Analysts Stay Positive on Polar Capital as Strong Inflows Offset Weaker Markets

Analysts remain upbeat on Polar Capital (LON:POLR) after the specialist asset manager’s trading update, pointing to continued client inflows even as market moves pulled assets lower.

Assets under management fell 3% from the end of June to £43.7 billion in the three months to Sept. 30. Net inflows of £1.2 billion were more than offset by negative market movements and performance of £2.4 billion. Over the first half of the financial year, net inflows reached £3.6 billion and assets were up about 43%.

The shares fell 1.6% on Monday and a further 1% on Tuesday, leaving them at 784 pence.

Cavendish analyst Jens Ehrenberg kept a Buy rating and set a new price target of 1,231 pence on the stock. He called it “a mixed update for Polar Capital this morning, tainted by overall lighter AuM vs. our expectations.”

Even so, Cavendish, which notes that the company is a corporate client of the firm, said “the strong and persistent flow momentum is highly encouraging,” noting that the weaker investment returns followed an outstanding first quarter. He cut his pretax profit forecasts by 0.8% to 1.5%, though he raised his net fee margin expectations given inflows into higher-margin strategies.

Equity Development analyst Paul Bryant said Polar continued to attract significant capital at a time when most active equity funds in the UK have suffered heavy outflows. He attributed the £2.4 billion decline in investment performance mainly to a fall in technology valuations in July.

In the note, which is non-independent, Bryant values the shares at 1,250 pence, more than 50% above the current price. “Polar’s shares trade on the lowest forward PER in the sector,” he wrote, adding that there is “no logical reason” for the gap.

Demand was strongest for Polar’s specialist strategies, led by global technology and artificial intelligence, alongside healthcare and smart energy.

Polar Capital will report interim results on Nov. 24.