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Pinnacle share price on watch after Coolabah Capital investment

The Pinnacle Investment Management Group Ltd (ASX: PNI) share price is on watch after the group’s latest investment.

What is Pinnacle buying into?

Pinnacle has entered into agreements to acquire a 25% equity stake in Coolabah Capital Investments. Coolabah is a long-only and long-short active investment-grade credit manager that has a number of institutional mandates.

Among these mandates, Coolabah manages the BetaShares Active Australian Hybrid ETF (ASX: HBRD). Coolabah was managing $3 billion of institutional and retail investments as at November 2019.

Pinnacle will purchase 25% of Coolabah for $29.1 million with a further $5 million subject to certain milestones over the next 1.5 to 4.5 years.

The Pinnacle share price will be one to watch this morning following yesterday’s after-market acquisition announcement.

Part of the deal is a global distribution partnership between the two, with Pinnacle sharing revenues from its capital raisings.

The acquisition is subject to certain limited conditions and is expected to occur on or around 16 December.

Pinnacle Managing Director Ian Macoun noted Coolabah’s outstanding results and significant alpha from liquid, high-grade credit. The acquisition diversifies Pinnacle’s fixed income and alternatives offering with a solid money manager.

How has the Pinnacle share price performed in 2019?

The Pinnacle share price has underperformed the S&P/ASX 200 Index (INDEXASX: XJO) this year.

The group’s shares are up 7.53% before distributions, while the benchmark index has gained 21.50% this year.

Pinnacle shares are far from the only ones amongst the ASX 200 Financials sector to be underperforming in 2019.

The ASX banking sector has been hammered this year with many of the banks struggling to post strong gains. Macquarie Group Ltd (ASX: MQG) shares are up 26.81% as the only outperforming banking stock this year.

Some of Pinnacle’s ASX-listed wealth management competitors this year have delivered for shareholders. Magellan Financial Group Ltd (ASX: MFG) and IOOF Holdings Ltd (ASX: IFL) shares have rocketed 133.16% and 55.27% higher, respectively.

It’s not been smooth sailing for AMP Ltd (ASX: AMP) and Challenger Ltd (ASX: CGF), however, with both companies’ share prices falling 22.13% and 11.28% this year.

However, this latest acquisition could be the key to unlocking further value for Pinnacle in 2020.

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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Challenger Limited and Macquarie Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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