Meet the funds making money in each of the past 10 years
This article first appeared on Trustnet on 9 July 2024 Whenever we look at fund performance, it’s...
Polar Capital Biotechnology
Polar Capital Biotechnology is a specialist fund that invests in companies of all sizes but with a bias towards smaller ones. It is run by the highly experienced team, headed up by manager David Pinniger. It has historically had an overweight to European names which feature little in the US-focused benchmark, but this demonstrates how David and the team are willing to look beyond the industry stalwarts and drive performance through superior analysis.
Our opinion
The biotech sector sits right at the top of the risk spectrum and requires specialist management to deliver results. David, aided by the team at Polar, fits this profile well. He makes the most of the team’s experience to dissect the sector, allowing them to find the smaller companies, others, and passive investing, miss. This then offers investors an excellent, risk-adjusted portfolio of well-researched ideas, which has historically delivered superior returns.Company description
Founded in 2001, Polar Capital supports more than 12 investment teams that focus on a range of products. Its founding strategy of fostering an equity culture amongst its employees and providing high levels of transparency to clients means 30% of the firm’s equity is currently held by directors, founders, and employees. Polar Capital is principally located in London and maintains offices in Tokyo, Connecticut, Jersey, Edinburgh, Shanghai, and Paris. It was awarded the Elite Equities Provider Rating in 2019 and 2021.
Fund manager
David Pinniger is CFA Charterholder and holds a first class honours degree in Human Sciences from Oxford University. He has more than 20 years ‘experience in the investment industry, most of which have been in the healthcare space. He joined Polar in 2013 as a fund manager and, prior to this, he worked at SV Life Sciences as a portfolio manager of the International Biotechnology Trust. David has also worked at venture capital firm Abingworth as a biotech analyst, and at Morgan Stanley as an analyst covering European pharmaceuticals and biotechnology.
David PinnigerFund manager
Investment process
Whilst the biotech universe is a specialist area itself, it can be split into multiple subsectors. The total universe consists of around 700 companies, of which around 450 are in North America, 150 in Europe and a further 100 across the rest of the world. David divides these into groups, which he identifies as; those with diversified earnings, revenue growth names, those in clinical development, those with technology platforms and research tools and diagnostic companies.
To identify the best ideas and build the portfolio, David looks at overall asset allocation, to give a target portfolio structure and ensure that the key themes in biotech are given appropriate exposure.
These allocations are then filled with ideas generated from the healthcare team, as well as industry sources, such as specialist brokers and analysts. David and the team will also attend multiple investor and medical conferences where new technologies are exhibited and discussed. Once identified, potential ideas are put through an ongoing review process. The team will assess the viability of each potential technology and look to identify a catalyst for the company, whether that be upcoming trial results or a technological breakthrough that will help drive the share price upwards.
ESG
ESG - Integrated
Being a specialist fund investing in a specific industry, ESG analysis is a lot more granular with this fund, but it remains an important part of the risk assessment and due diligence process. David has a particular focus on governance due to how highly regulated the industry is and how important it is that rules are followed by management teams. Meeting and engaging with these teams is an essential part of the investment journey and ESG considerations will be a part of this discussion. The industry also has a naturally large social impact, looking to find improvements in areas of oncology, obesity, respiratory disease, and mental health to name a few. The team engages with firms with poor overall ratings to try and improve practices. Divestment is an option should this approach not be successful, though David prefers to take a productive improvement approach.
Risk
Polar Capital Biotechnology is at the high end of the risk spectrum and will not be suitable for all investors. The fund is capacity constrained to ensure it can maintain its performance whilst continuing to invest in smaller companies. This allocation should be a key driver of performance.
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