feast and there are changes occurring constantly, which means you will always have Outflows, often due to reasons beyond your control. So you need to be growing. If you're not growing, you're going backwards.
So, Chaimo, would you like to take that question? Sure. So the growth was Substantially probably larger than obviously the net flows. The really big feature which impacts those growth flows or rather in fact to a net number It's effectively client rebalancing rather necessarily terminations going on within the business. So the first component is institutional debt with both here in Australia, but also as I said before, as well is that institutional debt is becoming much more systematic About the way they add in terms of asset classes based on market returns.
So I set a strategic target weight For every single asset class and those particular asset classes rally or underperform, they now add to those asset classes Well, they take money away from it, but based on the feed of the markets. And then the components relate to the excess return delivered by the manager Does adding or trimming manage effective tighter weights based on their excess returns? Now we saw that case in the case of high trim, the trimming Of the exceptional excess returns over and above the benchmarks back to strategic rights within portfolios. And on the market return side, we saw that in Global REITs where Global REITs didn't rally to the same degree as other markets sectors within Global Equities. And we've seen a lot of amazing put to work in that space.
So the growth returns are substantially high, but they often reflect Not if you want to manage it per se, but if you are on the asset class and also Cincinnati target weight as well. That's a really strong feature, Which is being more pronounced both domestically here, but also with large institutional prime sponsors.
Okay. That's helpful. Can you maybe sort
of link that commentary to how that's allowing you
to sort of manage capacity where you may be constrained and more generally just The outlook given the channels of geography of growth and the mix of retail vessels?
Yes. So the observation that I've made is we've built and continue to build low talent density with our associates, Distribution team and management team. So this place has been a very competitive mission to partner with the Willans The Australian institution consolidation rates as asset owners attempt to both premiumize and also Nationalize their active exposures in an environment where the herd of local asset management options are actually sitting. So if you're a high performing, For example, Australian Equity Manager, you have a lot more pricing power in the negotiation because there are few options available to win the market And the market is trying to embrace those best performing managers. We'd also empowered a firm like ourselves to be doing.
We don't want to Take on more capacity with a particular fund to recycle that capacity to its highest and best use. So the optionality provided by our retail, institutional and international channels to repurpose capacity and sell it into different channels to improve The yield of the business is substantially improved. We saw a lot of that in the high period where a lot of rebalancing which occurred as the institutional market The recycled into retail could be the best example you have to describe exactly that. And Tim, we have a very conscious policy when we're running out of capacity in a particular strategy, and we have a number of those. Like, we love our institutional clients.
We always work with them. But we recognize there's so much change in the institutional market, mergers and In housing, investment management and so on. But we will, from time to time, get some capacity back from Capacity constrained strategies and we'd love to take that capacity and sell it into the retail market where obviously we get higher Fees and it's a diversification of our client base.
Okay. That's very helpful. Just maybe a question on the performance fee Capability, I'm not sure whether you're willing to sort of discuss this, but if you were to sort of think about sort of through the cycle Base fee equivalent that you think you're effectively I mean, not giving up for not the right word, but what you're sort of trading off to get those Performance fee, that performance fee potential, what do you think it would equate to at a base fee level?
Yes. So Tim, we've deliberately decided not to give our sort of Forecast of performance fees and so on, we thought we'd give you all the information and then that it's up to the judgment of Investors and analysts such as yourselves to decide. But you're right. Whenever we Agree, a performance fee with a client. The base fee will be Substantially lower than it would have been if it was base fee only.
Now we're only going to do that if our expectation You said on average, we would earn higher fees from the performance and the base fee together Then we would have in a base fee only situation. And I wouldn't put a number on it, but at least sort of 30% would be our Higher fees. Now that won't be in every period, but on average, that's what we would expect. So you can look at the $23,000,000,000 of sum that we have set subject to performance fees, go through that and say what's the normal base fee That would normally be charged if it was base fee only on that strategy. And you can say, oh, well, However much lower the base fee will be, and it's often substantially lower, but we always have a usually have a base fee as well, Add a margin to that base fee for Gong, if you like, To get our expected average performance fees.
So It's got to be material when you're talking $23,000,000,000 subject to performance fees. Our base fees have floated up. The base fees excluding any performance fees have slowed it up in recent times, Notwithstanding the performance fee pressure that people talk about, because we've grown our retail firm And to be honest, our overseas sum, like for like is at higher fees than Domestic Insta, our average base fee rate is floating up, but our performance fee potential is much larger on top of that.
Okay. That's very helpful. Just a couple of quick questions, it's a pitch for me. You called out the fact that there was obviously no Leaks or lits into the current conditions, but do you feel what are you looking forward to that opportunity to have an up again on that
I think it's still fairly early days since the payment of Commissions, if you like, on the IPOs was banned. So it remains to be seen on what sort of replaces that. The one thing I would say, We have a number of very large and successful licks out there, and I would expect that we should be able to do top ups of those. So this is like PL-eight, PLAZO income, metrics, LIX and so on. But I'd say the jury is still out a little bit, to be honest.
We're all furiously Sort of merging our listed and unlisted or some of our listed and unlisted funds, Magellan has been very public about that. We're doing that to some extent as well. But my own view, and I'm not sure whether Ramzan would have a different view on this, but my own view is that It remains to be seen how that will all go going forward. We are very clear there's demand for listed. We're launching a Hyperion global ETF because there's very strong demand for that.
So listed won't go away. It will be growing as well as our unlisted. But it remains to be seen, Tim, I think.
Okay. And let's ask
We've also I'll just sort of mention, our Palisade Have launched into retail, so retail investors have wanted to get access to infrastructure. And They've offered a new retail fund that will be a couple of $100,000,000 but that's in an unlisted form at this stage. But I think you see a lot of innovation in listen.
Yes. And then just last question for me. There's been a few sort of small changes In the ownership percentage of peanut in the period, so probably not surprising there's not that much movement at the moment, but just any Comments on the outlook and the way those economics work?
Yes. So We put a lot of emphasis on succession and long term planning for succession and the bringing through Younger people and being ready for when a founder might be ready to retire, we've done that several times. So from time to time, the opportunity comes up for some equity to be available. And Oftentimes, we will buy that. Now we're also we're very happy to sell it to emerging Zippers when the time is right.
But sometimes, we feel it
will be happy for us to keep some
of that equity. So over time, as the value of executive equity goes up And we recycle. You need less percentage equity to have the same incentive Impact for individuals. So it's quite possible that over time, our equity interest will float up. But we are very, very Happy with the price we pay when we do that.
And we'd love we'd always love to own some more Of our affiliates, but we don't ever want to pressure the executives for us to take more. We love executives having Lots of equity and affiliates because they're so incentivized to do a great job and we all prosper together. But you'll see those percentages move around As that process continues, Tim. The other thing that could happen, Several of our affiliates are looking to expand with some acquisition Opportunities. So you could see us being a capital provider to an affiliate to buy something.
In that case, no, we'd be likely to buy extra equity in the affiliate and our equity percentage could go up. So we'll do that. We'll look at those opportunities as they make sense.
Okay. That's it for me. Thanks for taking my questions.
Thanks, Tim.
Our next question comes from Scott Murdock from Morgan. Please go ahead.
Good morning, Ian. Just a couple, if I can. Just firstly interested in the band of 6 or so managers that are still early stage of loss making. Are there any there which you can point to that are getting some traction, I guess, from the distribution side and close to
sort of getting some flows? Absolutely. So thanks, Scott. And I think people are aware that this is Something we do a lot. We love building new affiliates because
we think we get
a fantastic return on the early cost to us. And we do have a range of those. To some extent, a couple of them have probably been held back by the COVID crisis, but Still, we're very pleased with the way they're going. So I would call out Asia, only very new, sort of Less than a year old. We've got out early.
I think it's in the tables there, over $200,000,000 of Some are ready for them. That means they're away. That's very early. That's fabulous. Chamber's team has done a great job.
The Aitken team are very well respected. So that's a new affiliate build that's away already. And Longwave has its early thumb already in and early ratings, And it's clearly on a trajectory that goes very well. So and we've got other Prospects for the riparians and so on. So yes, as always, watch this space for our merging Not yet profitable affiliates to get to that point of profitability.
Okay. Thank you. And just a couple of around the flows. I guess the Insto pipeline, you stated there remains strong. You said that in the past and it's come through.
So just Understanding conversion timing is definitely unknown, but just interested in how that pipeline compares to previous periods and if you can give us a little bit of Snapshot on the couple of funds that are attracting the most attention.
So Andrew Chambers would best answer that. Yes. So I'll certainly highlight that conversion times certainly Since probably around April, you have started to accelerate with the stimulus in the market. As mentioned before, a component of our pipeline was deferred and then now crystallized broadly across the board. There's still substantial component of that pipeline, which is still yet to be realized.
If you look at the sales pipeline, you're looking at a period around Up to 3 years. And so there are things which we started 2 years ago, which is still yet to crystallize in any shape or form. But the pipeline remains as strong as a better clinic as a business on the institutional side. We also have more institutional salespeople In different jurisdictions during the quarter, we would expect that number to also be larger. But we also have more affiliates as well Adding to that, so my view is that we should continue to see sustained growth across the institutional book, Both domestic but also international channel.
The real feature of growth for our business has been the rise of our international business. If you look at our net flows at the last half, 50% of the flow came from Australia and 50% came from outside of Australia. If you look at our international FUN today, it's up 2 75% over the last 3 years. So over $6,000,000,000 got 28 countries out of Australia, top 5 in U. S, U.
K, United Arab Emirates, New Zealand and South Africa as well. So, with such a large contestable market, I think that we have reasonable confidence that our capacity continues to be raising capital with global products with global investors, Notwithstanding the challenges in the domestic institutional market.
Thanks, Andrew. I might just Follow-up question on that offshore presence that you mentioned there, it's really interesting. Is the investment in offshore distribution and I guess maybe for Ian, I guess focus on affiliates that are located offshore. Is that largely done or is there are we going to see a lot more focus In offshore markets going forward.
Yes. So we're very excited About the potential from offshore investors, it's not across all of our strategies, but we now have No. A pretty substantial number of strategies that are of interest to offshore investors. And We now we really know how to tap those investment pools. So I see further growth offshore.
Shane Bell and his team do a lot of work out of Australia. And Hodge now for Japan, does a lot of work out of Australia. But and we're pretty productive. We don't need army an army of people overseas, and we tend to wait until we can see The success prospects before we add resource, but there's no doubt. So we added Allison in New York.
We added Hodge in relation to Pam, we will progressively add more people overseas. I think that's A fair statement, thank you for the same time, but quite a few of the affiliates But we're selling offshore, our Australian based. So just because Hyperion is Australian based doesn't mean we can't sell it overseas. Antipodes we can sell overseas. Clearly, rescat we've sold big time overseas.
And a number of newer strategies Coming forward will be for offshore clients. Reminiscent, for example, I think Riparian will get quite a lot of their money from offshore. So offshore is not a flash in the pan. It's growing and we've hardly tapped that to date.
Okay. Thanks, Ian. I'll get back in the line, I'll allow others to ask questions. Thank you.
Thanks a lot.
Our next question comes from Nicholas McGarrigle from Ordmanett. Please go ahead.
Good day and well done on the results. There's a really strong outcome beyond the performances. Looking at the affiliate contribution, excluding performances, revenue was up 18%, profit was up 18%. Can you give us a sense of the ins and outs On the operating leverage or would have expected to see a bit more? Is that just because the loss making affiliates bringing down that overall profit growth?
Yes. So it moves around, Nick. As a general statement, there's no question we have a lot of operating leverage potential Across a range of our more mature affiliates, I would say, And we encourage this strongly. A number, a substantial number of our affiliates Adding new strategies or planning to add new strategies, quite a few of which are not yet announced And they're taking on extra people to do that.
So if
we had time, I'd go through them all, but Quite a few of our affiliates have been adding people. We're very happy for that to happen. We see that as an investment. It does retard their profitability in the short term. Very comfortable with that because the return they will earn on that investment We'll be huge.
So that's going on to quite a significant degree. It is true that the not yet profitable affiliates, The negative numbers goes into our share of overall affiliate profits and so that is an issue. And I make my apologies for adding New Horizon 2 affiliates because if there are attractive opportunities, We love to
do those.
But you'll see operating leverage, we don't say we must achieve a certain amount by a certain time. We just try to help our affiliates to make rational decisions on resourcing on an ongoing basis. So you get a spurt in it sometimes and then it doesn't go up as much, Nick. But there's just a lot of swings and roundabouts in that. That is pretty clear that the base level of some of our affiliates has moved up to a whole new level.
And you don't need to add people just as you get more funding to existing strategies. Generally, you don't need to add a lot of people. So that creates a higher base going forward. But there are a few like metrics added a lot of people ahead of growth And some of the things that had planned are delayed, but they didn't get the $500,000,000 lip raising and some of their inflows are still yet to come. So they've added people ahead of growth.
But this was yes, there's quite a lot of addition Of resourcing within affiliates for further growth.
Cool. And then I might the total flow number of 5.5 was impressive. The ins and outs obviously amongst that. Are there any I'm sure that there were some outflows across institutional And potentially retail, but maybe have turned in terms of momentum. But can you give us a sense on what some of those larger reallocations Away from asset classes or styles were because obviously they won't repeat into the next period.
Probably, Andrew and Ramzan should talk about those. We have called out that Levscap Had some outflows over the last 2 or 3 years from Aussie Insta, which has all Been redeployed into retail and offshore. And
in this half,
As Chanda mentioned, there were certainly some Hyperion Aussie equity institutional outflows, And we're getting retail inflows into Hyperion, both Aussie and Global at a great rate. So it's a very attractive process for us. But the numbers are fairly large. As I mentioned, there's churn. There will always be churn, especially in the Aussie instal market.
Yes. I'd say the interesting thing about this. So the 2 biggest ins and outs, if you will, on the first on the valuation side was In the Global REITs, as I highlighted previously, there was a view on the asset class that was undervalued relative to other Segment of Global Equities, that's on the inside. On the outside is what rebalancing the way from lots of high purity in particular Based on the phenomenal excess returns relative to their benchmark rather than the view on Australian equity or global equities. So that was probably the 2 big expense factors in terms of rebalancing going on within the book.
From a retail perspective, Antipinib perhaps talked 18 months ago was somewhat performance challenged, As value slows down turnaround and business has really increased its go to market activities, We're seeing the level of outflows in retail slowdown markedly. And so that capital is turning around. And perhaps the small cap managers like Spiria, things have slowed down a little bit, given that performance It's a market in Q4. The flood has turned around. Overall, edge inflows pretty much I thought it might slow a little bit in terms of the quantum of net inflows.
As soon as the performance turns around, we see flows turning around as well in the channel. So it's all looking pretty update from a retail perspective.
Okay, great. And just in terms of Horizon 3, it's been a tumultuous market, probably Show some asset managers who run their own businesses, probably determining that it's a bit hard running a business as well as running money. Have you discovered opportunities on Horizon 3 that are beginning to look attractive Potentially, that might sort of come through this year?
Yes. So we sort of we don't talk about things That we're looking at and we're pretty careful, Nick, as you know. But we have continued to call out The Horizon 3 is an important element of our growth agenda. We've looked at Quite a few things that we haven't ended up proceeding with for one reason or another. You know that our criteria are pretty tough.
We're only going to do Horizon 3 when it's really attractive. We've called out that We think we've got a track record of doing Horizon 3 well. ResCAP, we did 10 years ago, and I think their thumb was about $2,000,000,000 at the time and now it's $12,000,000,000 and we've helped them to grow a lot. We did metrics couple of years ago, and they've grown. We're very happy.
Coolida has grown, I think, from $3,000,000,000 to $5,000,000,000 in The year or so that we've owned them. So we think we have a track record of doing Horizon 3 well. We've always said we will not Put ourselves under pressure that we must do a certain number of them by a certain date. But As we said, we're only doing with the synergistic. But we do believe this is what you're saying, Nick, that this environment, There are likely to be, say, some fund managers out there that Aren't doing as well in distribution as they'd like and we can add value to distribution or fund managers might have succession challenges or whatever kind of challenges where we think we can help.
We can buy into them and grow them and grow their profitability.
Just the last one
for me, I
would be, are there any asset classes So is it offer attraction? You've already got a really diverse portfolio. But is there anything particularly that you're finding? I know that you won't Go out and target a specific asset class, but are there certain ones that are offering attraction on the acquisition side?
So again, and apologies for being vague, but there are a range of asset classes That we'd like to participate in as well as sort of what we call adjacencies to existing asset classes that we're in. There's a significant range of opportunities. So we don't tell you what they are because people start figuring out who we're talking to And so on. But even though it looks like we've got 16 affiliates with a lot of asset classes covered, There are subclasses, there are adjacencies and there are other asset classes that we're not getting in. So it's a rich opportunity set for us out there.
Great. Thanks for taking the questions. You're welcome.
We have one final question in queue from Sudipta Ghosh at Wilson. Please go ahead.
Hi, Ian. Just a quick question on margins at the affiliate level. It looks like there was a bit of a pickup This half, roughly 42% compared to 36% in the TCP. Appreciate there would have been some natural cost savings because of COVID as well as some leverage from higher funds and the performance fees. Just wanted to understand what component of the margin expansion was driven by cost related factors?
Yes. So thanks, Vedika. So certainly, we've been careful with costs During the last year, and we've had some cost savings in Travel, office accommodation, etcetera. These haven't been they've been meaningful. We've been very happy to have them.
But they're not Particularly last in the overall scheme of things. We very deliberately maintained our capabilities. We didn't lay anyone off or whatever. So I wouldn't say the cost outcomes were No, particularly abnormal. I think our margins, they'll move around Just depending on what particular strategies are growing and so on, I've mentioned the overall trend is that more retail and more offshore, by and large, greens Improved revenue margins, offsetting some Ongoing always, fee pressures.
I think we've in Pinnacle Current, We've had revenue boosts from our larger net income net inflows And so on. So that was helpful for margin. So I think the Pinnacle Parent margin, The revenue grew a fair bit and our costs didn't. In affiliates, it just moves around a bit. So I think people should think of our margins sort of floating up on the revenue side And growing consistently over time from operating leverage in our affiliates.
That's the way I think about our margins going forward. So if we have particularly Large increase in margin this half. I think it was just a little bit random, to be honest.
Okay.
Except in terms of parent where Yes.
Yes. And just a final question on flows. You talked to deferred flows, particularly in Insto. Have those deferred flows largely been executed or realized in the first half? Or is there more to come, particularly in that deferred pipeline that you talked about in the second half as well.
Andrew? Yes. The answer is that Some of it's crystallized, but not all of it. Because the reality is, like as I mentioned earlier on to Scott, Yes. You can have up to a 3 year pipeline where an opportunity starts to where it necessarily converts.
Some obviously converts faster than that. And some of those prices are still very much live. And we've also then replenished that pipeline with new opportunities since then because a lot of Research activities emanated from the experience of the pandemic and the drawdowns in the market And the continuing fall in global base rates around the globe. So I would say that we've partly crystallized the platform, but not fully. And we've replenished it subsequently, such that it remains relatively full one of forward looking basis.
Great. Thank you.
Pleasure.
Thank you. We have no further questions. So I'll hand back to Ian for Final comments. Thank you.
Well, look, my final comment would simply be thank you so much to everyone for Coming on the call, thank you for bearing with us as we've sought to articulate things like performance fees And growth and resilience at the same time and the platform that we have for future growth. Clearly, we always say we don't know what lies ahead. There are always a bunch of worrying things out there. All we can do is tell you how things are at the monument and how our capabilities are set. We feel that we're very well positioned.
We feel great about our company. And No. We're confident we can keep growing. And if there's any further adversity ahead, We're confident we can cope with that as we have with the crisis. So we're feeling good and we're very grateful to the analysts and shareholders for joining us.
Thank you so much. Ladies and gentlemen, that does conclude the call today. Thank you so much for attending. You may now disconnect.