Regal Partners Recovers Performance Fee Mojo

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Auguring well for upcoming interim results, Regal Partners has provided a positive quarterly update showing a rebound for funds under management and performance fees.

-Regal Partners’ positive June quarter update
-FUM and performance fees rebound
-Management raises normalised profit guidance
-Share price undervalued, suggests Bell Potter

By Mark Woodruff

In a positive update ahead of interim results on August 25, alternatives investment manager Regal Partners ((RPL)) has announced an increase in fee generating funds under management (FUM) during the June quarter.

Bell Potter highlights a rapid rebound for the group in terms of FUM, management fees and the potential for future performance fees, suggesting this is not currently reflected in the Regal Partners share price.

Shares remain below previous highs, and by a wide margin still, even though July thus far is shaping up as a strong month for the shares.

A combination of net client inflows and positive investment performance across a wide range of investment strategies resulted in a 7% increase in FUM on the March quarter. 

Management now expects a normalised profit of at least $40m, exceeding the previous consensus forecast of $34.6m.

The increase in FUM came in 9% ahead of Ord Minnett’s forecast driven by strong gains in Regal’s long-short equity strategy, largely reflecting investment performance.

The company’s credit and royalty strategies were also supported by net inflows of fee-earning FUM.

Performance fees have been lagging

Previously in 2025, Regal had encountered setbacks in several key investments, negatively impacting on it achieving performance fees.

Most notably, the company’s speculative biotech holding Opthea ((OPT)), held across several Regal funds, suffered from a clinical trial failure.

Regal also held around 15% of luxury e-commerce company Cettire ((CTT)) whose share price fell -76% in the first half of 2025.

As a result, on July 3 management estimated first half 2025 performance fees would be at least $35m, about -40% lower than the prior year.

On the day of this announcement, the share price rallied, perhaps because investors gained clarity and were relieved the outcome was not even more dire.

The bounce may also have reflected investor confidence Regal’s issues were temporary and that its base management fees (on growing FUM) remained intact.

Ord Minnett raises its EPS forecasts across 2025-27 by 48.4%, 16.3%, and 10.3%, respectively, following management’s increase in performance fee guidance plus a mark-to-market uplift in FUM to reflect current market values.

Morgans explains improving performance fees have largely been underpinned by Regal’s global long/short equity strategies, including PM Capital’s global equities strategy and the recently launched Regal Global Small Companies Fund.

The Regal Resources Royalties Fund, Regal Private Credit Opportunities Fund and Regal Emerging Companies Fund III also contributed to performance fees along with the partly owned Attunga Capital and Taurus Funds Management businesses.

A short history of Regal Partners

A merger of Regal’s strong performance track record in alternative assets with VGI Partners’ listed-company structure and established client base was completed in June 2022, renamed as Regal Partners.

Following the union, Phil King (Regal’s co-founder) assumed a leading role in the investment team. 

Strong investment performance, fund inflows and acquisitions have led the business to increase FUM five-fold since the merger.

In late 2023, Regal announced the acquisition of PM Capital and a half-stake in Taurus Funds Management, thus doubling Regal’s FUM to about $11bn by year’s end.

In the second half of 2024, Regal Partners made headlines by bidding for Platinum Asset Management ((PTM)). The deal was later abandoned, allowing management to refocus on organic growth.

All up, Regal Partners now has nine dedicated alternative investment management brands. Those not already mentioned are Merricks Capital, Kilter Rural, Argle Group, and the merged VGI Partners.

The strategies cover long/short equities, private markets, real & natural assets, and credit & royalties on behalf of institutions, family offices, charitable groups, and private investors.

June quarter trading update in more detail

As previously noted, FUM in the June quarter increased by 7.0% to $17.7bn, or by 5.5% to $17.9bn when factoring in additional non-fee-earning commitments.

Management expected first-half normalised profit of at least $40m follows $59m in the first half of FY24, a strong period for performance fees, notes Bell Potter, and $38.6m in the second half of FY24.

Bell Potter updates its forecasts to reflect higher FUM and performance fees, but lowers the assumed average management fee to 115bps from 121bps, given recent gains and inflows into lower-fee strategies.

This follows the company’s reported average management fee of 120bps in the second half of FY24.

Outlook

Following the June quarter update, the average target price of three daily monitored brokers (all with Buy ratings) in the FNArena database jumped to $3.70 from $3.48, implying 22.5% upside to the $3.02 closing share price on July 28.

Highlighting a strong balance sheet and capacity to continue growing FUM, Morgans raised its target to $3.55 from $3.30, while also acknowledging the difficulty of accurate forecasting.

This broker lists potential positive catalysts including ASX300 index inclusion, stronger than expected net inflows and/or fund performance (FUM upside) and additional M&A.

Morgans also cautions, that with around 40% of diluted shares held by non-free-float interests, primarily insiders, and Phil King owning approximately 10%, key person risk is a material consideration for investors.

Ord Minnett increased its target to $4.00 from $3.60, while Bell Potter maintained its $3.55 target.

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