The crystallisation, which means the managers forego their profit share in return for receiving Polar Capital equity, took effect from 1 April 2018, but was announced to the market in October.
As a result, the managers’ profit share cost has been reduced over the six-month reporting period.
The statement explained further: “The initial crystallisation value is to be satisfied by the issue of up to 4,060,074 shares in three tranches which can be adjusted downward if profitability of the Healthcare Opportunities fund and Polar Capital Global Healthcare Trust decline.
“Based on the results for the financial year ended 31 March 2018, the impact of the crystallisation would have been an earnings enhancement of around 3p per share.”
The group also said core profits were boosted by higher AUM and “a steady revenue margin and costs”. Pre-tax profits grew to £27.3m, up from £11.8m last year.
AUM increased by £2.7bn to £14.7bn during the period with net inflows of £932m and £1.8bn added to the figure from market movements and fund performance. However, by the end of October AUM had fallen to £13.6bn as “some of the outperformance reported to end of September was given back”.
Although this morning’s statement said net inflows were “broadly dispersed across the fund range”, the technology team saw net inflows of £402m and North America had inflows of £218m. Other popular vehicles included the UK Value Opportunities fund, with flows of £125m, the Biotechnology fund (91m), the Global Convertible fund (£93m) and the Global Insurance fund (£86m).
However, the Japan funds continue to face “performance headwinds” and saw net outflows of £144m and financials team saw outflows of £43.
During the period, Polar soft closed its £668m UK Absolute Return fund and launched a Emerging Market Stars fund and two China vehicles with plans to add a Asia ex Japan Stars fund next year.
Despite the progress, CEO Gavin Rochussen, who took u the role in July 2017, warned on a more tricky period ahead: “While we have had a highly satisfactory first six months, there is no doubt that we will encounter more volatile markets and a reduction in risk appetite by investors as developed markets begin to reduce accommodative monetary policy in the case of Europe and Japan and as the US continues to normalise interest rates with monetary tightening.”
He added: “There are currently large valuation dispersions between regions with the UK and Europe impacted by Brexit, Italy’s increasingly strained relationship with Brussels and changes in the German political landscape. Meanwhile the emerging markets, as a consequence of a strengthening US dollar, fears of escalating trade wars and concerns over slowing consumption in China, have experienced a significant market sell-off. While the US equity markets have performed well, driven in large part by deregulation and monetary policy, at some point there is likely to be a rebalancing of valuations across key geographic regions.”
The group also reiterated it had opened an AMF-regulated subsidiary in France ahead of Brexit to allow the conduct of European activities.