Tech tailwinds boost Polar Capital as AI bubble balloons
Asset manager Polar Capital reported a surge in earnings after the firm’s “meaningful exposure” to tech stocks provided a hefty tailwind.
The London-listed business recorded a 21 per cent jump in pre-tax profit to £27.9m, this was up from £23.1m just last year.
Whilst outflows soared to £690m, including a significant £632m concentrated in the first quarter, assets under management (AuM) managed to notch a record high.
Polar’s AuM climbed 25 per cent to £26.7bn as of 30 September, and by 7 November, the group said assets had topped £28.4bn.
It comes as investors pile into tech equities and valuations balloon, prompting some to fear markets are in the midst of an AI bubble.
OpenAI’s finance boss earlier this month called for a “federal backstop” to guarantee any loans issued to the tech giant by private backers but chief executive Sam Altman later poured cold water on the sentiment after it sparked a wave of investor concerns.
The Bank of England has also joined the chorus of warnings, stating there was potential for a “sharp correction” in global markets due to the “stretched” stock valuations from the artificial intelligence (AI) boom.
Tech frenzy boosts Polar but warns of uncertainty ahead
But the AI frenzy has bolstered Polar, whose tech strategy represents 51 per cent of the groups total asset under management.
Tech AuM reached £13.6bn at the end of September, a leap from £9bn at the end of March.
Artificial intelligence and global technology funds were also cited as top sources of net inflows helping drive the £195m instream.
Polar’s Capital Global Technology Fund also recorded inflows of £226m in the second quarter, which reversed outflows from the prior three months and teed up an 18 per cent return – which fell ahead of the average tech market index.
Basic earnings per share increased 22 per cent to 21.1p, whilst the group declared an interim dividend of 14p, maintaining the previous year’s level.
“The first half of Polar Capital’s financial year ended on a positive note for equity markets and our meaningful technology exposure was a clear tailwind,” Iain Evans, chief executive, said.
But the firm did note the macro environment was “uncertain and likely to remain volatile”.
“Our plan is clear: scale where we are strongest, apply targeted fixes where needed, diversify selectively, and leverage distribution – particularly in the US.”
Top names have weighed in on the tech jitters racing across global markets over the last few weeks.
David Solomon, the boss of Goldman Sachs, warned markets were due a “drawdown” due to the AI frenzy propelling indexes to continuous record highs.
Earlier this month, Michael Burry, whose role shorting the US housing market in 2007 partly inspired the ‘Big Short’ Hollywood film, disclosed a billion-dollar bet against Palantir and Nvidia.
In a series of posts on X, the founder of Scion Asset Management compared the unprecedented amount AI firms were piling into data storage and processing power with the slowing demand for cloud computing from customers.