Polar Capital Holdings plc

I'm Gavin Rochester, Chief Executive of Polar Capital. I, alongside our Chief Finance Officer, Chief Investment Officer, and the Global Head of Distribution will present an overview of our annual results to the 31st of March, 2024. It has been another challenging period for active equity managers, with widespread outflows reported by many of our peers. Polar Capital has not been immune to this. And across the financial year, we have also seen net outflows. However, in Q1 of 24, we witnessed net inflows into our range, the first quarter of net inflow in eight, and this trend has continued into Q2. Having passed its five-year anniversary during the reporting period, our Emerging Markets Stars Fund has seen strong inflows with the team receiving over £400 million into their range of funds. Unsurprisingly, given the breakthrough in artificial intelligence seen last year and the resulting performance of technology stocks, we've seen renewed interest into our technology franchise, with the Artificial Intelligence Fund also seeing net inflows. Asset under management ended the financial year at £21.9 billion, an increase of 14%, and AUM has now grown further to £22.8 billion on 14 June, an 18% increase from April last year. Despite net outflows across the period and inflation increasing our cost base, our diluted earnings per share ended the year just 1% lower. With performance and investor demand having improved, we remain confident on the outlook and therefore are able to hold the full-year dividend at 46p. Markets continue to prove fascinating, with an ever-changing macroeconomic and geopolitical backdrop continuing to affect investor sentiment. For now, volatility remains subdued, inflation has abated, and interest rates look to have peaked, with central banks now easing monetary policy. Interest rates have started declining in some developed economies. After a strong recovery in Q4 of 23, equity markets continued to rise in Q1 of 24, and many are now all-time highs. The S&P 500 was up 30% in the financial period, with technology stocks in particular outperforming. The market remains narrow, with the Magnificent Seven, or Fab Five, dominating market cap indices. In Q1 of 24, gold outperformed a rising US equity market, surprising many.

The last two years have been a challenging period for the asset management industry. Following a difficult year in 2022, the fund flows rebound hoped for in 2023 failed to materialise. Investor caution remained the dominant narrative, and as a result, the European funds industry suffered a second consecutive year of net outflows. The same factors continued to drive flows in the first quarter of 2024, with investors still erring on the side of caution. The perceived safe haven of fixed income has recorded five consecutive months of inflows, while in equity and mixed assets, outflows underline investors' risk aversion, as does further strong support for money market funds.

This chart shows annualized relative performance of polar strategies since inception. That's the number on each bar. And peer group ranking, that's represented by the color. So the blues are first and second quartile versus peers. And the oranges are third quartile. And these numbers are all to the end of May. And the key message here is the consistency of outperformance versus benchmark and peers over long periods, both for polar's thematic and also regional equity strategies. All but two are ranked in the first or second quartile versus peers. One further comment, the two bars on the right for our smart energy and smart mobility strategies. Their performance is shown here against the MSCI World benchmark, but we also compared the strategies to a purer and narrower reference benchmark containing the key beneficiaries of decarbonization and electrification, and their performance is ahead of these more specialist benchmarks. showing performance versus peers over shorter time periods as well. We're seeing an improvement since this time last year with 94 percent of AUM in the first and second quartile over one year now and 91 percent above peer median over three years to the end of May. Over 99% of our AUM is ahead of peers since inception, and over 60% of AUM is also ahead of benchmark, which is a pretty solid record. Moving on to look at performance versus markets, the long-term picture is good, with more than 60% of funds and more than 80% of assets under management beating their benchmark since inception. The numbers are a little lower over three and five years, and the reason for that is that 2022 was a year in which value styles dominated, whereas a significant number of polar strategies and a high percentage of AUM are growthy, like tech and like healthcare. We now have a situation where a small number of companies account for a pretty significant proportion of market cap weighted indices. This is not unprecedented. Every era has its disruptors and its innovators. And unlike the last time this happened, at the height of the tech bull market in 1999, and 2000, the leading companies this time are hugely profitable, many of them with substantial cash reserves too. Polar's technology team remains an area of strength and expertise and is in many ways the foundation on which the business was built. And the team's really positive about the potential for AI, not just in the tech sector, but in transforming businesses outside tech too.