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Polar Capital managing capacity

A soft-close of the equity manager’s outsized tech fund heralds a diversification push
November 19, 2020
  • Active fund manager posts rise in profits and dividend
  • Fifty-five per cent of all assets now in the tech fund
IC TIP: Buy at 606p

Three jobs stick out of Gavin Rochussen’s in-tray. After a run of good fund performance, the Polar Capital (POLR) chief executive needs to maintain a collegiate culture eight months into a pandemic, reduce the proportional weighting to technology stocks, and find a way to expand distribution.

The first challenge was less of an issue in the spring, when Mr Rochussen’s teams handled the novelty with ease. But long and irregular hours to meet client demand take their toll eventually. “I’ve definitely noticed lockdown fatigue,” he acknowledges.

The second task has grown alongside the run in tech stocks since March. Assets in the sector swelled from £5.3bn to £9.1bn in the half-year to September, and now make up 55 per cent of all funds managed. A soft-close of the Global Technology Fund – only existing unit holders can top up – should help. “The key for me is to grow the others,” notes the CEO.

Ideally, this needs to happen with an expanding distribution network, especially after revenues dipped 3.5 per cent in the period once gains on seed investments are excluded. A push into the US might be the answer. In two to four years’ time Mr Rochussen hopes assets could grow here by “a couple of billion dollars”, market conditions pending.

Analysts think profit growth is viable from here. FactSet-compiled consensus forecasts show earnings of 51.4p per share for the full-year to March, rising to 53p in FY2022.

The shares have delivered a total return of 9 per cent since our initial tip (612p, 20 Sep 2018). That’s scant reward for the quality of the Polar fund brand and focus on booming sectors, but a 21 per cent premium to the FTSE All-Share nonetheless. Despite growth in the dividend, cover still looks healthy, so we stand by our income-themed call. Buy.

Last IC View: Buy, 474p, 8 Jul 2020

POLAR CAPITAL (POLR)  
ORD PRICE:606pMARKET VALUE:£569m
TOUCH:604-610p12-MONTH HIGH:650pLOW: 282p
DIVIDEND YIELD:5.6%PE RATIO:13
NET ASSET VALUE:122pNET CASH: £80.1m
Half-year to 30 SepTotal income (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201972.124.921.68.0
202074.127.023.49.0
% change+3+8+8+13
Ex-div:17 Dec   
Payment:08 Jan