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Mountain Range

A Global Expertise in Small and Mid-Cap Equity Investing

Pinnacle Associates (“Pinnacle”) was founded in 1984 as an independent Registered Investment Advisor with a particular focus on the small and mid-cap (“SMID”) space. We have historically focused on the SMID market since it is less efficient than the Large Cap market, and securities are generally less followed by Wall Street. Since our inception, our stock picking expertise in SMID has attracted the attention of various institutions (including religious organizations, endowments, family offices, and public and corporate pension plans). Our clients select Pinnacle due to our unique approach to investing and ability to generate attractive returns in a variety of market cycles. Pinnacle was also an early adopter of Socially Responsible criteria, as our client list expanded to include religious organizations. As the firm grew, we adapted the investment philosophy and process that has proven so successful for SMID to include both International Small Cap and Global Equity. We remain confident that active management offers the ability to generate outperformance, especially in the less efficient markets like Small and Mid-Cap. Today, Pinnacle remains 100% employee owned with no debt and manages approximately $7 billion in AUM for a diverse group of clients across a variety of strategies.

Domestic Small/Mid Cap Equity

SMID is the flagship strategy for institutional investors at Pinnacle Associates and has been managed by the same team since 1996 with no departures. The fundamental philosophy that drives the SMID portfolio is that a combination of both Sustainable and Cyclical Growth stocks will provide a portfolio that is best suited to outperform in a wide variety of market conditions. Fundamental, bottom up stock selection is based on both quantitative and qualitative factors, with a deep understanding of company management as the linchpin. New purchases must have a market cap of less than $3 billion. However, we will retain these names and “let them run” if we continue to see upside potential. Our goal is to buy a small cap name and have it grow to a large cap name, trimming as position size exceeds 5%. We are benchmark agnostic and would describe SMID as a Core strategy with a strong Growth tilt (i.e. we are valuation sensitive and will not chase momentum growth stocks). We maintain a strong focus on risk, which we define as a permanent impairment to capital. Due to the Cyclical component of our portfolio and combined with some of the tailwinds now benefitting the Sustainable component, we are extremely confident that the strategy is ideally positioned to benefit as we emerge from the Covid recession. This trend is evidenced through recent outperformance (SMID has been awarded “Top Gun”* on several databases in recent quarters).

International Small Cap

The Pinnacle International Small Cap (“ISC”) equity strategy was established in 1997 and has evolved, over the past several years, into a more concentrated approach. The International Small Cap equity strategy shares many of the characteristics that have made our U.S. SMID strategy successful, including a deep understanding of each company’s financials and management. The Strategy seeks to provide investors with a concentrated exposure to a high-quality portfolio of internationally listed companies with market capitalizations of under $5 billion at purchase. Employing an extensive investment process that combines frequent contact with company management plus fundamental bottom-up analysis, the strategy aims to identify businesses operating within structural growth sectors with the ability to meaningfully grow and compound earnings over time. Typically, most names within the portfolio will already have well-established business models with large or growing end markets and a clearly identifiable pipeline of future growth opportunities. As a concentrated portfolio, the strategy seeks to identify the very best of these opportunities to ensure each portfolio position delivers a meaningful impact on overall portfolio returns. As mentioned earlier, we define risk as the permanent impairment of capital. We invest so much effort in understanding our companies’ financial statements and management that we are willing to accept short term volatility in return for long term growth. ISC has also been awarded “Top Gun”* status in recent quarters.

Global Opportunity Strategy

Pinnacle Associates’ Global Equity Strategy seeks to provide investors with exposure to a high-quality portfolio of U.S. and internationally listed companies. Typically, this strategy is a “Best Ideas” portfolio comprised of names with our highest conviction and contains the largest positions across the firm’s SMID and International Small Cap strategies. Managers from the SMID and ISC teams collaborate to identify those ideas that are most compelling, from a growth and diversification/risk management perspective. Global Opportunity management typically allocates the U.S./non-U.S. exposure equally, and the median market cap size may be slightly larger than SMID and ISC.

For more information contact:
John Black, Director of Institutional Marketing
Pinnacle Associates

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