Polar Capital Holdings plc (“Polar Capital”) announces it has reached agreement to acquire from Los Angeles based asset manager First Pacific Advisors, LP (“FPA”) its International Value and World Value equity team led by Pierre Py and Greg Herr (“the Managers”).
Polar Capital and the Managers share common philosophies, being specialist, investment-led active fund managers. Polar Capital offers the team a platform from which together they can build a significant US based international and global equity franchise.
Polar Capital will provide global operational support and distribution capabilities in multiple jurisdictions to support the strategies’ growth while allowing the Managers to continue to focus on seeking to deliver exceptional returns to their clients.
Polar Capital has made known its desire to build upon its strong UK and European wholesale franchises by attracting specialist active investment strategies that manage products suitable for institutional investors particularly, but not exclusively, in North America. The arrival of Jorry Nøddekær and his Emerging Market team in 2018 is evidence of this strategic intent.
The arrival of Pierre, Greg and their team is a natural extension of this strategy and delivers Managers with excellent track records and existing client relationships into an asset class that is complementary to the existing strategies managed by Polar Capital.
The team will establish a joint venture with Polar Capital, to be named Phaeacian Partners, with separate branding but with economics consistent with the other investment teams at Polar Capital.
As at 31 December 2019, the Managers managed approximately $1bn of assets in three pooled vehicles and three institutional segregated accounts. The FPA Paramount Fund, Inc. and FPA International Value Fund (each, an “FPA Fund”), have delivered top quartile performance in their respective Morningstar mutual fund categories over 3 years, and each has a four-star Morningstar rating.
The transaction contemplates that each FPA Fund will be reorganized into a new US series trust organized by Polar Capital. The transaction is subject to all required regulatory, FPA Fund Board and FPA Fund shareholder approvals. Polar Capital, the Managers and FPA will be recommending to the FPA Funds Board, FPA Fund shareholders and all of the Managers’ existing clients to transition to the Polar Capital platform.
The expectation is that in quarter 3 or 4 of 2020 the transaction will complete with the Managers, their team and their business transferring to Polar Capital and the FPA Funds reorganizing into a newly established series trust organized by Polar Capital.
The material quantum of consideration for the transaction will be satisfied in the initial five years by Polar Capital delivering to FPA, from its standard 55% interest, a 25% share of the business’s revenues. On the existing $1bn of AUM, core EPS will benefit by circa 0.5p but during the period of the FPA revenue share the benefit to total EPS will be depressed by its existence. As strategy revenues grow EPS will benefit, with the end of the initial five year revenue trail delivering a further gear change of EPS improvement.
Gavin Rochussen, Chief Executive of Polar Capital, commented,
“This is a very exciting development for Polar Capital that begins to deliver our strategy to develop an international and global product, an institutional presence and to establish a Polar Capital North American bridgehead to complement our existing east coast presence. The establishment of Phaeacian Partners is clear evidence of the delivery of this strategy. Pierre, Greg and their colleagues are precisely the type of team that we have been looking to recruit; a global and international equity team, deploying a fundamental value style of investing with an excellent track record, with existing institutional support and significant growth potential.”
Pierre Py and Greg Herr commented,
“We are delighted to have found in Polar Capital an organisation that is so complementary to us and our ambition. We look forward with excitement and confidence to growing a significant business with Polar Capital based upon our top performing, well tested and long term international and global equity investment processes.”
J. Richard Atwood, Managing Partner of FPA, commented,
“We are excited to have found Polar and to maintain a continued financial interest in the success of the International Value and World Value strategies. Polar’s business model is the right fit for Pierre and Greg as they pursue growth with institutional and overseas investors. We are glad to have identified and launched strategies that have added value for clients and believe this is an ideal alignment of interests for all stakeholders, particularly current investors in these strategies.”
For further information please contact:
+44 (0)20 7227 2700
Gavin Rochussen (Chief Executive)
John Mansell (Executive Director)
Samir Ayub (Finance Director)
Numis Securities Limited – Nomad and Joint Broker
+44 (0)20 7260 1000
Kevin Cruickshank (QE)
Peel Hunt LLP – Joint Broker
+44 (0)20 7418 8893
+44 (0)20 3757 4995