Capacity Management

One of Polar Capital’s key drivers is the belief that if funds perform well, they will attract investors. Therefore, while its investment teams are autonomous, they share the attributes of managing specialist, active and capacity-constrained portfolios.

To safeguard the teams’ investment processes, we believe that the capacity of a fund needs to be carefully managed. As such, we have stated limits for each fund, which are monitored regularly by our Chief Risk Officer and Chief Investment Officer. As part of their analysis, the CRO and CIO look at three underlying factors: 

• Stock liquidity: how easy it is to trade in a particular security under different scenarios.
• Trading patterns: an assessment of each investment team’s typical trading behaviour including turnover and the potential ability to find liquidity in a stock.
• Client concentration: how diversified is the underlying investor base.
  
  

When a fund reaches a level we feel is optimal in terms of maintaining performance for our investors, we will actively take steps to limit further inflows. Typically, the first stage is a ‘soft-close’, a level where we shut the fund to new investors, allowing existing unit holders to add to their positions. At this point, we also stop actively marketing the fund and focus our activities on providing an ongoing service of the highest standard to our existing investors.

The next stage, where appropriate, is a ‘hard-close’, where no further inflows at all are allowed. Importantly, redemptions are allowed through both stages, liquidity permitting, something we would communicate to holders separately. As well as regularly monitoring each fund’s underlying liquidity, we continually review the capacity of all our funds and will re-open to investors as and when applicable, for example following changes in investor demand and market liquidity.