The Pinnacle Investment Management Group Ltd (ASX: PNI) share price has risen by more than 7% today following the tariff reduction by the US and China. The broker Macquarie is expecting the S&P/ASX 200 Index (ASX: XJO) share to have the potential to continue rising.
Macquarie describes Pinnacle as an investment management company that provides distribution services, marketing, business development, and investment infrastructure for affiliates (other fund managers it takes a stake in).
Pinnacle recently gave an update at the Macquarie investment conference, and the broker updated its view on the business after seeing those numbers.
Positive update
Macquarie said that Pinnacle's Macquarie conference presentation highlighted funds under management (FUM) diversification and medium-term operating leverage, despite recent market volatility.
The broker pointed out that affiliate FUM was $159.9 billion at March 2025, which represented a 2.9% increase from December 2024. Retail FUM rose 3.4%, international FUM rose 5.6%, and domestic institutional FUM went up 0.8%.
In the FY25 third quarter, Pinnacle experienced net inflows of $6.2 billion, comprising $2.6 billion from retail investors, $2.2 billion from international investors, and $1.4 billion from domestic international investors.
Macquarie noted that seven of Pinnacle's affiliates grew FUM in the three months to 31 March 2025, while five affiliates saw FUM contract, largely due to share market volatility. Life Cycle was the "stand-out", according to Macquarie, with $4.7 billion in FUM at March 2025, an increase of $3.7 billion in the three months to March 2025.
The broker also pointed out that Pinnacle retains around $325 million to $300 million of dry powder for new initiatives. Additional seed capital has been valuable in seeding and accelerating the commercialisation of new products, particularly for Life Cycle.
Investment performance
In my view, a fund manager's long-term health is dependent on its ability to produce returns for investors.
Macquarie pointed out that 88% of investment strategies and products (with a track record exceeding five years) have outperformed the benchmark over five years to March 2025. At March 2025, around 28% of FUM can earn a performance fee, with more than half (57% or $25.3 billion) at high watermark and a further 17% ($7.4 billion) within 2%. In other words, it's looking positive for Pinnacle.
The broker also noted that Pinnacle's private markets and non-equity-linked affiliates and strategies have limited the impact of share market volatility across the platform.
Macquarie's view on Pinnacle shares
The broker has an outperform rating on the business, which essentially means a buy.
However, following the volatility, Macquarie decided to reduce its earnings per share (EPS) FY25 forecast for Pinnacle by 3% and reduce it for the financial years between FY26 and FY30 by 7% to 10%. However, I'll note that a strong rally in the share market could change this again.
After taking those earnings forecasts into account, Macquarie decided to reduce its target price for Pinnacle shares to $25.10, which is where the broker sees the share price reaching in 12 months from now.
This suggests a possible rise of around 20% from where it is after today's rise.
Explaining why Macquarie is optimistic on Pinnacle shares, the broker said:
PNI has an attractive organic growth outlook and potential to add accretive M&A. Outlook for organic performance is backed by net flows, performance fees, and operating leverage.
