Fund manager Polar Capital (POLR) reported better-than-expected first-half pre-tax profit and hiked its dividend by 12.5% for the first half of 2020.
Polar’s share price nudged around 1% higher to 616p after investors welcomed the company's 8.4% increase in pre-tax profit to £27 million, although they will also be cheering the accompanying 12.5% hike in the interim dividend, up to 9p per share from 8p a year ago.
STRONG INFLOWS
From a depressed base in March assets under management (AuM) increased 34% to £16.4 billion. Net subscriptions increased £907 million offset by a previously announced fund closure of £301 million and an increase of £3.6 billion from market movement and fund performance.
The company saw additional inflows of £158 million in October. Importantly the inflows were more balanced with multiple teams contributing outside the suite of popular technology funds.
For example, the Healthcare Opportunities Fund and Biotechnology Fund benefited from £120 million and £198 million of net inflows respectively. The Emerging Markets Stars Fund saw net inflows of £55 million with the rate of increase said to be ‘steadily increasing, albeit from a low base.’
Interestingly the UK Value Opportunities Fund had experienced net inflows following the positive vaccine trial news in early November reflecting the rotation into value out of growth.
Broker Numis estimates that net inflows to 13 November have been £85 million and current AuM is around £18 billion with full-year 2021 performance fee profits are running at £22.3 million.
KNOCKING THE BALL OUT OF THE PARK
Management noted the helpful market backdrop for the funds with a growth and quality style. The $7.4 billion Global Technology Fund was up 39% year-to-date to the end of October, compared with 26% for its benchmark.
Other notable performances this year include the £479 million Automation & Artificial Intelligence Fund, up 20% on its benchmark, the 12% outperformance of its £1 billion Biotechnology Fund and the $250 million Emerging Market Stars Fund, which has rallied 19% ahead of benchmark.
In the calendar year to 31 October 80% of the firm’s AuM was ahead of the benchmark with 84% and 89% respectively ahead over three and five years.
Broker Shore Capital strikes a note of caution saying, ‘Polar’s tremendous performance in technology does mean that 55% of Group AuM is now in tech-related products, despite management’s best efforts at executing a clearly communicated diversification strategy. This clearly represents a concentration risk.’
Despite this caveat the broker continued,’ our last published fair value of 750p was set in a post Q2 update, we see scope to edge this up by around 5%.
