Polar Capital Holdings Plc · LSE:POLR
Polar Capital — FY2019 Earnings Presentation
34 slides from Polar Capital's earnings presentation, June 2019
Slide 1: Results Presentation
Results Presentation Full Year to 31 March 2019 Gavin Rochussen, Chief Executive Officer John Mansell, Executive Director June 2019 This presentation is for one-on-one use with non-US professional investors only www.polarcapital.co.uk
Slide 2: Agenda
Agenda • Overview • 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 present
Slide 3: Overview
Overview Compelling Fund Performance1 Net Inflows • 73% of AuM in top quartile over three years • £556 million net inflows • 96% of AuM in top quartile since inception • 14 out of a total of 23 open ended funds had positive net inflows • Average AuM increased by 23% Active Management Delivers Result
Slide 4: Highlights
Highlights Record performance fee profits of £24m (2018 - £15m) Total dividend AuM increased 15% increased by 18% to to £13.8bn 33p Adjusted diluted EPS Core operating profit increased 40.7% to increased 52% to 51.5p £42.2m and margin increased to 37% (2018 – 30%) Source: Polar Capital, as at 31 May
Slide 5: Market Perspective
Market Perspective Global indices vs volatility 40% • Increased market volatility and a market correction in February 2018 when the US ten 30% year bond yield approached 3% 20% • Fears of trade wars and concerns about 10% global growth triggered a correction in the last quarter of 2018 0% • All majo
Slide 6: Market Perspective
Market Perspective Net sales of active long-term funds across Europe • The environment for equities remains challenging • Fixed income is the only area of net inflows across Europe since January • Equity fund flows have been negative since October 2018 • Industry outflows in Q1/19 down on Q4/18 but
Slide 7: Performance
Performance Annualised strategy performance against benchmark (since inception) 16.0% 14.0% 1st Quartile 2nd Quartile 3rd Quartile 12.0% 4th Quartile 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% Source: Polar Capital factsheet data, 31 May 2019, Lipper quartile rankings as at 31 May 2019. Lipper Leaders fun
Slide 8: Performance
Performance % of UCITS funds AuM in top quartile • Majority of AuM is in the first quartile against the Lipper peer group over three years 96% • Lipper quartile ranking is compelling over five years and since inception 73% 71% Top Quartile over 3 Years Top Quartile over 5 Years Top Quartile since in
Slide 9: Performance Against Benchmarks
Performance Against Benchmarks Percentage of AuM that has outperformed benchmark • 81% of AuM outperformed benchmark in YTD 81% 2019 to 31 May 2019 • 61% of AuM outperformed benchmark in 3YR 73% 2018 • 20 funds outperformed benchmark in 2019 to 5YR 92% 31 May 2019 • 12 funds outperformed benchmark i
Slide 10: Current Active Share
Current Active Share Japan Fund Japan Value Fund • As active equity managers, the percentage Automation & Artificial Intelligence Fund “active share” of portfolios is between 60% UK Value Opportunities Fund and 92% GEM Income Fund • Where specialist sector or regional Global Convertible Fund benchma
Slide 11: Fund Liquidity
Fund Liquidity Fund Liquidity Total cumulative fund liquidity • Fund liquidity monitored in real time by the 100% oversight team 80% • Fund capacity is determined by underlying fund liquidity profile 60% • Less liquid strategies have reduced capacity • 50% of the least liquid Polar Capital Fund can
Slide 12: Style Profile
Style Profile 24 Other - 5% Income - 6% y • Value and Income style profile is 44% of AuM • Growth style profile is half of total AuM • ‘Other’ includes absolute return and Growth - 50% alternative asset classes Value - 38% Growth Value Income Other Source: Polar Capital, 31 May 2019. Totals may not
Slide 13: AuM
AuM 16.0 £14.7bn £14.1bn £13.8bn 14.0 £12.0bn 12.0 £10.6bn 10.0 £9.3bn £7.3bn £7.7bn 8.0 6.0 4.0 2.0 0.0 Mar-16 Sep-16 Mar-17 Sep-17 Mar-18 Sep-18 Mar-19 May-19 Total AUM Avg AUM Source: Polar Capital, 31 May 2019. All figures quoted in Pounds Sterling. Totals may not sum due to rounding. Past perfo
Slide 14: Net Flows By Strategy
Net Flows By Strategy Flows £600 • Net flows driven by the Technology funds £500 £400 • Net inflows to the UK Value strategy despite £300 negative sentiment for UK Equities and UK Equity Funds £200 Millions £100 • Pleasing demand for the Global Convertible £0 Fund and early inflows into the Global -
Slide 15: 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. 15
Slide 16: Financial Highlights
Financial Highlights Financial Highlights 31 March 31 March Change 2019 2018 • Constant net management fee yield Average AuM £13.2bn £10.7bn +23% Net management fees • Profit margin – improved by 7% £113.5m £90.3m +25% (excluding research) to 37% Net management fee yield 84bps 84bps - • Performance
Slide 17: Operating Costs
Operating Costs 31 March 31 March Change 2019 2018 Salaries, bonuses and other staff costs £22.0m £20.9m +5% • Increased salaries, bonuses and other staff costs due to an increase in Core distributions £24.5m £22.9m +7% headcount Core cash compensation costs £46.5m £43.8m +6% • Core distributions up
Slide 18: Other Operating Costs
Other Operating Costs 31 March 31 March 2019 2018 IT £5.4m £5.3m • Increased research and corporate Rent and rates £2.6m £2.6m access costs due to MiFID II impact Professional fees £1.5m £1.2m Research and corporate access £4.5m £0.7m Insurance and regulation £0.5m £0.4m Travel and entertainment £1.
Slide 19: Cash and Investments
Cash and Investments 31 March 31 March 2019 2018 Cash £111.7m £87.9m Investments - £9.9m UK ARF Seed European Income - £8.2m EM Stars £7.3m - • Cash resources up 27% China Stars £4.8m - • Strategic seeding programme China Mercury £3.8m - supporting 6 funds (2018 – 1 fund) Japan Value £7.0m - Global
Slide 20: Regulatory Capital
Regulatory Capital 31 March 31 March 2019 2018 Shareholder funds £109.7m £87.7m • Increase in material holdings requirement due to an increase in Less: deferred tax and capital reserves £(9.1)m £(3.1)m seed programme Tangible capital £100.6m £84.6m Less: dividend provision £(23.5)m £(20.0)m • Health
Slide 21: 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. 21
Slide 22: Growth With Diversification - Strategy Update
Growth With Diversification - Strategy Update Emerging Market Diversification • Emerging Market Stars team settled • Top quartile performance since launch • Adds additional ~$7bn of capacity • Emerging Market Stars Fund net flows since launch exceed seed capital • Selected for a key Scandinavian pla
Slide 23: Growth With Diversification - Strategy Update
Growth With Diversification - Strategy Update Succession Planning For Fund Oversight Strengthened Future Growth • CIO appointed to provide additional oversight • Japan team changes - Gerard Cawley who has rigour while preserving investment autonomy been with the team for 14 years has taken over for
Slide 24: Summary and Outlook
Summary and Outlook Summary Outlook • Current AuM exceeds average AuM • Actively managed funds are well positioned for FY19 for more volatile markets • 28 funds (including three Investment Trusts • 81% of AuM is ahead of benchmark from and two managed accounts) provides January to the end of May div
Slide 25: 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. 25
Slide 26: 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. 26
Slide 27: Voting and ESG
Voting and ESG Enhancements to investment process • Improved ESG oversight for all Polar Capital strategies • Incorporating MSCI ESG scores • Sector relative scores; AAA to CCC for each company • Asset weighted score versus benchmark • Higher level sustainability analysis for Polar Capital’s EM Star
Slide 28: Current Investment Strategies
Current Investment Strategies Technology AuM: £4.6bn Japan AuM: £650m Established: 2001 Funds managed: Established: 2001 Funds managed: Typical number of positions: 50-140 • Technology Trust Typical number of positions: 45-100 • Japan (UCITS) Team size: 7 • Global Technology (UCITS) Team size: 5 • J
Slide 29: Current Investment Strategies
Current Investment Strategies Convertibles AuM: £692m 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 30: Lipper figures for long and alternative UCITS
Lipper figures for long and alternative UCITS – as at 31 May 2019 1 Year 3 Years 5 Years Since AuM £m Percentile Percentile Percentile Inception Japan (I JPY) 469 93 38 63 10* 19/10/2001 Japan Value (S JPY) 18 29 5 28 24 31/10/2012 Healthcare Opportunities (I USD) 1,197 32 11 14 4** 3/12/2007 Health
Slide 31: Alternative Strategies
Alternative Strategies As at 31 May 2019 Annualised returns Strategies Inception date YTD 3 years 5 years Inception Europe Long/Short (AX EUR) 1 August 2003 1.63% 3.07% 0.91% 7.94% UK Absolute Equity (GBP I) 29 September 2014 0.19% 16.40% N/A 16.73% Global Convertible 31 December 2015 5.85% 3.71% N/
Slide 32: AuM Analysis
AuM Analysis AuM split by strategy Long only 90.6% Alternative 9.4% Investment Trusts 17.4% Open Ended Funds 82.6% AuM split by business unit Technology 32.3 Healthcare 15.8 North American 15.7 Financials 13.0 UK Value 6.2 Japan 5.1 1 Convertibles 4.6 UK Absolute 3.3 European (long/short) 1.5 2 Euro
Slide 33: AuM Analysis
AuM Analysis Investor mix by geography UK 67.1% Europe 30.1% Other 1.8% USA 1.0% Investor mix by holdings Bank 22.5% Polar Investment Trusts 17.4% Private Wealth Manager 16.7% Platform 15.3% Asset Manager 15.1% Fund Of Funds 6.5% Family Office 1.8% Other 1.4% Consultants 1.4% Insurance Company 1.1%
Slide 34: 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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