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Polar Capital Global Insurance

IA Sector:
Financials and Financial Innovation
Asset Manager:
Polar
Asset Manager Website:
Asset Manager Factsheet:

A specialist equity fund that invests in the insurance sector, with a focus on non-life insurers and reinsurance companies. The managers aim to invest in best-in-class companies, which often leads them to smaller and mid-sized businesses with focused underwriting strategies. The fund represents an effective way to gain exposure to the non-life insurance industry. Within its sector, the fund features in our ‘Global Equity – Insurance’ category.


Opinion, Characteristics & Utility

Opinion

  • This Recommended fund benefits from the team's long experience and established connections in the insurance industry.
  • We believe their strong focus on the quality of their companies' underwriting will continue to support long-term performance.
  • Investors should be aware that a 10% performance fee is charged on outperformance of the MSCI World Insurance index in addition to a relatively standard management fee. The benchmark is not wholly representative of the team's investment universe given their caution towards life insurers, which are an important part of the benchmark.

Characteristics & Utility

  • The team’s quality focus means the fund typically displays lower volatility and lower than average drawdowns relative to global equities.
  • Nevertheless, investors should be aware that the fund invests in equities and will not be immune from downturns in the asset class.
  • Given the fund’s niche focus, it would typically be a satellite holding in a broader equity portfolio, held to express a positive long-term outlook on the non-life insurance industry.
  • Note: some share classes have a performance fee –see prospectus.

Risk Commentary

The fund’s KIID Synthetic Risk and Reward Indicator (SRRI) is 6.  This is a regulatory measurement that is, where possible, calculated from the volatility of its weekly performance over a five-year period.  A score of 6 means the fund’s historic volatility is between 15% and 25%.

Our analysis indicates that the fund’s five-year standard deviation is modestly higher than that of global equity benchmarks.  We highlight that the concentrated portfolio and niche sector focus of the fund are risk factors that can result in periods of higher volatility and/or a differentiated risk and return outcome.  At the same time, the team’s long-term focus on prudent underwriting and high-quality balance sheets has the potential to offset risk.  Different share classes could have differing SRRI scores.

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Description

Investment Team

Nick Martin is lead manager with Dominic Evans as co-manager.  Mr Martin has been involved with the strategy since 2001 when he joined Hiscox Plc.  The team moved to Polar Capital in 2010.  Mr Evans joined the team in October 2012 as an investment analyst, having previously worked at KPMG.  He was promoted to co-manager of the fund in April 2022.

Investment Philosophy

The team believe they are able to use their long experience of analysing and working in the insurance industry to identify stocks with significant performance opportunity. They build a concentrated portfolio of companies with the ability to grow their book value, with considerable exposure to mid caps.

Portfolio Construction & Risk Controls

The portfolio is concentrated, typically featuring 30-35 companies, mostly domiciled in the US, UK and Bermuda. They have a low-turnover approach, aiming to benefit from the long-term value creation of their high-quality holdings. However, they will adjust stock weightings according to the outlook for different parts of the insurance industry. They seek to ensure diversification by business and risk types and this is evident in the 35% cap on reinsurance companies, which are seen as more volatile holdings given their catastrophe exposure. Within the reinsurance positions, a diversification of catastrophe risk is preferred.

Investment Process

The team combine analysis of the industry outlook for the different parts of the insurance sector with detailed company research to identify stocks that meet their requirements. They rotate their exposure to different lines of insurance, with a primary focus on property insurance, casualty insurance and reinsurance, according to their outlook for rates and profitability in each sub-sector. Life insurers are rarely a significant part of the portfolio.

At the company level, they believe that long-term performance is driven by investing in quality companies with the ability to grow their book value through prudent, responsible underwriting. Indeed, they believe long-term outperformance in the sector is governed by avoiding failures and thus seek to purchase these strong companies at attractive entry prices. Typically, they find their focus on profitability rather than volume of business leads them to invest in mid caps and they like to identify companies where management has a significant stake in the business, to further encourage responsible underwriting. Their quality focus extends to balance sheet analysis and research into reserving policies.


Key Fund Facts

Inception Date:

27 May 2011

Manager(s) (Since):

Nick Martin (May 11)
Dominic Evans (Apr 22)

Fund Domicile:

Ireland

Base Currency:

£ Sterling

Fund Benchmark:

MSCI World Insurance

IA Sector:

Financials and Financial Innovation

Formal documentation, including the fund prospectus and the KIID, should be sought directly from the asset manager.  For ease of reference, a link to the ASSET MANAGER WEBSITE can be found above, as well as a link to the ASSET MANAGER FACTSHEET.


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