UPDATE 2-Polar Capital profits rise after bumper inflows

Wed Jun 13, 2012 6:11am EDT

Related Topics

* Pretax profit for year to end-March up 5 pct to 9.62 mln stg

* Assets under management $5.08 bln

* "Reasonable assumption" that inflows continued since March

* Polar's fund managers see opportunities to buy cheap stocks

* Dividends for the year up 20 pct to 9 pence

By Laurence Fletcher

LONDON, June 13 (Reuters) - Fund firm Polar Capital posted higher profits after its strongly-performing funds attracted more than $1 billion of net client cash over the past year, and its CEO pointed to further inflows despite investor caution over the euro zone debt crisis.

The London-based firm, which has been winning clients to its mutual funds at a far greater rate than investors have exited its hedge funds, said pretax profit for the year to end-March rose 5 percent to 9.6 million pounds ($14.9 million), roughly in line with analyst forecasts.

The firm saw strong inflows into its Japan, global insurance, healthcare and North America funds, CEO Tim Woolley told Reuters. Seven of its eight long-only funds were in the top quartile of performance over the year, while four of its six hedge funds made money.

Woolley declined to give details of fund flows since March, but said it was "a reasonable assumption" that inflows seen in the year to March had continued.

Polar's assets under management at the end of March stood at $5.08 billion, almost one-third higher than a year before.

Woolley also said that hedge fund flows had "stabilized", after poor performance in 2010 from its UK hedge fund, which has since been closed.

"We're at a turning point," he added. "We hope we'd start to grow hedge fund assets."

Peel Hunt analyst Mark Williamson, who rates the stock a hold, said in a note that Polar's results had met his expectations.

He added that while the stock was on a higher rating than the sector, that "strikes me as a justified premium given the higher rates of growth and operational leverage ... in the Polar business model".

Polar's shares were trading at 1.91 percent higher at 189.4 pence at 1008 GMT.

In March chief executive and co-founder Tim Woolley sold 1 million pounds' worth of his shares at 200 pence each.

Woolley told Reuters on Wednesday that the sale was part of a previously-agreed short-term programme of sales to boost liquidity, which had now finished.

"VERY TOUGH"

Polar's flows mark it out as one of the better performers in a sector in which some firms are suffering amidst investor caution over the euro zone while others are still winning new money.

Last month Henderson reported a net outflow of 857 million pounds during the first quarter, although Aberdeen Asset Management reported a net inflow of 2.4 billion pounds.

Meanwhile, hedge fund manager Man Group, whose shares have fallen by three quarters since the start of last year, posted a $1 billion net outflow in the three months to March.

Woolley said market conditions remained difficult, but that fund managers at Polar had seen good opportunities to pick up stocks cheaply.

"We're in a very tough environment, which is almost becoming the norm," he said.

"It's difficult to analyse. But the encouraging thing there is that, on a corporate level, a lot of companies are still doing pretty well ... Valuations look pretty reasonable, certainly compared with some of the (government) bond levels."

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