Polar Capital: funds paying dividends At the last update, fund manager Polar Capital was administering $13.6bn of investor funds. The forecast profits from this operation are expected to be used to pay a dividend in excess of 30p per share. At current share prices, that would make the company one of the biggest dividend yields available on AIM today. Polar Capital offers a range of funds to professional and institutional investors i.e. not direct to Joe Public. It runs what looks to be a very lean operation. That $13.6bn of funds constitutes 20 funds and 40 managed accounts, overseen by just 46 investment professionals and another 53 group staff.
a strong owner/manager culture at the company Polar Capital came to AIM in 2007. There is a strong owner/manager culture at the company — 36% of the equity is in the hands of directors, staff and original founders. The company is committed to paying a majority of the group’s total earnings for the year as dividend. For the year ending March 2014, Polar paid 25p of dividend from (diluted) earnings per share of 29p. The equation is obvious. Big profits 10
= big dividends. That leaves the usual challenge of gauging Polar Capital’s long-term earnings potential. Looking back, Polar’s progress is impressive. In 2009, Polar began the year with $3.1bn of assets under management and ended with just $1.5bn. Nevertheless, the company still managed to report £12.1m of pretax profit and pay total dividends of 4.5p. For the year ending March 2014, assets under management reached $13.2bn and pre-tax profit hit £32.7m. Asset managers’ fees are typically charged as a percentage of funds being managed. Some Polar funds are run on performance-based arrangements that can lead to even higher revenues when a fund does well. Good performance ratchets assets under management higher, increasing future fees. It also attracts more investors, further increasing the revenues that can be earned. If performance disappoints, this process goes into reverse and a fund manager’s profits can fall fast.
even higher revenues when a fund does well
the FTSE 100 is up 36%, America’s S&P 500 is up 90% and the Nikkei 225 is 53% higher. However, with economic panic receding, further rounds of quantitative easing are unlikely.
further rounds of quantitative easing are unlikely This leaves me to conclude that unless Polar can win an enormous amount of assets over from its peers, the performance of recent years is unlikely to be repeated. While it feels like we are overdue a market correction, the bull market has not gone away. I have no strong feeling that a big move in stock markets would be merited. I am left to conclude that Polar Capital looks to be well worth further research. Polar Capital Holdings (LON:POLR) FOR Big dividends forecast Markets remain strong AGAINST Dependent on a small number of key managers Strong pound may hurt Market cap Bid:offer
Volleys of quantitative easing in large economies have delivered massive stock market advances. In the last five years,
P/E (forecast) Yield (forecast) 52week low:high
£375m 423p:432.5p 12 7.2% 388p:572p
Published on Oct 5, 2014