December 9, 2011 / 7:25 AM / in 6 years

UPDATE 2-Polar Capital assets buoyed by mutual funds sales

* Assets under management $4.28 bln at end-Nov

* H1 profit before adjustments 4.8 mln stg vs 2.3 mln stg a year ago

* Interim dividend 1.5 pence

* Says macroeconomic conditions to limit industry flows

* Hedge funds still suffering outflows

By Laurence Fletcher

LONDON, Dec 9 (Reuters) - Polar Capital posted a 9 percent rise in assets over the past two months, as sales of strongly performing mutual funds helped it buck an industry trend of losing clients during the euro zone debt crisis.

The British-based fund firm, which manages a combination of long-only and hedge funds, said assets under management at end-November had grown to $4.28 billion, helped by bets on rebounding markets and sales of its Japan, North America and financials funds.

Adjusted profits more than doubled to 4.8 million pounds ($7.5 million) for the six months to end-September, up from 2.3 million pounds a year ago.

“Whilst this was a good performance, the key period for Polar, as always, remains the second half,” said Peel Hunt analyst Stuart Duncan, referring to the period when Polar calculates most of its performance fees.

“Polar has gone from being one of the cheapest stocks in the sector to being one of (the) more highly valued,” added Stuart, who has cut his investment recommendation to “hold” from “buy”.

At 0930 GMT Polar Capital’s shares, which traded below 130 pence in March, were unchanged at 203 pence.

Mutual fund sales have been helped by interest from some high-end financial advisers and funds of funds, who have begun buying into long-only funds in the belief equities are now cheap, said Chief Executive Tim Woolley.

“If you think that (the euro zone crisis) can muddle through then equities are probably an interesting bet to make. Some people are brave enough to see it as an opportunity,” he told Reuters in an interview.

However, he warned that the euro zone’s debt crisis could limit flows across the industry.

“It’s a very uncertain environment, which is clearly having an impact on clients. I wouldn’t extrapolate (from these figures) unless things improve.”


Over the six months to end-September, the firm booked $706 million of net sales of its mutual funds.

The firm’s European Conviction fund is up 5.9 percent in performance terms from the start of the year to Oct. 28, while its Global Insurance fund is down 1.7 percent and its Japan fund has fallen 1.9 percent, both ahead of their benchmark indexes.

In contrast, many fund managers are now seeing outflows. Earlier this week Aberdeen Asset Management said clients withdrew 900 million pounds in September.

And last month fund firm Henderson said assets fell by 9 billion pounds in the three months to September as the euro zone crisis spooked clients into withdrawing more money than analysts had expected.

However, Polar’s hedge funds saw a net $73 million outflow, driven by its UK fund, which is down around 12 percent this year in performance terms.

“The hedge fund environment in regard to net flows has been pretty tough,” he said. “We hope we’ve reached a nadir in terms of net outflows.”

He added that the firm’s European long-short funds had profited this year from stockpicking rather than bets on the overall direction of the market.

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