Polar Capital Holdings Plc · LSE:POLR
Polar Capital — H1 2023 Earnings Presentation
38 slides from Polar Capital's earnings presentation, November 2022
Slide 1: Polar Capital: Interim Results Presentation
Polar Capital: Interim Results Presentation Gavin Rochussen, Chief Executive Officer Samir Ayub, Group Finance Director Six Months to 30 September 2022 polarcapital.co.uk This presentation is for use with non-US professional investors only.
Slide 2: Pages
Pages 3 Overview & Highlights 4 Market Perspective 7 Fund Performance & Capacity 12 AuM & Fund Flows 18 Financial Review 25 Strategy & Outlook 31 Questions 32 Appendices This presentation is for use with non-US professional investors only. Please refer to the Important Information at the end of this
Slide 3: Overview & Highlights
Overview & Highlights Continue to evaluate Fund Performance opportunities to relative to peers has advance improved1 ‘Growth with 73% of AuM in the UCITS Net inflows into Diversification’ and SICAV fund range was Sustainable fund strategy ranked in top two quartiles ranges against Lipper peers over
Slide 4: 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. 4
Slide 5: Market Perspective: Global indices vs volatility
Market Perspective Global indices vs volatility 175% 155% • Inflation remains high, although recent US data indicates 135% it is cooling 115% • Policy rates have risen sharply 95% • While investor sentiment on equity markets is close to 75% record lows, EPS declines pose a further risk for markets 5
Slide 6: Market Perspective: Net sales of funds across Europe
Market Perspective Net sales of funds across Europe (€m) 60,000 • An extremely challenging back drop for the funds industry, with net outflows calendar year-to-date in both Europe of 40,000 €287bn and the US of $209bn 20,000 • Having slowed in July and August, outflows accelerated in September, as i
Slide 7: 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. 7
Slide 8: UCITS Performance
UCITS Performance Annualised fund performance against benchmark (since inception) 12% 1st Quartile 10% 2nd Quartile 3rd Quartile 8% 4th Quartile 6% 4% 2% 0% -2% -4% -6% -8% Source: Polar Capital, 30 September 2022, Lipper quartile rankings as at 30 September 2022. UCITS performance illustrative of P
Slide 9: Performance
Performance % of UCITS funds AuM by quartile ranking • Strong UCITS fund performance against Lipper peer group 100% • 79% of UCITS AuM in the top two quartiles of the Lipper 90% peer group over six months 80% • 73% of UCITS AuM in the top two quartiles of the Lipper peer group over one year 70% • 87
Slide 10: Performance Against Benchmarks
Performance Against Benchmarks % of UCITS AuM & funds that have outperformed benchmark to 30 September 2022 • The value style funds, many with smaller AuM than the growth style funds, have outperformed benchmark over three and five years YTD • Global Convertible Fund, Europe ex-UK Income, Income Opp
Slide 11: Capacity
Capacity Capacity as at 30 September 2022 • Managing capacity prioritises investment Technology performance over asset gathering Healthcare Insurance • Total capacity is £66bn Emerging Markets • Polar Capital has a significant runway to growth in 1 Melchior Funds AuM with current remaining capacity
Slide 12: 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. 12
Slide 13: AuM
AuM 30 September 2022 bn £25 £23.4bn £22.1bn £20.9bn £20 £18.8bn AuM CAGR 12% £16.4bn £14.7bn £14.3bn £15 £13.8bn £12.0bn £12.2bn £10.6bn £10 £5 £0 Total AuM Avg AuM Source: Polar Capital, 30 September 2022. All figures quoted in Pounds Sterling. Totals may not sum due to rounding. Past performance
Slide 14: Net Flows By Strategy
Net Flows By Strategy Six months to 30 September 2022 £400 • The Technology outflows in the last six months follows a Millions change in market leadership with clients reducing their technology exposure £200 • Prior years saw strong inflows into Technology funds £- • Global Insurance Fund flows are
Slide 15: Net Flows By Strategy October 2017 to September 2022
Net Flows By Strategy 1 October 2017 to 30 September 2022 from ongoing fund strategies £1,500 • Despite a challenging year for net inflows, over the five Millions year period to September 2022, the majority of ongoing strategies have experienced net inflows £1,000 • The largest net inflow over the f
Slide 16: Net Flows By Strategy
Net Flows By Strategy Five largest strategy flows each calendar year £2,000 • 2020 was characterised by COVID and extraordinary Millions stimulus and liquidity driving inflows into all equity £1,500 strategies, particularly those with a growth style bias • Q4 of 2021, with inflation rising due to ea
Slide 17: AuM: Five largest strategies over past five years
AuM Five largest strategies over the past five rolling years • The fastest growing strategy over the 2018 2019 2020 2021 2022 AuM five years has been the sustainable CAGR EM Stars range, albeit from a low base • The Healthcare strategy has had Global Technology £4.3bn £4.8bn £9.1bn £10.7bn £6.9bn 21
Slide 18: 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. 18
Slide 19: Financial Highlights
Financial Highlights H1 2022: Changes in PBT vs £m comparable period (£m) 30 Sep 30 Sep Change 2022 2021 AuM and Revenue Average AUM (£bn) £20.0bn £22.5bn -11% Net management fees (£m) £80.0m £92.9m -14% Net management fee yield 80 bp 83bp Profitability and other income (£m) Core operating profit1 £
Slide 20: Operating Costs
Operating Costs H1 2022: Changes in Total Operating Costs vs comparable period (£m) 30 Sep 30 Sep £m 2022 2021 £m £m Salaries, bonuses and other 17.6 17.7 staff costs1 Core distributions1 22.9 25.4 Share-based payments2 1.9 3.5 Performance fee interests - - Staff compensation costs 42.4 46.6 Other o
Slide 21: Other Operating Costs
Other Operating Costs • Increased travel costs post COVID-19 30 Sep 2022 30 Sep 2021 £m £m • Full year travel spend at current run rate will be just over IT 3.3 3.5 equivalent pre-pandemic spend Rent and rates 1.5 1.4 Professional fees 1.0 1.0 Research and Corporate access 1.9 1.8 Travel & entertain
Slide 22: Cash And Seed Investments
Cash And Seed Investments Strong balance sheet 30 Sep 2022 30 Sep 2021 Total cash and seed investments of £129.2m Total cash and seed investments of £140.5m £m £m Cash 82.5 Cash 96.0 Seed investments 46.7 Seed investments 44.5 129.2 140.5 EM Stars US Mutual 5.9 EM Stars US Mutual 7.5 China Stars 7.6
Slide 23: Group Capital
Group Capital Strong balance sheet Capital allocation (£m) 160 30 Sep 30 Sep 141.3 146.8 Regulatory Capital 2022 2021 140 £m £m 30.6 39.1 120 Shareholder funds 141.3 146.8 100 13.6 13.5 24.4 24.7 80 Less: deferred tax and capital reserves -14.1 -12.4 60 26.0 25.0 Less: Goodwill and intangible assets
Slide 24: Dividend Policy
Dividend Policy • First interim dividend maintained at 14p 70.0p 50.0p • 69% payout ratio on adjusted core EPS CAGR 12% 45.0p 60.0p Policy 40.0p 56.0p • The first interim dividend paid each 50.0p 35.0p January is 50% of the first half’s core 62.2p earnings, under normal circumstances 30.0p 40.0p • U
Slide 25: 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. 25
Slide 26: Growth With Diversification
Growth With Diversification Changing landscape through diversification – five largest AuM strategies compared YoY Global Technology 37.2% Global Technology 55.9% Global Healthcare 20.2% Global Healthcare 16.2% Global Insurance 11.9% Global Insurance 7.6% Emerging Markets & Asia 2022 UK Value 5.3% 20
Slide 27: Growth With Diversification – A Changing World Order?
Growth With Diversification – A Changing World Order? The top 10 stocks by market cap seldom make it to the end of the next decade October 2022 (Market cap 1980 1990 2000 2010 USD Billions) IBM NTT Microsoft Exxon Mobil Apple (US$2,482b) Bank of Tokyo- AT&T General Electric PetroChina Microsoft (US$
Slide 28: Growth With Diversification: What will lead markets from here?
Growth With Diversification What will lead markets from here? The questions we grapple with: What will market leadership look like in 2030? Technology is here to stay but has it already benefited from massive capital inflows? Will returns rise or fall from here as we enter a higher interest rate env
Slide 29: Growth With Diversification: Markets are presenting opportunities
Growth With Diversification Markets are presenting opportunities • Polar Capital is always open to new ideas • CEO and CIO spend a significant amount of time researching managers and teams • The short list of new opportunities is longer than for many years Continue to develop • Uncertain markets and
Slide 30: Summary & Outlook
Summary & Outlook Strong A strong Balance Sheet pipeline of Supports a interest exists maintained in many of A boutique first interim Polar Capital’s Capacity in with a strong dividend Fund strategies fund culture and is performance strategies that an attractive relative to will benefit home for pee
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: 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. 32
Slide 33: Current Investment Strategies
Current Investment Strategies Technology AuM: £7.0bn Japan AuM: £157m 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: 8 • Automation & Artificial Team size: 2 In
Slide 34: Current Investment Strategies
Current Investment Strategies European ex UK Income AuM: £107m UK Value AuM: £1.0bn Established: 2014 • European ex UK Income (UCITS) • UK Value Opportunities (UCITS) Established: 2017 Typical number of positions: 25-50 Typical number of positions: 30-100 Team size: 3 Team size: 2 Years’ experience:
Slide 35: Lipper Figures For Long And Alternative UCITS
Lipper Figures For Long And Alternative UCITS – As At 30 Sept 2022 1 Year 3 Years 5 Years Since AuM £m Percentile Percentile Percentile Inception Japan Value (S JPY) 157 8 68 53 15 29/07/2016 Healthcare Opportunities (I USD) 1438 33 28 16 4** 3/12/2007 Healthcare Blue Chip (I USD) 140 16 24 20 29 11
Slide 36: Alternative Strategies
Alternative Strategies As at 30 September 2022 Annualised returns Strategies Inception date YTD 3 years 5 years Inception Forager (AX EUR) 1 August 2003 -7.82% 3.35% 3.23% 7.19% China Mercury (S USD) 1 August 2018 -15.63% -4.08% - -3.37% Source: Polar Capital. Basis: Net of fees. Currency as stated.
Slide 37: AUM Analysis
AUM Analysis AuM by strategy Investor mix by geography Long only 95.10% UK 58.13% Europe 33.99% Alternative 4.90% Asia 5.93% USA 0.95% Open Ended Funds 75.04% Other 1.00% Investment Trusts 19.74% Segregated Mandates 5.21% AuM by investment team Investor mix by holdings Global Technology 37.23% Bank
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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