Tim Woolley co-founded Polar Capital back in 2001 with the plan to grow the London boutique to about 12 stock picking fund management teams - a decade later, they have just one to go.
Woolley notes Europeans prefer onshore to offshore hedge, and 11 of its funds are Ucits compliant. Polar distributes directly to Continental investors, and uses distributor Statum Capital GmbH in Germany.
Almost a quarter of Polar’s assets are from European clients, and it is preparing to spread its message more widely there.
Infrastructure and distribution provided at Polar allows its managers to run money. Woolley estimates 20% or less of managers’ working hours are spent outside this focus.
“They are pretty accessible, but they do not want all their time to be marketing, and not to compromise performance. We have kept the communication going through tough market conditions, also through conference calls and people visiting us.”
Having such support in a “collegiate atmosphere”, to quote Woolley, also helps attract managers who do not want the exogenous pressures in institutional-sized firms or banks, but and who might struggle to raise, and manage money simultaneously alone.
“It is increasingly difficult in this environment for new managers. Investors are not just looking at the manager and his performance and process. They are also looking at the entity behind him, and they will spend as much time in the manager’s offices, looking at operations, at compliance and the surrounds.”
For hedge funds – five of Polar’s 16 products – these difficulties are compounded by the largest investors increasingly investing directly, but demanding ‘institutional strength’ infrastructure. Such investors will understandably first pick the largest, successful funds, Woolley concedes.
But as these close flagship funds – for example Brevan Howard and Lansdowne Partners – he says the “next wave” of direct money could find home in boutiques like Polar.
“For us, it is about being the ‘next wave’, whenever it comes, from institutions shifting more money. The largest managers might be closed, or institutions will start to see they have increased concentration risk. Large investors will then look to managers delivering good risk-adjusted returns with relatively safe strategies, but with the infrastructure and support as well.”
It is increasingly difficult for smaller managers, particular owner-managers – to provide all this alone. “Regulators need much more information these days so it is a challenge for smaller fund groups to deal with. Managing money is a pretty full-time job, and a team and business on top, if you are a proprietor fund manager.”