Polar Capital Holdings Plc · LSE:POLR
Polar Capital — H1 FY2021 Earnings Presentation
38 slides from Polar Capital's earnings presentation, November 2020
Slide 1: Results Presentation
Results Presentation Gavin Rochussen, Chief Executive Officer John Mansell, Executive Director Samir Ayub, Finance Director Six Months to 30 September 2020 polarcapital.co.uk This presentation is for use with non-US professional investors only.
Slide 2: Agenda
Agenda Overview & highlights – pages 3-4 Market perspective & COVID-19 – pages 5-8 Fund performance & capacity – pages 9-13 AuM & Fund Flows – page 14-16 Financial review – pages 17-23 Strategy & outlook – pages 24-30 Questions – page 31 Appendices – pages 32-37 This presentation is for use with non
Slide 3: Overview
Overview Fund Performance • 80% of AuM outperforming Making Strategic benchmark calendar YTD Progress Net Inflows and on a three • A strong balance sheet • Two quarters of net year annualised with cash and inflows and a strong basis1 investments at £111m pipeline • A resilient boutique • Average AuM
Slide 4: Highlights
Highlights AuM increased by £4.2bn to Core operating profit increased £16.4bn over by 3% to £22.0m the six months from the Average AuM comparable six Completed on the to 30 September increased by month period in acquisition of the 2020 Net inflows of 2019 FPA International 5% to £14.7bn and Global £
Slide 5: Market Perspective & COVID-19
Market Perspective & COVID-19 This presentation is for use with non-US professional investors only. Please refer to the Important Information at the end of this presentation. 5
Slide 6: Market Perspective
Market Perspective Global indices vs volatility 100% • Following unprecedented stimulus, markets gained from the low point in March with US Equities outperforming all 80% other developed markets 60% • Volatility steadily declined as markets rose but became more elevated as COVID case numbers acceler
Slide 7: Market Perspective
Market Perspective Net sales of active long-term funds across Europe (€m) 100,000 • Across Europe, equity funds had net inflows in all six months to September 50,000 • February and particularly March recorded significant net 0 outflows from equity funds -50,000 • Net inflows into equities in the six
Slide 8: COVID-19
COVID-19 Operational resilience, wellbeing of staff and client service During and post hard Initial priorities The second wave lockdown • Wellbeing of staff • Increased client communication • Staff numbers at Palace Street had risen to circa 30% from July to September on mid- • Remote working facili
Slide 9: Fund Performance & Capacity
Fund Performance & Capacity This presentation is for use with non-US professional investors only. Please refer to the Important Information at the end of this presentation. 9
Slide 10: UCITS Performance
UCITS Performance Annualised strategy performance against benchmark (since inception) 16% 1st Quartile 14% 2nd Quartile 3rd Quartile 12% 4th Quartile 10% 8% 6% 4% 2% 0% -2% -4% Source: Polar Capital, 30 October 2020, Lipper quartile rankings as at 30 October 2020. Lipper Leaders fund ratings do not
Slide 11: Performance
Performance % of UCITS Funds AuM by quartile ranking 100% • UCITS fund performance against peer group has continued to improve over the year 90% • 84% of AuM is in the first quartile against the Lipper peer 80% group over three years (60% as at 31 May) 70% • 91% is in the first quartile over five ye
Slide 12: Performance Against Benchmarks
Performance Against Benchmarks Percentage of AuM that has outperformed benchmark to 30 October 2020 • Performance fees accrue over a calendar year and crystallise in December each year YTD 80% • 80% of AuM is outperforming benchmark in the calendar year to 30 October 2020 3Y 84% • 84% is outperformi
Slide 13: Capacity
Capacity Capacity as at 30 October 2020 • Capacity is managed to preserve investment Phaeacian performance Technology • Capacity is determined by portfolio concentration, Healthcare turnover, underlying market capitalisations, liquidity of EM Stars holdings and client servicing requirements European
Slide 14: AuM & Fund Flows
AuM & Fund Flows This presentation is for use with non-US professional investors only. Please refer to the Important Information at the end of this presentation. 14
Slide 15: AuM October 2020
AuM 30 October 2020 bn £18 • AuM increased by £4.2bn from £12.2bn at 31 March 2020 £16.9bn to £16.4bn at 30 September 2020 £16.4bn £16 £14.7bn ‒ Average AuM for six months to September 2019 were £14.1bn £14.3bn £13.8bn £14 ‒ Average AuM for six months to March 2020 were £14.0bn £12.0bn £12.2bn £12 ‒
Slide 16: Net Flows by Strategy
Net Flows by Strategy Fund flows by team Six month flows to 30 September 2020 £1,600 • Ten funds had positive net inflows in the period to 30 Millions £1,400 £1,200 September 2020 of £907m (offset by £301m fund closure) £1,000 £800 £600 £400 • Current calendar year net inflows (to 30 October 2020) £
Slide 17: Financial Review
Financial Review This presentation is for use with non-US professional investors only. Please refer to the Important Information at the end of this presentation. 17
Slide 18: Financial Highlights
Financial Highlights 6 months to 6 months to Change 30 Sept-20 30 Sept-19 Average AuM £14.7bn £14.1bn +4% • Net inflows and market movements Net management fees £61.8m £59.1m +4% resulting in higher average AuM (excluding research) than comparable period Net management fee yield 84bps 84bps - Core o
Slide 19: Operating Costs
Operating Costs 6 months to 6 months to Change Sept-20 Sept-19 Salaries, bonuses and other £12.5m £12.3m +2% • Total operating costs marginally staff costs1 lower than comparable six month Core distributions1 £16.1m £13.7m +18% period Core compensation costs £28.6m £26.0m +10% • Core compensation co
Slide 20: Other Operating Costs
Other Operating Costs 6 months to 6 months to Sept-20 Sept-19 IT £3.2m £3.1m • Other operating costs remain flat Rent and rates £1.4m £1.4m compared to prior period Professional fees £0.8m £0.6m • Professional fees: increase in legal Research and Corporate access £1.8m £1.9m costs as a result of cor
Slide 21: Cash and Investments
Cash and Investments 30 September 30 September 2020 2019 Cash £82.5m £71.6m • Strong cash position at period end Seed EM Stars - £7.8m • Strategic seeding programme supporting 5 funds (2019: 6 funds) China Stars £6.7m £5.0m China Mercury £4.2m £3.9m • EM Stars seed money redeemed during the period J
Slide 22: Regulatory Capital
Regulatory Capital 6 months to 6 months to Sept-20 Sept-19 Regulatory Capital • Surplus capital position after Shareholder funds £114.4m £103.6m allowing for first interim dividend Less: deferred tax and capital reserves -£(9.2)m -£(9.6)m • As a reminder the increase in Capital Resources £105.2m £94
Slide 23: Dividend Policy
Dividend Policy 60.0p 140% • The policy in respect of the first interim dividend paid each January 51.5p is that half of the first half’s core 120% 50.0p earnings are paid out 40.7p 100% • Under normal circumstances the 40.0p 36.6p Group would expect to pay a total 80% annual dividend within a range
Slide 24: Strategy and Outlook
Strategy and Outlook This presentation is for use with non-US professional investors only. Please refer to the Important Information at the end of this presentation. 24
Slide 25: Strategy Update – Growth with Diversification
Strategy Update – Growth with Diversification Increasing capacity to enable growth • Two team acquisitions, Emerging Market Stars in 2018 and Sustainable Phaeacian Partners adds £20bn of potential capacity and EVA Creation provides new channels to market. EM Stars brings exceptional Sustainability a
Slide 26: Strategy Update – Growth with Diversification
Strategy Update – Growth with Diversification Increasing capacity to enable growth Diversification Emerging Market Stars Sustainable EVA • Increased exposure to non-US • Four fund strategies (EM, China, Asian & China Mercury) Creation equities within Polar AuM • Launched July 2018 (now has two year
Slide 27: Strategy Update – Growth with Diversification
Strategy Update – Growth with Diversification Increasing capacity to enable growth Diversification Phaeacian Partners • Increased exposure to non-US ‘Expert navigators – driven by thought’1 equities within Polar AuM International and Global Value Strategies • Reduced relative US $ exposure • Three f
Slide 28: Strategy Update – Growth with Diversification
Strategy Update – Growth with Diversification Increasing capacity to enable growth Diversification Polar Capital Technology Strategies • The team size and resource has • Significant beneficiaries of lockdown and remote increased to a total of nine. Five fund working through investor demand for techn
Slide 29: Summary
Summary Increased focus on Sustainability and ESG corporately and through integration AuM Significant within fund increased by processes £4.2bn from capacity in 31 March to top quartile 30 September Continued Positive net funds 2020 inflows in Resilience October and a of business promising model and
Slide 30: Outlook
Outlook ESG factors will Unprecedented become stimulus likely to embedded in the be inflationary in processes of the long-term and capital allocators positive vaccine creating trials will opportunity for Positioned for Well positioned accelerate New teams those that continued fund economic with circ
Slide 31: Thank You Questions?
Thank You Questions? This presentation is for use with non-US professional investors only. Please refer to the Important Information at the end of this presentation. 31
Slide 32: Additional Information
Additional Information This presentation is for use with non-US professional investors only. Please refer to the Important Information at the end of this presentation. 32
Slide 33: Current Investment Strategies
Current Investment Strategies Technology AuM: £9.2bn Japan AuM: £116m Established: 2001 • Technology Trust Established: 2001 • Japan Value (UCITS) Typical number of positions: 50-140 • Global Technology (UCITS) Typical number of positions: 45-55 Team size: 9 • Automation & Artificial Team size: 2 In
Slide 34: Current Investment Strategies
Current Investment Strategies Convertibles AuM: £717m North America AuM: £698m Established: 2010 • Global Convertible (UCITS) Established: 2011 • North American (UCITS) Typical number of positions: 40-80 • Global Absolute Return Fund Typical number of positions: 40-60 (UCITS) Team size: 5 Team size:
Slide 35: Lipper Figures for Long and Alternative UCITS – as at Oct 2020
Lipper Figures for Long and Alternative UCITS – as at 30 Oct 2020 1 Year 3 Years 5 Years Since AuM £m Percentile Percentile Percentile Inception Japan Value (S JPY) 116 96 79 68 68 31/10/2012 Healthcare Opportunities (I USD) 1,463 33 19 21 4** 3/12/2007 Healthcare Blue Chip (I USD) 55 64 47 34 35 11
Slide 36: Alternative Strategies
Alternative Strategies As at 30 October 2020 Annualised returns Strategies Inception date YTD 3 years 5 years Inception Europe Long/Short (AX EUR) 1 August 2003 -19.51% -3.36% -0.76% 6.58% Global Convertible 2 September 2013* 8.68% 4.68% n/a 4.11% (I EUR Portfolio Hedged) Global Absolute (USD I Acc)
Slide 37: AuM Analysis
AuM Analysis AuM split by strategy Investor mix by geography Long only 94.7% UK 64.5% Alternative 5.3% Europe 33.8% Other 1.2% Investment Trusts 21.4% USA 0.5% Open Ended Funds 78.6% AuM split by business unit Investor mix by holdings Tech 55.9% Bank 23.1% Healthcare 16.2% Polar Investment Trusts 21
Slide 38: Important Information
Important Information Polar Capital, 16 Palace Street, London SW1E 5JD House View This document has been produced based on Polar Capital research and analysis and represents our house view. All sources are Polar Capital unless otherwise stated. Important Information The information provided in this
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