Polar Capital’s acquisition of a value-focused equity team from a little-known US boutique has been described as a “slow burn asset raise” as the fund group looks to push into the US market.
The firm announced on Thursday it has bought the international value and world value equity team of the Los Angeles-based asset manager, First Pacific Advisors, led by Pierre Py and Greg Herr.
The deal, expected to complete in the third or fourth quarter, will net Polar $1bn (£770.3m) in assets under management from the addition of FPA’s three pooled vehicles and three institutional segregated accounts.
Polar will establish a joint venture with the team under the new name of Phaeacian Partners. The entity will have separate branding but be one of the wider Polar teams and benefit from its global operational support and distribution network.
FPA’s globally focused $168m (£129m) Paramount fund delivered a total return of 29.3% in dollar terms in 2019 while the $263m FPA International Value fund returned 24%, according to Morningstar.
A natural extension of Polar’s growth strategy
In a press release announcing the deal, Polar said the managers “share common philosophies, being specialist, investment-led active fund managers”. It added the acquisition is part of its well-known strategy to acquire active managers with products suitable for institutional investors particularly, but not exclusively, in North America.
Polar Capital chief executive Gavin Rochussen (pictured) said: “This is a very exciting development for Polar Capital that begins to deliver our strategy to develop an international and global product, an institutional presence and to establish a Polar Capital North American bridgehead to complement our existing east coast presence. The establishment of Phaeacian Partners is clear evidence of the delivery of this strategy.”
Py and Herr said: “We look forward with excitement and confidence to growing a significant business with Polar Capital based upon our top performing, well tested and long term international and global equity investment processes.”
Why would Polar buy a growth fund?
Fairview Investing investment consultant Ben Yearsley said he was not aware of First Pacific Advisors, but does not think the move is a sign Polar believes value investing is about to rebound. Rather he views it as an attempt to diversify the business in terms of geography and management style.
He said: “Global growth funds have been dominant for many years, Fundsmith and Lindsell Train are the two obvious examples. Would there have been any point adding a global growth team to the business? Probably not in my view. It’s probably a slow burn asset raise rather than a quick win for Polar.”
AJ Bell head of active portfolios Ryan Hughes added: “Polar made it clear that they were looking to diversify their business and look to expand further into the US than this acquisition of the value team from First Pacific Advisors is a clear statement of intent.
“These managers are not known in the UK but are running about $1bn in the US so clearly have built a strong reputation and Polar will be looking to capitalise on that both in the UK and potentially to a wider audience.”
