Polar Capital Holdings Plc · LSE:POLR
Polar Capital — H1 2024 Earnings Presentation
43 slides from Polar Capital's earnings presentation, November 2023
Slide 1: Polar Capital: Interim Results
Polar Capital: Interim Results September 2023 polarcapitalfunds.com Gavin Rochussen, Chief Executive Officer Samir Ayub, Group Finance Director
Slide 2: Overview And Highlights
Overview And Highlights Net outflows of £581m, a decrease of £264m vs the Strong performance prior comparable across the range period, aided by relative to the Lipper Strong balance inflows into a peer groups; sheet enables number of funds 93%1 of AuM in the seeding of new top two quartiles funds an
Slide 3: Market Perspective
Market Perspective This presentation is for use with non-US professional investors only. Please refer to the Important Information at the end of this presentation. 3
Slide 4: Market Perspective
Market Perspective Global indices vs volatility 200% • The rate of inflation has reduced • US inflation peaked at 9% and is currently below 4% 150% • This follows the steepest policy rate rises for 40 years 100% • Investor sentiment on equity markets remains close to record lows 50% • Technology sto
Slide 5: Market Perspective
Market Perspective ‘Magnificent Seven' vs indices: YTD performance driven by a small number of stocks 450% 400% 350% 300% 250% 200% 150% 100% 50% 0% -50% Magnificent 7Seven’ ‘Magnificent Index Index Dow Jones World Tech S&P 500 Index MSCI ACWI Index Past performance is not indicative or a guarantee
Slide 6: Market Perspective
Market Perspective Steepest policy rate rise in 40 years curbs inflation 10% 8% 6% 4% 2% 0% -2% -4% US inflation US interest rate Source: Polar Capital and Bloomberg, 30 September 2023. Some information contained herein has been obtained from third party sources and has not been independently verifi
Slide 7: Market Perspective
Market Perspective Net sales of funds across Europe (€m) 75,000 • After an extraordinary and very forgettable 2022 for both the European and US fund industries, 2023 has proved almost as difficult so far, characterised by general risk 50,000 aversion • The golden age of doing nothing has arrived for
Slide 8: Fund Performance And Capacity
Fund Performance And Capacity This presentation is for use with non-US professional investors only. Please refer to the Important Information at the end of this presentation. 8
Slide 9: UCITS Performance
UCITS Performance Relative annualised fund performance against benchmark (since inception) 9% 8% 1st Quartile 2nd Quartile 7% 3rd Quartile 6% 4th Quartile 5% 4% 3% 2% 1% 0% -1% -2% Past performance is not indicative or a guarantee of future returns. Source: Polar Capital, 30 September 2023, Lipper q
Slide 10: UK Value Opportunities Performance Impacted By Cap Bias
UK Value Opportunities Performance Impacted By Cap Bias FTSE 250 vs FTSE 100 relative performance 120 110 100 Index price 90 80 70 60 Range FTSE 100 FTSE 250 3.6 High: 3.4 3.4 3.2 -29% (-17.58% annual) Index price 3.0 2.8 2.6 2.4 2.2 Low: 2.4 FTSE 100 / FTSE 250 c30% underperformance of FTSE 250 rel
Slide 11: Performance
Performance % of UCITS funds AuM by quartile ranking 100 Strong UCITS fund performance against Lipper 90 peer groups 80 % of UCITS AuM in the top two quartiles: 70 60 50 73% Over one year 40 30 48% Over three years 20 10 84% Over five years 0 1 Year 3 Years 5 Years Since inception 1st quartile 2nd q
Slide 12: Performance Against Benchmarks
Performance Against Benchmarks % of UCITS AuM and funds that have outperformed benchmark to 30 September 2023 • Strong performance in many Polar Capital strategies, and particularly Technology, during 2020, has created a high YTD starting point for 3-year performance numbers • This is why the percen
Slide 13: Capacity
Capacity Capacity as at 30 September 2023 • Capacity is managed to enhance and maintain fund Technology* performance Healthcare • Total capacity at 30 September was £63bn Sustainable Thematic • Remaining capacity across all strategies is £44bn Emerging Market Stars & Asia European Income • In excess
Slide 14: AuM And Fund Flows
AuM And 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 September 2023
AuM 30 September 2023 £25 Billions AuM CAGR1 £20 7.5% £15 £23.4 £22.1 £10 £20.9 £18.8 £19.2 £19.1 £16.4 £13.8 £14.3 £12.2 £5 £0 Total AuM Average AuM Past performance is not indicative or a guarantee of future results. Source: Polar Capital, 30 September 2023. All figures quoted in Pounds Sterling.
Slide 16: Net Flows By Strategy
Net Flows By Strategy Six months to 30 September 2023 • Net outflows in the six months of £581m excluding fund £300 closures (prior comparable period: £845m net outflows) Millions • Net inflows into Emerging Market Stars, European ex-UK Income, Sustainable Thematic (Smart Energy) and £200 Japan fund
Slide 17: Gross and Net Subscriptions per Strategy
Gross and Net Subscriptions per Strategy Six months to 30 September 2023 £600 Millions • Gross inflows into all 13 of Polar Capital’s strategies in £400 the period • Gross subscriptions of £1.9bn into funds in the period £200 • Healthcare, Technology, Insurance, EM Stars each had gross £0 subscripti
Slide 18: October Fund Flows
October Fund Flows Negatively impacted by two sizeable redemptions £50 • Net outflows in October amounted to £390m Millions • Redemptions from Biotechnology and UK Value £0 Opportunities funds, by two clients, accounted for 72% of the total outflow – Biotech is soft-closed and has an active wait-lis
Slide 19: 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. 19
Slide 20: Financial Highlights
Financial Highlights H1 2023: Changes in Profit before tax vs £m comparable period (£m) 6 months to 6 months to Change 30 Sep-23 30 Sep-22 AuM and Revenue Average AUM (£bn) £19.4bn £20.0bn -3% 23.0 -3.6 Net management fees (£m) £76.4m £80.0m -4% Net management fee yield 79 bp 80 bp -1bp 0.1 0.6 1.0
Slide 21: Operating Costs
Operating Costs Managing cost base without step changes H1 2023: Changes in Total Operating Costs vs comparable period (£m) 6 months to 6 months to £m 30 Sep-23 30 Sep-22 £m £m Salaries, bonuses and other 17.3 17.6 staff costs1 Core distributions1 20.9 22.9 Share-based payments2 1.5 1.9 Performance
Slide 22: Other Operating Costs
Other Operating Costs 6 months to 6 months to • Additional office space taken up at 16 Palace Street and Sep-23 Sep-22 existing lease extended to 2028. This provides the business Other operating costs £m £m good medium-term clarity on occupancy IT 3.5 3.3 Rent and rates • Targeted spend on marketing
Slide 23: Cash And Seed Investments
Cash And Seed Investments Strong balance sheet 30 Sep 2023 30 Sep 2022 Total cash and seed investments of £107.1m Total cash and seed investments of £129.2m £m £m Cash 72.8 Cash 82.5 Seed investments 34.3 Seed investments 46.7 107.1 129.2 EM Stars US Mutual 5.9 EM Stars US Mutual 5.9 China Stars 6.9
Slide 24: Group Capital
Group Capital Strong balance sheet 30 Sep-23 31 Mar-23 Capital allocation (£m) Regulatory Capital £m £m 160 142.9 Shareholders funds 123.1 142.9 140 Less: Regulatory deductions1 -27.6 -28.2 123.1 28.2 120 Capital after regulatory deductions 95.5 114.7 27.6 100 Less: dividend provision -13.6 -31.0 31
Slide 25: Dividend Policy
Dividend Policy Mar-20 Mar-21 Mar-22 Mar-23 £137.9m £175.7m £169.4m £151.0m Total cash and investments 70p 70p • First interim dividend maintained at 14p 62.2p • Payout ratio of 81% of adjusted core 60p 56.0p 60p earnings per share 50p 50p 44.3p 40.7p Policy 40p 40p • Under normal circumstances, the
Slide 26: 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. 26
Slide 27: Specialist, High-Quality Products Offer Differentiation
Specialist, High-Quality Products Offer Differentiation Recent rating upgrades across a number of funds Emerging Market Stars and Asia1 Sustainable Thematic1 European Ex-UK Income2 • 25% team AuM increase YTD • 48% team AuM increase YTD • 131% team AuM increase YTD • EM Stars UCITS and 40 Act • Smar
Slide 28: Advances In AI Have Extended The Technology Growth Cycle
Advances In AI Have Extended The Technology Growth Cycle Increased interest in the Polar Capital Artificial Intelligence Fund A highly active approach will be required to capture winners and avoid losers The development of AI is as fundamental as the creation of the microprocessor, the personal comp
Slide 29: Global Insurance Fund Reaches 25 Year Milestone
Global Insurance Fund Reaches 25 Year Milestone Defensive characteristics seeing increased client interest given market volatility NAV performance1 1000% 900% +933% 800% 700% 1976 600% Alec Foster joins Hiscox: 500% +489% Group Investment Officer and 400% managed Members’ Agency for 300% +283% 22 ye
Slide 30: Biotechnology Fund Reaches 10 Year Milestone
Biotechnology Fund Reaches 10 Year Milestone Significant outperformance of index 400% • Specialist portfolio managed by an experienced team • Lead fund manager David Pinniger has managed 300% the fund since inception in 2013 and has 23+ years’ experience • Medical innovation accelerating through ad
Slide 31: Distribution Update – Regional Diversification Continues
Distribution Update – Regional Diversification Continues In volatile times, client servicing matters In volatile times, client servicing and transparency is paramount. Q4 2023 will see our busiest period for direct client interaction with high Progress made demand to hear from our with our Asia, Mid
Slide 32: Marketing Key To Distribution Reach
Marketing Key To Distribution Reach Client engagement paramount for both servicing and attracting new investors Polar Capital rankings in Broadridge UK Fund Buyer 50 Report1 Significant number of events targeting investment professionals globally 3rd party events and conferences Over 1,400 UK Europe
Slide 33: Awards And Nominations
Awards And Nominations Third-party recognition Polar Capital Global The Global Absolute Return Polar Capital won European Polar Capital Technology Polar Capital Technology Healthcare won Investment Fund was highly commended Fund Management Firm of Trust won the Best Report & Trust won the Best Compa
Slide 34: Growth With Diversification
Growth With Diversification Changing landscape through diversification – five largest AuM strategies compared YoY Global Technology 39.1% Global Technology 45.8% Global Healthcare 19.0% Global Healthcare 16.4% Global Insurance 10.7% Global Insurance 7.2% 2023 Emerging Markets And Asia 7.8% 2021 Melc
Slide 35: Summary And Outlook
Summary And Outlook Strong UCITS fund performance £17bn of against remaining Gross inflows Lipper peer capacity in into all 13 of groups strategies that Polar have benefited Capital’s from net inflows in strategies Advances in Highly active, Continued the period and over the six- AI have specialist
Slide 36: Questions?
Questions? This presentation is for use with non-US professional investors only. Please refer to the Important Information at the end of this presentation. 36
Slide 37: Appendices
Appendices This presentation is for use with non-US professional investors only. Please refer to the Important Information at the end of this presentation. 37
Slide 38: Current Investment Strategies
Current Investment Strategies Technology AuM: £7.5bn Healthcare AuM: £3.6bn Established: 2001 Technology Trust Established: 2007 Global Healthcare Trust Typical number of positions: 50-140 Global Technology (UCITS) Typical number of positions: 25-80 Healthcare Opportunities (UCITS) Biotechnology (UC
Slide 39: Current Investment Strategies
Current Investment Strategies Emerging Market Stars AuM: £1.5bn UK Value AuM: £1.1bn And Asia Emerging Market Stars (UCITS) China Stars (UCITS) Established: 2017 UK Value Opportunities Established: 2018 Asia Stars (UCITS) (UCITS) Typical number of positions: 30-100 Typical number of positions: 40-65
Slide 40: Lipper Figures For Long And Alternative UCITS As At September 2023
Lipper Figures For Long And Alternative UCITS As At 30 September 2023 1 Year 3 Years 5 Years Since AuM £m Percentile Percentile Percentile Inception 15* Japan Value (S JPY) 207 17 15 27 29/07/20161 6** Healthcare Opportunities (I USD) 1229 59 24 41 3/12/2007 22 Healthcare Blue Chip (I USD) 209 19 6
Slide 41: AUM Analysis
AUM Analysis AUM split by strategy Investor mix split by geography Long only 96.67% UK 60.44% Alternative 3.33% Europe 28.53% Asia 5.82% Open Ended funds 73.70% Nordics 3.11% Investment Trusts 21.44% North America 1.27% Segregated Mandates 4.86% Other 0.83% AuM split by investment team Investor mix
Slide 42: Reconciliation of APMs to reported results
Reconciliation of APMs to reported results Reclassification on 2023 Interim 2022 Interim 2023 Interim consolidation of Reclassification Non-GAAP Non-GAAP reported results seed investments of costs results results (£m) (£m) (£m) (£m) (£m) Management fees 86.9 - - 86.9 90.9 Commissions and fees payabl
Slide 43: 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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