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Polar Capital braced for volatility

The asset management group has suffered a decline in funds since the end of September
November 26, 2018

Equity market volatility is inescapable for an active asset manager such as Polar Capital (POLR). While £932m in net inflows and £1.8bn of market returns boosted assets under management by more than a fifth to £14.7bn during the first half, a market downturn pushed that figure back down to £13.6bn by the end of October. That meant performance fees – of which £5.5m have been crystallised and received – dipped from £32.5m to £23.3m during the same period.

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Technology strategies were the most popular with investors, gaining £402m in net inflows, followed by value-biased North American funds at £218m. Chief executive Gavin Rochussen says value-biased strategies – which prioritise metrics such as cash-flow performance rather than revenue growth – should become more favoured by investors if market growth continued to slow.

Japan and emerging markets income were the only strategies to suffer net outflows, of £144m and £25m, respectively. However, that did not stop management launching three emerging markets funds during the period – the Emerging Market Stars and China Stars UCITS funds and the absolute return China Mercury fund.      

Analysts at house broker Peel Hunt expect adjusted pre-tax profits of £65.2m, giving EPS of 50.1p (from £46.4m and 36.6p 2018).

POLAR CAPITAL HOLDINGS (POLR)  
ORD PRICE:526pMARKET VALUE:£495m
TOUCH:526-528p12-MONTH HIGH:738pLOW: 445p
DIVIDEND YIELD:5.7%PE RATIO:10
NET ASSET VALUE: 89pNET CASH:£60.6m
Half-year to 30 SepTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201744.411.810.26
201874.527.324.38
% change+68+131+138+33
Ex-div:20 Dec   
Payment:11 Jan