A low-cost, leveraged technology play is called Polar Capital

In the field of fund management, Polar Capital has established a niche and is benefiting from it

Last year was a terrible year for the active fund-management sector. Over the previous ten years, investors have continuously taken money out of active investment funds; however, in 2025, outflows increased. More than £1 trillion left US active mutual funds last year, up from about £600 billion in 2024, according to data gathered by Bloomberg Intelligence. Over £600 billion was added to passive exchange-traded funds (ETFs) by investors last year. Though the numbers are smaller, the trend is essentially the same in the UK.

This may seem to indicate that the listed fund-management industry in the UK is nearing its demise, but that is not totally the case. According to Peel Hunt's analysis, only two of the listed managers are expected to report a decrease in assets under management (AUM). These managers, Impax Asset Management and Liontrust, lost two important mandates from St. Jamess Place. This could result in a 23.3% annual decline in group AUM.

POLR, or Polar Capital, is the best performer. Group AUM was up from 23.2billion at the end of June to a record 26.7billion at the end of September. The quarter's net outflows were only 58 million, down from 632 million in the previous quarter. The company's success can be ascribed to its role as a specialist manager that concentrates on a few important sector mandates. Open-ended funds made up 75% of the company's assets at the end of September, followed by investment trusts at 23% and segregated mandates at the remaining 25%. 51% and 14% of AUM, respectively, came from tech and healthcare strategies. Although the company has been on the right side of the fence for the last ten years, this does indicate that managers are overexposed to these sectors.

Polar Capital has a strong technological foundation.

It's difficult to argue that investors won't be interested in technology and healthcare for the next ten years. Tech and healthcare will continue to be two of the most fascinating and promising thematic trends, even though these industries may experience some upheaval along the way. Polar intends to focus more on the markets that have made it one of the leading boutique fund managers in the UK under the direction of the new CEO.

Technology is the group's foundation. In order to establish the new boutique, Tim Woolley and Brian Ashford-Russell quit their jobs at the Henderson Technology Trust, which is run by Henderson Investors, in 2001. Despite the .com bubble, the self-managed investment trust Polar, supported by Caledonia Investments, expanded rapidly, reaching £2 billion in assets under management by 2005. Launched in 1996, Henderson Technology Trust evolved into the Polar Capital Technology Trust, a key component of the organization's fund portfolio. Since its founding, the tech trust has returned 14.7% annually (to April 30, 2025) by accurately predicting significant technological turning points, like the emergence of AI in 2017 and Big Data in 2010.

At Polar's founding, the company's flagship open-ended technology fund, the Global Technology Fund, was introduced. Even though they are both run by the same team, it is now much larger than the trust. Concentration is the main distinction. The trust has 91 positions, while the open-ended vehicle has 65. However, compared to the open-ended fund, which has 47% of its portfolio in the top ten holdings, the trust has a more concentrated portfolio, with 53%.

A promising new boss is Iain Evans.

Iain Evans joined the company in September and was named CEO after 21 years. With a few strategic acquisitions, Evans intends to build on Polar's success in a few important areas. In an industry that frequently seems to be lacking direction, this desire to concentrate on what works is refreshing. The rise of passive funds has alarmed many managers, who frequently squander money on bolt-on acquisitions in an attempt to achieve growth or enter new markets.

Polar's actions are the opposite. Even though it might put the business at the mercy of technological performance, it stands out in a sector that is having difficulties. The market, however, is failing to consider this advantage. Instead, because Polar's valuation is close to the bottom of the range for its fund-management peers, investors are grouping it with struggling managers like Impax and Liontrust.

According to Panmure Liberum and Peel Hunt, shares of Polar Capital are currently trading at a forward price-to-earnings ratio (p/e) of ten and nine, respectively. Compared to the fund-manager sector average of 16 (including wealth managers), that represents a significant discount. The shares should be discounted to the sector average because fund managers' earnings are cyclical compared to wealth management's more consistent earnings, but a difference of more than 43 percent seems excessive. According to Panmure Liberum, twenty percent would be a better amount.

The company's dividend is another. Polar receives revenue from both regular fund management and performance fees. In the first half of fiscal 2025, Polar Capital recorded management fees of 86.8 million based on its asset base of 23.2 billion. It recorded a management fee yield of 78 basis points (0.78 percent) for the year that concluded in March 2025, resulting in net management fees of 178.3 million. Additionally, it received 16 million in performance fees for the yeara few million more than in 2024. Panmure predicts that by 2026, these could reach 28 million. Even though Polar's dividend is already covered by regular management fees, the additional performance fees mean that the company's 8.7 percent yield is more than covered by earnings per share, and this should continue for some time to come.

All things considered, Polar provides a low-cost, leveraged approach to capitalize on the worldwide demand for tech stocks, along with a dividend yield that exceeds the market.

Polar Capital's stock price.