Ann: Funds under management as at 31 March 2021, page-9

Hi peejay2

PNI and PAC are very similar, but different. The charts tell the story, go back to 2014 when there were rumours PAC was going to buy PNI. PAC decided to JV (takeover) Northern Lights, the chart tells the strategic consequences of this misfire.

PNI - from 06/10/2014 Close at $0.64 to $10.60


PAC - from 06/10/2014 Close at $9.90 to $5.55



The similarities are:
> Both PAC and PNI report aggregate FUM. PNI typically take higher stakes in Fund Managers, so has a larger share of FUM, see following table:

* More of a difference - above table shows that PNI Share of the FUM is $AUD26B, PAC's Share of the FUM is half of this (see above post). PAC's revenue from dividends and earnings agreements from boutiques is only two thirds of PNI - PNI should be twice as much based on FUM.
> Both have investments in a series of boutique strategies that align (except two for additional PAC has invested in):
Global and Australian Equity Investment
Aikya/Hyperion Asset Management/Antipodes/Firetrail/Longwave/Omega/Plato/Reminiscent/Spheria/Solaris versus
GQG/EAM/Blackcrane
Rural Investment
Riparian versus ROC Capital/Proterra
Commercial Property Investment
Resolution Capital versus Pennybacker
Credit Investment
Metrics/Coolabah (Commercial and Bond focus) versus Victory Park (FinTech and BNPL focus)
Infrastructure Investment
Palisade versus CAMG/Astarte Capital
Commodities Investment - Aether (Oil and rural)
Life Settlement secondary market - Carlisle
> High FUM growth

The differences:
> Some of PNI's revenue is generated through administration services (low margin), they process FUM for some funds (Retail not Institutional)
> Obvious PNI focus on Australian Market Boutique firms (one is London based) versus PAC focus on US/UK/Luxembourg and one in Australia - Australian market margin is higher than US. US has high margin pressure, but PAC has invested in some boutique managers to alleviate margin pressure.
> PNI's investment in boutique fund managers is stable and low turnover (when did PNI last sell a Fund Manager?). PAC while has tripled money, shutdown or sold off fund managers has had high turnover of boutique fund managers - Australian businesses were sold off profitably too.
> PNI has standard agreement with Fund Managers and PAC has variable income sources but standard equity ownership provisions -
Astarte Capital - PAC earns 40% of net income, but in the event of a business sale equity ownership is similar for PAC
Carlisle - PAC earns 16% of revenue and owns 40% of the equity in the business in the event of a sale
> PAC is typically writing down asset values, PNI not
> PNI presents at the Macquarie Bank and other investment conferences, they have strong broker coverage. PAC either does not get invited or does not want to attend, they have one broker covering them.
> PAC focuses on helping more on Institutional investment, PNI has both an Institutional and Retail investment focus. Retail is a higher margin operating model.
> PNI is using a debt facility to acquire strong fund management businesses. Believe this is largely due investment in stronger business models. PAC has struggled with getting a debt facility from lenders (why haven't they confirmed debt facility they were looking to set up prior to COVID?) PNI has recently fully utilised the CBA $30M facility.

At the end of the day, from an investment thesis perspective how much should we look into a business to understand it versus look at the chart. I have always liked the Fund Management industry due to high margins, but PAC has taken a while to recover historical margins and appears to still have a long way to go to restore market confidence. Believe it is this market confidence that is critical for PAC to turnaround.

Another reason is PAC's half year's are accrued revenue, based on what they think they will get for the full year. The PAC boutiques pay on an annual basis. Management advised that Victory Park and Carlisle investments were to smooth out the lumpy earnings, but management have not achieved this. More needs to be done by PAC maangement on this front.

@peejay2 regarding your original question on fund quality, as follows:
> ROC partners are leading Industry Superfund investment partners and Proterra has a long history of investing in Australia. Proterra were born out of Cargill, global leader in soft commodities. Quality of these businesses are more comparable to Macquarie than PNI.
> GQG, fastest growing fund manager across the globe from startup and nothing is stopping it.
> Nereus, CAMG and IFP appear to have been poor investments by PAC, but Two Trees, Longwave, Riparian, Reminiscent and Aikya appear to be poor from a PNI perspective (this is another similarity, but two more than PAC). See the table below from PNI (which I reallly like):


Nothing is perfect, but if I were to invest money this week, I would be investing into PAC than PNI. One reason is that the financial ratios (depsite historical chart) are more favourable to a higher long term return (PE ratio of current 12 for PAC versus 37 for PNI) and the other is that the US market to me has a higher FUM limit where businesses start to slow growth at approximately the $USD450Billion mark, as opposed to Australian market of about $USD100B. Although I think PNI and PAC can avoid FUM limit blues due to multiple boutique investments. At a cursory level it does look like PAC is earning a higher percentage of dividends from its boutiques than PNI (PAC $66M from $12.7B = 0.0052% versus PNI $90M from $26.26B = 0.0034%) ** have forecast PNI based on a bit less than doubling half year results. This is fairly bullish compared to forecasts of less for the full year from brokers (analysts who know what they are doing).

To conclude, we can know and analyse every little bit of detail about a company, but the charts tell the picture quite clearly.

Best of Luck
Lost