Pinnacle capital raising $400m to buy up offshore funds

The $4.4 billion funds firm is issuing at least $400 million of new equity to buy stocks in two offshore fund managers and make investments in existing funds within its stable, a move aimed at satisfying lofty growth expectations.

“The Pinnacle model works just as well overseas as in Australia, and that opens up enormous expansion opportunities for us,” Pinnacle’s founder and chief executive Ian Macoun said on Wednesday.

Pinnacle will tap institutional investors for $400 million of fresh equity and will target an additional $25 million via a share purchase plan. New shares under the SPP will be issued at $20.30 capped at $30k per investor. The SPP, which is expected to close on 12 December, follows the completion last week of a $400 million equity raising through an institutional share placement.

Of the funds raised, $143 million will be used to buy a 25 per cent stake in London-based wealth manager Pacific Asset Management and 22.5 per cent in US-based private asset manager VSS Holdings. Pinnacle will allocate around $75 million to seed new funds strategies for existing fund managers while $182 million will be used on existing growth opportunities.

In February, assets managed by Pinnacle affiliates surpassed $100 billion. As a result of the two new investments, total assets will reach $145.9 billion.

Some investors have queried the high price paid for the stake in VSS.

The $US50.8 million ($76.6 million) investment values the business at $US225 million, 23 per cent of its total funds under management.

“You’re never going to get a bargain with very high-quality, high-growth managers,” Mr Macoun said. “We pay a fair price, and we can add value to them with our distribution. They’re able to grow faster than they otherwise would have so it ends up being cheap.”

Lakehouse capital has revealed that they are not participating in the SPP due to a full position sizing already.

Looks like a price arbitrage as at current market.