Polar Capital Holdings Plc · LSE:POLR
Polar Capital — FY2020 Earnings Presentation
40 slides from Polar Capital's earnings presentation, Mar 31, 2020
Slide 1: Results Presentation
Results Presentation Gavin Rochussen, Chief Executive Officer John Mansell, Executive Director Twelve Months to 31 March 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 6-8 Fund performance & fund flows – pages 9-14 Capacity – page 16 Financial review – pages 17 - 22 Strategy update – pages 20 - 24 Summary & outlook – pages 23 - 30 Appendices – pages 31 - 39 This presentation is for use
Slide 3: Overview
Overview Well Positioned • Over 70% of AuM Net Inflows outperforming • Tech net inflows of benchmark on Strong Balance Sheet £316m and positive a YTD and • Net assets of three year flows continue basis1 £116m including net • Majority of open ended cash of £107m funds had net inflows • No debt on bal
Slide 4: Highlights & Challenges
Highlights & Challenges AuM recovered from 31 March 2020 level of Performance fee profits of £12.2bn to Marginal £8.8m Fund £14.4bn at the decline in (2019 - £24m) performance end of May 2020 core has improved operating after the profit despite challenging investment in Second interim month of divid
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% • Fastest bear market rotation after the longest bull market on record 80% • Peak to trough sell off over a four week period saw the S&P 500 fall 33% 60% • Following unprecedented stimulus, markets have gained 40% from the low point with the NASDA
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 November, December and January 50,000 • Net outflows in equities began in February. March 0 witnessed dramatic outflows of all asset classes -50,000 • Net inflows were r
Slide 8: COVID-19
COVID-19 Operational resilience, wellbeing of staff and client service Initial priorities During lockdown Approaching the new normal • Wellbeing of staff • Increased client communication • Limited numbers will work from the office commencing in July • Remote working facilities tested • Weekly COVID-
Slide 9: Fund Performance & Flows
Fund Performance & Flows 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: Performance
Performance Annualised strategy performance against benchmark (since inception) 14.0% 12.0% 1st Quartile 2nd Quartile 10.0% 3rd Quartile 4th Quartile 8.0% 6.0% 4.0% 2.0% - -2.0% Source: Polar Capital, 29 May 2020, Lipper quartile rankings as at 29 May 2020. Lipper Leaders fund ratings do not constit
Slide 11: Performance
Performance % of UCITS Funds AuM by quartile ranking 100.0% • 60% of AuM is in the first quartile against the Lipper peer 90.0% group over three years. 70% is in the upper quartile over five years and 80% since inception 80.0% 70.0% • 60% of AuM is in the first two quartiles against the Lipper peer
Slide 12: Performance Against Benchmarks
Performance Against Benchmarks Percentage of AuM that has outperformed benchmark • Performance fees accrue over a calendar year and crystallise in December each year YTD 73.6% • 73.6% of AuM is outperforming benchmark in the calendar year to 29 May 2020 3Y 77.4% • 77.4% is outperforming benchmark ov
Slide 13: AuM
AuM 16.0 £14.7bn £14.4bn £14.3bn £13.8bn 14.0 • AuM recovered from £12.2bn at 31 March 2020 to £12.2bn £12.0bn £14.4bn at 29 May 2020 12.0 £10.6bn • Average AuM since September 2019 has been flat 10.0 £9.3bn • The AuM increase since year-end has been driven by the 8.0 market recovery following gover
Slide 14: Net Flows by Strategy
Net Flows by Strategy Fund flows by team Twelve month flows to 31 March 2020 £400 • Majority of funds had positive net inflows, in the year to 31 Millions £200 £0 March 2020 -£200 -£400 -£600 -£800 • Net outflows of £485m and £1.1bn from the Japan and -£1,000 North American funds respectively oversh
Slide 15: Capacity
Capacity This presentation is for use with non-US professional investors only. Please refer to the Important Information at the end of this presentation. 15
Slide 16: Capacity
Capacity Capacity as at 30 April 2020 • Capacity is managed to preserve investment Forager performance Japan • Capacity is determined by portfolio concentration, EM Income turnover, underlying market capitalisations, liquidity of Convertible Bonds holdings and client servicing requirements UK Value
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 31 March 2020 31 March 2019 Change Average AuM £14.1bn £13.6bn +4% • Average AuM provided support by Net management fees (excluding research) £119.5m £113.5m +5% weak sterling Net management fee yield 84bps 84bps - • Net management fees after Core operating profit1 £41.6m £42.2m
Slide 19: Operating Costs
Operating Costs Year to March Year to March Change 2020 2019 Salaries, bonuses and other £25.6m £22.0m +16% • Total operating costs lower due to staff costs1 lower performance fee payouts Core distributions1 £27.7m £24.5m +13% compared to 2019 Core compensation costs £53.3m £46.5m +15% • Staff costs
Slide 20: Other Operating Costs
Other Operating Costs Year to March 2020 Year to March 2019 IT £6.4m £5.4m • IT: increased Bloomberg and back Rent and rates £2.7m £2.6m office costs as a result of absorbing the full impact of four new funds Professional fees £1.8m £1.5m launched part way through the prior Research £3.6m £4.2m year
Slide 21: Cash and Investments
Cash and Investments 31 March 2020 31 March 2019 Cash £107.8m £111.7m Seed • Strong cash position at year end EM Stars £7.1m £7.3m • Strategic seeding programme China Stars £5.1m £4.8m supporting 6 funds (2019: 6 funds) China Mercury £3.9m £3.8m • Japan Value seed money redeemed Japan Value - £7.0m
Slide 22: Regulatory Capital
Regulatory Capital Year to March Year to March 2020 2019 Shareholder funds £116.1m £109.7m • Healthy surplus capital position after Less: deferred tax and capital reserves -£(8.3)m -£(9.1)m allowing for second interim dividend Tangible capital £107.8m £100.6m • The increase in surplus capital arises
Slide 23: 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. 23
Slide 24: Strategy Update – Growth with Diversification
Strategy Update – Growth with Diversification Client & geographic Further fund diversification Looking forward diversification Four new fund launches in the past • Progress made in developing the Asian • Global and International Value team three years to increase capacity client base acquisition in
Slide 25: Strategy Update – Delivery of Recent Initiatives
Strategy Update – Delivery of Recent Initiatives Automation and Artificial Intelligence Fund (October 2017) • The fund was launched in October 2017 • As at 29 May 2020, the fund size was £397m1 • This is an extension for the proven Technology team with a dedicated • Measured against the Lipper peer
Slide 26: Strategy Update – Delivery of Recent Initiatives
Strategy Update – Delivery of Recent Initiatives Emerging Market Stars (June 2018) Four funds were launched for this The two year track record for EM The process includes a strong ESG five member team in 2018 led by Stars is achieved in July 2020 component and awarded the best Emerging Market ESG fu
Slide 27: Strategy Update – Addressing ESG at Fund Level
Strategy Update – Addressing ESG at Fund Level Governance and Culture Strategy and Technology • The consideration of ESG issues has been part of our • Management quality and • Business model fund managers’ stock research since Polar Capital’s track record founding in 2001, helping to assess risks an
Slide 28: Summary
Summary Net inflows into the majority of funds to 31 Significant March 2020 Positive capacity in net inflows top quartile in May funds Resilient 2020 AuM has risen by business £2.2bn since model and 31 March operating 2020 to 29 platform May 2020 Strong balance sheet Source: Polar Capital, 29 May 20
Slide 29: Outlook
Outlook Strong culture and Economic nimbleness impact of enables unprecedented adaptation to Well stimulus is the new norm – unknown Continue to positioned when that Over 70% of diversify by adding funds emerges Positioned for AuM growth, but outperforming and teams to markets will benchmark on a Th
Slide 30: 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. 30
Slide 31: 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. 31
Slide 32: Capacity
Capacity Remaining capacity as at 30 April 2020 • Healthcare capacity is provided by the Healthcare Blue Chip Fund which includes large cap pharma stocks, Healthcare typically not held in the other healthcare funds • While the Biotech fund has limited capacity there is EM Stars capacity in the Healt
Slide 33: Strategy Update – Delivery of Recent Initiatives
Strategy Update – Delivery of Recent Initiatives Global Absolute Return Convertibles Fund (December 2018) Managed by the experienced Global • Net equity exposure is typically less • Current fund size is £30m1 Convertible Bond team in London than 20%, 80% of the time and Connecticut who launched the
Slide 34: Strategy Update – Delivery of Recent Initiatives
Strategy Update – Delivery of Recent Initiatives Healthcare Discovery Fund (January 2020) Supported by the experienced and highly rated Polar Capital Healthcare team, Deane Donnigan manages the Healthcare Discovery Fund • Smaller capitalisation growth companies are typically the ‘diamonds in the rou
Slide 35: Current Investment Strategies
Current Investment Strategies Technology AuM: £7.1bn Japan AuM: £188m 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 36: Current Investment Strategies
Current Investment Strategies Convertibles AuM: £703m North America AuM: £928m 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 37: Lipper Figures for Long and Alternative UCITS – as at 29 May 2020
Lipper Figures for Long and Alternative UCITS – as at 29 May 2020 1 Year 3 Years 5 Years Since AuM £m Percentile Percentile Percentile Inception Japan Value (S JPY) 188 92 68 62 54 31/10/2012 Healthcare Opportunities (I USD) 1,490 62 12 30 4** 3/12/2007 Healthcare Blue Chip (I USD) 65 51 47 35 37 11
Slide 38: Alternative Strategies
Alternative Strategies As at 29 May 2020 Annualised returns Strategies Inception date YTD 3 years 5 years Inception Europe Long/Short (AX EUR) 1 August 2003 -19.64% -3.41% -1.52% 6.74% Global Convertible 2 September 2013* -0.89% 2.20% n/a 2.35% (I EUR Portfolio Hedged) Global Absolute (USD I Acc) 31
Slide 39: AUM Analysis
AUM Analysis AUM split by strategy Investor mix by geography Long only 91.1% UK 64% Alternative 8.9% Europe 35% Other 1% Investment Trusts 21.1% USA 1% Open Ended Funds 78.9% AUM split by business unit Investor mix by holdings Tech 43.6% Polar Investment Trusts 21% Healthcare 15.2% Insurance 10.1% B
Slide 40: 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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