Polar Capital  

Polar’s Godber defends hefty performance fee

Polar’s Godber defends hefty performance fee

George Godber has defended the performance fee on his Polar Capital UK Value Opportunities fund.

The £295m fund charges 10 per cent of any outperformance of the FTSE All Share benchmark.

It was launched in January of this year by Mr Godber’s colleague Georgina Hamilton and he joined in April, at the end of his contractual obligations to his previous employer.

The duo had previously made their reputations running the Miton UK Value Opportunities fund, which grew in size to just short of £900m before their resignations to join Polar.  

Patrick Connolly, head of communications at Chase De Vere, said the performance fee at that level was a big concern.

Darius McDermott, managing director at Chelsea Financial Services, has long been a fan of the fund managers, but is less keen on the performance fee.

He said if a fund has a performance fee then he would typically expect the ongoing charges to be lower but the annual management charge for the Polar Capital fund is 0.75 per cent.

Mr McDermott added that he would usually want the hurdle at which a performance fee is levied to be higher than simple out-performance of the benchmark.

His said that if such a fee is levied, the hurdle should probably be that the performance fee happens once a certain percentage of outperformance of the benchmark has been achieved, rather than just any level of outperformance.

But he said that the performance fee is not a “deal breaker” for the fund, as he has strong faith in the performance of the managers.

Mr Godber said the performance fee was introduced to ensure that the interests of the fund manager were "aligned with investors".

He said in many instances fund managers have their remuneration linked to the ability of the fund to grow in size, more so than performance.

Mr Godber’s view is that his fund cannot perform adequately if it grows above £1.2bn in size because if the fund grew beyond that size it would be unable to invest in some of the smaller companies that he likes and that have been strong performers for him when he ran this strategy at previous firms.

The fund typically has a third of its exposure in UK small caps, a third in mid caps, and a third in large caps, though at present his exposure to large caps is much lower than that, with pharmaceuticals being the one area of the FTSE 100 that he believes represents value.

Mr Godber told FTAdviser that with his and Hamilton’s remuneration linked to entirely to performance, rather than asset gathering, he believes investors will benefit over the longer term.  

The Polar Capital UK Value Opportunities fund has returned 11 per cent since launch in January, compared with 7 per cent for the average fund in the IA UK All Companies sector in the same time period.