A torrid time for tech stocks has eaten into profits at Polar Capital, which saw performance fees plunge 68%.
Pre-tax profit came in at £62.1m for the year ended 31 March 2022, an 18% decline from 2021’s £75.9m, generated off the back of performance fees of £43.6m.
Performance fees for the current year were considerably lower at £14.1m by comparison as Polar’s growth-oriented funds got caught up in the brutal tech sell-off, which ramped up at the start of 2022.
Of its 19 UK-domiciled funds, only three have delivered a positive return year-to-date, according to FE Fundinfo. The Polar Capital Automation & Artificial Intelligence and Global Technology funds, its biggest losers so far this year, are down 27% and 23%, respectively.
“Investment performance has been more challenging than the prior year when our portfolios benefitted from many of the so-called ‘Covid-19 winners’,” chief executive Gavin Rochussen (pictured) said in the results.
However, he added fund performance “has held up well” over the two pandemic years.
At the end of March 2022, 84% of its Ucits fund’s assets under management (AUM) were in the top two quartiles against the Lipper peer group over three years, which jumps to 93% over five years.
Investors pull £1.3bn from tech funds
Polar’s assets under management rose 6% from £20.9bn to £22.1bn during the period, thanks largely to market performance of £867m.
Net flows for the full year remained “resilient”, despite the market turbulence, Rochussen noted, with investors pumping in £391m during the period. However, this was a far cry from the £2.1bn brought in last year.
In the past three months, Polar suffered its first quarter of net outflows, totalling £400m, since early 2020 when the coronavirus sent markets into a freefall.
Its technology funds, which account for 42% of total assets, bore the brunt of the redemptions, haemorrhaging £1.3bn during the period after taking in £1.8bn of client cash the year before.
This was offset by net inflows into its Emerging Market Stars fund (£873m), Healthcare strategies (£561m), Convertible Bond funds (£143m) and European Opportunities fund (£85m). Polar’s newly -launched Sustainable Thematic Equities fund also attracted £120m.
Overseas segregated mandates buoy AUM
Despite this, AUM in its open-ended funds was flat for the year at £16.6bn.
Instead its total assets were boosted by seven segregated mandate wins over the period, which added £769m. One was from a UK institution, while the rest were from overseas investors.
It now runs £1.1bn in segregated mandates for clients, accounting for 5% of AUM.
Polar said it sees “significant opportunities” outside its home market of the UK and plans to continue broadening its presence in continental Europe. But its primary focus remains expanding in the US and southeast Asia.
Nearly £10bn of its AUM is from clients based overseas, a 117% increase over the past three years.