Polar Capital Holdings Plc · LSE:POLR
Polar Capital — H1 2020 Earnings Presentation
30 slides from Polar Capital's earnings presentation, November 2019
Slide 1: Results Presentation
Results Presentation Six Months to 30 September 2019 Gavin Rochussen, Chief Executive Officer John Mansell, Executive Director November 2019 This presentation is for one-on-one use with non-US professional investors only www.polarcapital.co.uk
Slide 2: Agenda
Agenda • Highlights • Market Perspective • Fund Performance • Fund Flows and AuM • Financial Review • Strategy Update • Summary and Outlook This presentation is for one-on-one use with non-US professional investors only. Please refer to the Important Information at the end of this presentation. 2
Slide 3: Highlights
Highlights Net performance fee profits crystallised of £3.3m The majority of (2018 - £5.5m) AuM increased 4% to Funds in net inflow for the period £14.3bn. But Adjusted EPS declines 10% to 19.8p Challenging Fund Investment in future performance in September growth by increasing following rapid chang
Slide 4: Market Perspective
Market Perspective Global indices vs volatility 40% 30% • Increased market volatility in September, although not the same level as Q4 2018 20% • All major equity indices have advanced 10% during calendar 2019 0% • Q1 2019 had strongest recovery in any quarter since the financial crisis -10% • Contin
Slide 5: Market Perspective
Market Perspective Net sales of active long-term funds across Europe 40,000 30,000 20,000 • The environment for equities remains 10,000 challenging 0 • Fixed income is the only area of net inflows -10,000 across Europe since January -20,000 • Equity fund flows have been negative since -30,000 Octobe
Slide 6: Performance
Performance Annualised strategy performance against benchmark (since inception) 18.0% 16.0% 1st Quartile 2nd Quartile 14.0% 3rd Quartile 4th Quartile 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% Source: Polar Capital, 30 September 2019, Lipper quartile rankings as at 30 September 2019. Lipper Le
Slide 7: Performance
Performance % of UCITS Funds AuM in top quartile 90% 75% 68% • Majority of AuM is in the first quartile against the Lipper peer group over three years • Lipper quartile ranking is compelling over five years and since inception Top Quartile over 3 Years Top Quartile over 5 Years Top Quartile since in
Slide 8: Performance Against Benchmarks
Performance Against Benchmarks Percentage of AuM that has outperformed benchmark YTD 16% • 16% of AuM outperformed benchmark in 3Y 75% 2019 to 30 September 2019 • 61% of AuM outperformed benchmark 5Y 76% in 2018 • 75% of AuM is ahead of benchmark over SI 73% three years and 76% over five years to 30
Slide 9: Fund Liquidity
Fund Liquidity Fund Liquidity Total fund liquidity 100% 90% 80% • Fund liquidity continuously monitored 70% 60% • Fund capacity addresses underlying liquidity 50% • 50% of the least liquid Polar Capital Fund can 40% be liquidated in 15 days 30% • 87% of AuM can be liquidated inside 10 days 20% 10% 0
Slide 10: AuM
AuM 16.0 £14.7bn £14.3bn £13.8bn 14.0 £12.0bn 12.0 £10.6bn 10.0 £9.3bn 8.0 6.0 4.0 2.0 0.0 Mar-17 Sep-17 Mar-18 Sep-18 Mar-19 Sep-19 Total AUM Avg AUM Source: Polar Capital, 30 September 2019. All figures quoted in Pounds Sterling. Totals may not sum due to rounding. Past performance is not indicati
Slide 11: Net Flows By Strategy
Net Flows By Strategy Flows Fund flows by team £300 Millions £200 £100 £- • Majority of Funds had positive net inflows, in -£100 the period -£200 • Net outflows were concentrated in Japan, -£300 North America and Healthcare -£400 • Rate of outflows from the Japan Fund is -£500 decreasing following t
Slide 12: Financial Review
Financial Review This presentation is for one-on-one use with non-US professional investors only. Please refer to the Important Information at the end of this presentation. 12
Slide 13: Financial Highlights
Financial Highlights Financial Highlights H1 2020 H1 2019 Change Average AuM £14.1bn £13.4bn +5% Net management fees • Average AuM provided support by weak £59.1m £57.3m +3% (excluding research) sterling Net management fee yield 84bps 85bps -1bp • Net management fees after currency Core operating pr
Slide 14: Operating Costs
Operating Costs H1 2020 H1 2019 Change Salaries, bonuses and other • Of the total increase in core operating costs £12.3m £11.3m +9% staff costs1 of £2.4m around half relates to investment Core distributions1 £13.7m £13.2m +4% in future growth as highlighted in the 2019 Annual Report and detailed be
Slide 15: Other Operating Costs
Other Operating Costs H1 2020 H1 2019 IT £3.1m £2.6m • IT: increased Bloomberg and back office costs as a result of absorbing the full Rent and rates £1.4m £1.3m impact of four new funds launched part way Professional fees £0.6m £0.6m through the prior year and additional costs from implementing ESG
Slide 16: Cash and Investments
Cash and Investments H1 2020 H1 2019 Cash £71.6m £60.6m Investments - £9.2m UK ARF Seed Global Absolute £8.1m - Return European Income - £8.9m • Cash resources up 3% EM Stars £7.8m £7.1m • Strategic seeding programme supporting 6 China Stars £5.0m £7.6m funds (2018 – 5 funds) China Mercury £3.9m £3.
Slide 17: Regulatory Capital
Regulatory Capital H1 2020 H1 2019 Shareholder funds £103.6m £83.9m • Healthy surplus capital position of £36.6m Less: deferred tax and capital reserves £(9.6)m £(8.1)m after allowing for increased seeding Tangible capital £94.0m £75.8m programme and first interim dividend Less: dividend provision £
Slide 18: Strategy and Outlook
Strategy and Outlook This presentation is for one-on-one use with non-US professional investors only. Please refer to the Important Information at the end of this presentation. 18
Slide 19: Growth With Diversification - Strategy Update
Growth With Diversification - Strategy Update Further Fund Diversification • Emerging Market Stars team settled • Adds additional ~$7bn of capacity • Emerging Market Stars Fund net flows since launch exceed seed capital • Selected for a key Scandinavian platform Recent Fund launches • Received Fund
Slide 20: Fund Pricing Strategy
Fund Pricing Strategy Liquid North America Blue Chip European Income A & AI EM Stars Financials Trust EM Income Fin Opps £2,550m £700m Regional Specialist Tech Tech Trust China Mercury HOF UK Absolute Biotech Japan Value GCB & ARG UK Value Global Insurance Forager Income Opps Asian Stars Asian Opps
Slide 21: Summary and Outlook
Summary and Outlook Summary Outlook • Net inflows into the majority of strategies • Continued focus on new team acquisitions • Continuing diversification into new markets and existing team extensions • Asian domiciled investors increased by • Quality and cultural fit are key 43% to $719m in the cale
Slide 22: Thank you Questions?
Thank you Questions? This presentation is for one-on-one use with non-US professional investors only. Please refer to the Important Information at the end of this presentation. 22
Slide 23: Additional Information
Additional Information This presentation is for one-on-one use with non-US professional investors only. Please refer to the Important Information at the end of this presentation. 23
Slide 24: Current Investment Strategies
Current Investment Strategies Technology AuM: £4.9bn Japan AuM: £650m Established: 2001 Funds managed: Established: 2001 Funds managed: Typical number of positions: 50-140 • Technology Trust Typical number of positions: 45-55 • Japan Value (UCITS) Team size: 9 • Global Technology (UCITS) Team size:
Slide 25: Current Investment Strategies
Current Investment Strategies Convertibles AuM: £750m North America AuM: £2.2bn Established: 2010 Funds managed: Established: 2011 Funds managed: Typical number of positions: 50-80 • Global Convertible (UCITS) Typical number of positions: 40-60 • North American (UCITS) Team size: 5 • Global Absolute
Slide 26: Lipper figures for long and alternative UCITS
Lipper figures for long and alternative UCITS – as at 30 September 2019 1 Year 3 Years 5 Years Since AuM £m Percentile Percentile Percentile Inception Japan (I JPY) 326 89 26 69 10* 19/10/2001 Japan Value (S JPY) 14 16 9 25 23 31/10/2012 Healthcare Opportunities (I USD) 1,154 69 15 19 25** 3/12/2007
Slide 27: Alternative Strategies
Alternative Strategies As at 30 September 2019 Annualised returns Strategies Inception date YTD 3 years 5 years Inception Europe Long/Short (AX EUR) 1 August 2003 3.88% 4.73% 0.75% 7.92% UK Absolute Equity (GBP I) 29 September 2014 -0.58% 12.38% 15.36 15.35% Global Convertible 31 December 2015 3.93%
Slide 28: AuM Analysis
AuM Analysis AuM split by strategy Long only 89.8% Alternative 10.2% Investment Trusts 18.3% Open Ended Funds 81.7% AuM split by business unit Regional strategies North American 15.2% UK Value 7.0% Regional Convertibles 5.2% UK Absolute Return 3.6% Japan 2.2% Sector European Income 1.7% European (lo
Slide 29: AuM Analysis
AuM Analysis Investor mix by geography UK 67% Europe 30% Other 2% USA 1% Investor mix by holdings Bank 22% Polar Investment Trusts 18% Private Wealth Manager 18% Platform 16% Asset Manager 14% Fund Of Funds 6% Family Office 2% Other 1% Consultants 1% Insurance Company 1% Pension Fund/Foundation 1% S
Slide 30: Important Information
Important Information Polar Capital House View 16 Palace Street 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. London SW1E 5JD Important Information The information provided in this pr
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