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Polar Capital fund’s 10 per cent fee raises eyebrows

Polar Capital fund’s 10 per cent fee raises eyebrows

Investment advisers have questioned why Polar Capital has added a 10 per cent performance fee to a fund it plans to launch tomorrow (31 January).

Polar Capital’s UK Value Opportunities fund will launch under the management of Georgina Hamilton who joined the specialist investment manager on 6 October.

George Godber will join Polar Capital in April 2017, as per his contractual agreement, to manage the fund with Ms Hamilton.

According to Polar Capital, the UK Value Opportunities fund has been designed to achieve long term capital appreciation, unearthing companies whose value the manager does not believe is fully appreciated. 

It will invest in UK companies and will seek to discover under-valued companies and listed organisations whose embedded value has yet to be recognised in its market valuation.

Ms Hamilton will use a bottom up fundamental investment approach to derive a portfolio of undervalued investments, whether they are large, medium or small cap companies. 

The fund will aim to outperform its index, the FTSE All Share, by investing in undervalued assets, while reducing the volatility of the return by investing in a diversified portfolio. 

The fund’s focus is to invest in stocks across the market cap spectrum that the manager believes are trading materially below their tangible asset bases, or companies whose value creation is underappreciated.

All potential stocks must also meet strict valuation, sustainability and funding requirements set by the manager to be considered for the fund. 

While investment advisers FTAdviser spoke to about the launch praised the managers, they questioned why there was a performance fee given that other similar funds did not come attached with this charge.

It is expected that the fund will hold around 65 positions with a typical position size of 1 per cent to 3 per cent. 

The largest holding will account for no more than 5 per cent of the fund.

The fund has class I and S share classes available, offering both accumulation and distribution shares. 

The fund has an annual management charge of 0.75 per cent and 0.6 per cent respectively, and a performance fee of 10 per cent.

Polar Capital argued the fund seeks capital growth rather than income.

Patrick Connolly, Certified financial planner at Chase de Vere, said Ms Hamilton and Mr Godber are very much a double act and have been successful working together at both Matterley and Miton. 

He said: “They use an investment process which has worked well when markets are rising but also provided some protection on the downside. 

“It isn’t a concern that Godber won’t be joining until April, a bigger issue is that the fund has a performance fee.”

When Polar Capital was asked to comment on why the fund came with a 10 per cent performance fee, a spokesman for the company said: “Polar Capital’s core philosophy is to focus on investment performance over and above the gathering of assets. 

“We believe that through the use of performance fees there is an alignment of interest between the investment managers we recruit, their focus on delivering superior returns and the interests of professional and institutional clients who are seeking differentiated investment products.