Polaris Global Equity Fund (MAQ0838AU) Report & Performance

What is the Polaris Global Equity Fund fund?

Polaris Global Equity Fund aims to achieve a long-term total return (before fees and expenses) that exceeds the MSCI World ex Australia Index, in $A unhedged with net dividends reinvested (Benchmark). The Fund is actively managed using a, fundamental, research driven approach to build a diversified portfolio of companies that Polaris believes: demonstrate strong, sustainable, cash flow generation; and are priced at a meaningful discount to their intrinsic value.

  • Provides exposure to a diversified portfolio of global equities which may include emerging markets and small-capitalisation companies.
  • Typically holds 65 – 85 stocks in the portfolio.
  • For minimum 7 year investment timeframe suggestion.
  • The fund may hold cash by no more than 10%.

Growth of $1000 Investment Over Time

Performance Report

Peer Comparison Report

Peer Comparison Report

Latest News & Updates For Polaris Global Equity Fund

Polaris Global Equity Fund Fund Commentary September 30, 2023

• The Fund returned -2.43%, net of fees, in September 2023, compared with a return for the Benchmark of -4.01%, with the US Federal Reserve signalling the possibility of further interest rate increases and maintaining “high levels for longer”.

• Energy was the only sector to contribute to Benchmark performance for the month, with all other sectors detracting in unhedged terms. For the Fund, the largest relative sector contributors were holdings in Consumer Discretionary, such as eBay, and an overweight to the Health Care sector. Relative detractors included holdings in Financials, including AIA Group, and a lack of exposure to the energy sector.

• Takeda Pharmaceutical was among the top individual contributors to performance in September. The company has been supported by positive developments in its pipeline including positive topline results from a Phase 2b study for its treatment of active psoriatic arthritis. The share price was up modestly in local currency terms, which, against choppy equity markets, resulted in outperformance.

• NextEra Energy was among the top individual detractors from performance in September. Following the announcement of the sale of Florida City Gas to Chesapeake Utilities for $923 million (USD), NextEra Energy Partners, LP, a subsidiary of NextEra Energy, announced that it was lowering the limited partner distribution per unit growth rate to 5-8% through to 2026 versus previous guidance of 12-15%. The change was mainly driven by tight financial conditions that put pressure on the growth prospects of NextEra Energy Partners. Following the announcements, NextEra Energy’s stock price fell around 20% over 4 days. Mirova believe that the investment case of NextEra Energy is still valid in spite of the short-term challenges. NextEra Energy continues to be very well positioned to pursue the growth opportunities in both the unregulated renewable energy and regulated utility business in Florida. NextEra Energy has a strong track record on execution over more than a decade and a solid balance sheet. Its valuation has become very attractive after its recent selloff.

READ HISTORICAL PERFORMANCE COMMENTARIES

Product Snapshot

  • Product Overview
  • Performance Review
  • Peer Comparison
  • Product Details

Product Overview

Fund Name APIR Code
? A Product Code is unique a identifier code issued by a group or governing body, to reference products in a large group. For an example, APIR codes are commonly used for Funds and Ticker codes are commonly used for Securities such as ETFs and Stocks.
Structure
?
Asset Class
? An Asset Class breakdown provides the percentages of core asset classes found within a mutual fund, exchange-traded fund, or another portfolio. Asset classes (in microeconomics and beyond) generally refer to broad categories such as equities, fixed income, and commodities.
Asset Category
? An Asset Category is a grouping of investments that exhibit similar characteristics and are subject to the same laws and regulations. Asset categories (or a sub-asset class) are made up of instruments which often behave similarly to one another in the marketplace, looking down to the Asset Category level is important if looking to build a diversified portfolio.
Peer Benchmark Name
? A Peer Index (benchmark) refers to a peer group of investment managers who have the same investment style or category. It is used to compare the performance of one manager to their peer group, which makes it simpler for investors to choose between the vast number of investment managers.
Broad Market Index
? A Market Index (benchmark) refers to a hypothetical portfolio of investments that represents a segment, asset or category of an investable market. Market Indices are used to benchmark managers performance, to assist their style reliability and ability to provide excess returns.
FUM
? Funds/Assets under management (AUM) is the total market value of the investments that a person or entity manages on behalf of clients. Assets under management definitions and formulas vary by company.
Management Fee
? A management fee is a charge levied by an investment manager for managing an investment fund. The management fee is intended to compensate the managers for their time and expertise for selecting finanical products and managing the portfolio.
Performance Fee
? A performance fee is a payment made to an investment manager for generating positive returns. This is as opposed to a management fee, which is charged without regard to returns. A performance fee can be calculated many ways. Most common is as a percentage of investment profits, often both realized and unrealized. It is largely a feature of the hedge fund industry, where performance fees have made many hedge fund managers among the wealthiest people in the world.
Spread
? A spread can have several meanings in finance. Basically, however, they all refer to the difference between two prices, rates or yields. In one of the most common definitions, the spread is the gap between the bid and the ask prices of a security or asset, like a stock, bond or commodity. This is known as a bid-ask spread.
Polaris Global Equity FundMAQ0838AUManaged FundsForeign EquityLarge ValueForeign Equity - Large Value IndexDeveloped -World Index165.57 M1.28%0.00%0.42%

Performance Review

Fund Name Last Month
? Returns after fees in the most recent (last) month).
3 Months Return
? Returns after fees in the most recent 3 months.
1 Year Return
? Trailing 12 month returns.
3 Years Average Return
? Average Annual returns from the last 3 years.
Since Inc. Average Return
? Average (annualised) returns since inception
1 Year Std. Dev. (Annual)
? The standard deviation (or annual volatility) of the last 12 months.
3 Years Std. Dev. (Annual)
? The average standard deviation (or annual volatility) from the last 3 years.
Since Inc. Std. Dev. (Annual)
? The average standard deviation (or annual volatility) since the fund inception.
1 Year Max Drawdown
? The maximum drawdown in the last 12 months - a drawdown is a peak-to-trough decline during a specific period for an investment, trading account, or fund.
3 Year Max Drawdown
? The maximum drawdown in the last 36 months - a drawdown is a peak-to-trough decline during a specific period for an investment, trading account, or fund.
Since Inc. Max Drawdown
? The maximum drawdown since inception - a drawdown is a peak-to-trough decline during a specific period for an investment, trading account, or fund.
Polaris Global Equity Fund-2.1%2.86%17.32%6.67%9.98%10.58%11.95%12.72%-3.84%-16.15%-22.28%

Peer Comparison

Fund Name Peer Index Name
? A group of individuals who share similar characteristics and interests are called peer groups. Peer group analysis is an essential part of assessing a price for a particular stock in investment research. The emphasis here is on making a comparison, meaning that the peer group constituents should be more or less identical to the company being examined, especially in terms of their main business and market capitalization areas.
12 Months Excess Return
? Excess returns are an important metric that helps an investor to gauge performance in comparison to other investment alternatives. In general, all investors hope for positive excess return because it provides an investor with more money than they could have achieved by investing elsewhere.
Excess Return Annualised Since Inception
? Excess returns are an important metric that helps an investor to gauge performance in comparison to other investment alternatives. In general, all investors hope for positive excess return because it provides an investor with more money than they could have achieved by investing elsewhere.
12 Months Alpha
? Alpha is used in finance as a measure of performance, indicating when a strategy, trader, or portfolio manager has managed to beat the market return over 12 months. Alpha, often considered the active return on an investment, gauges the performance of an investment against a market index or benchmark that is considered to represent the market’s movement as a whole.
Alpha Annualised Since Inception
? Alpha is used in finance as a measure of performance, indicating when a strategy, trader, or portfolio manager has managed to beat the market annualized since inception. Alpha, often considered the active return on an investment, gauges the performance of an investment against a market index or benchmark that is considered to represent the market’s movement as a whole.
12 Months Beta
? Rolling 12Month Beta is a measure of the volatility—or systematic risk—of a security or portfolio compared to the market as a whole. Beta is used in the capital asset pricing model (CAPM), which describes the relationship between systematic risk and expected return for assets (usually stocks).
Beta Annualised Since Inception
? Beta is a measure of the volatility—or systematic risk—of a security or portfolio compared to the market as a whole. Beta is used in the capital asset pricing model (CAPM), which describes the relationship between systematic risk and expected return for assets (usually stocks).
12 Months Tracking Error
? 12Month Tracking error is the difference in actual performance between a position (usually an entire portfolio) and its corresponding benchmark over the last 12 months. The tracking error can be viewed as an indicator of how actively a fund is managed and its corresponding risk level. Evaluating a past tracking error of a portfolio manager may provide insight into the level of benchmark risk control the manager may demonstrate in the future.
Tracking Error Since Inception
? Since Inception tracking error is the difference in actual performance between a position (usually an entire portfolio) and its corresponding benchmark since inception. The tracking error can be viewed as an indicator of how actively a fund is managed and its corresponding risk level. Evaluating a past tracking error of a portfolio manager may provide insight into the level of benchmark risk control the manager may demonstrate in the future.
12 Months Correlation
? Correlation, in the finance and investment industries, is a statistic that measures the degree to which two securities move in relation to each other. Correlations are used in advanced portfolio management, computed as the correlation coefficient, which has a value that must fall between -1.0 and +1.0.
Correlation Since Inception
? Correlation, in the finance and investment industries, is a statistic that measures the degree to which two securities move in relation to each other. Correlations are used in advanced portfolio management, computed as the correlation coefficient, which has a value that must fall between -1.0 and +1.0.
Polaris Global Equity FundForeign Equity - Large Value Index0.71%-0.19%NA%NA%NA%1.13.2%3.75%0.960.96

Product Details

Fund Name Verifed by SMSF Mates Manager Address Phone Website Email
Polaris Global Equity FundYes-https://www.macquarie.com/id/en.html-

Product Due Diligence

What is Polaris Global Equity Fund

Polaris Global Equity Fund is an Managed Funds investment product that is benchmarked against Developed -World Index and sits inside the Foreign Equity - Large Value Index. Think of a benchmark as a standard where investment performance can be measured. Typically, market indices like the ASX200 and market-segment stock indexes are used for this purpose. The Polaris Global Equity Fund has Assets Under Management of 165.57 M with a management fee of 1.28%, a performance fee of 0.00% and a buy/sell spread fee of 0.42%.

How has the investment product performed recently?

The recent investment performance of the investment product shows that the Polaris Global Equity Fund has returned -2.1% in the last month. The previous three years have returned 6.67% annualised and 12.72% each year since inception, which is when the Polaris Global Equity Fund first started.

How is risk measured in this investment product?

There are many ways that the risk of an investment product can be measured, and each measurement provides a different insight into the risk present. They can be used on their own or together to perform a risk assessment before investing, but when comparing investments, it is common to compare like for like risk measurements to determine which investment holds the most risk. Since Polaris Global Equity Fund first started, the Sharpe ratio is NA with an annualised volatility of 12.72%. The maximum drawdown of the investment product in the last 12 months is -3.84% and -22.28% since inception. The maximum drawdown is defined as the high-to-low decline of an investment during a particular time period.

What is the relative performance of the investment product?

Relative performance is what an asset achieves over a period of time compared to similar investments or its peers. Relative return is a measure of the asset's performance compared to the return to the other investment. The Polaris Global Equity Fund has a 12-month excess return when compared to the Foreign Equity - Large Value Index of 0.71% and -0.19% since inception.

Does the investment product produce Alpha over its Peers?

Alpha is an investing term used to measure an investment's outperformance relative to a market benchmark or peer investment. Alpha describes the excess return generated when compared to peer investment. Polaris Global Equity Fund has produced Alpha over the Foreign Equity - Large Value Index of NA% in the last 12 months and NA% since inception.

What are similar investment products?

For a full list of investment products in the Foreign Equity - Large Value Index category, you can click here for the Peer Investment Report.

What level of diversification will Polaris Global Equity Fund provide?

Polaris Global Equity Fund has a correlation coefficient of 0.96 and a beta of 1.1 when compared to the Foreign Equity - Large Value Index. Correlation measures how similarly two investments move in relation to one another. This establishes a 'correlation coefficient', which has a value between -1.0 and +1.0. A 100% correlation between two investments means that the correlation coefficient is +1. Beta in investments measures how much the price moves relative to the broader market over a period of time. If the investment moves more than the broader market, it has a beta above 1.0. If it moves less than the broader market, then the beta is less than 1.0. Investments with a high beta tend to carry more risk but have the potential to deliver higher returns.

How do I compare the investment product with its peers?

For a full quantitative report on Polaris Global Equity Fund and its peer investments, you can click here for the Peer Investment Report.

How do I compare the Polaris Global Equity Fund with the Developed -World Index?

For a full quantitative report on Polaris Global Equity Fund compared to the Developed -World Index, you can click here.

Can I sort and compare the Polaris Global Equity Fund to do my own analysis?

To sort and compare the Polaris Global Equity Fund financial metrics, please refer to the table above.

Has the Polaris Global Equity Fund been independently verified by SMSF Mate?

This investment product is in the process of being independently verified by SMSF Mate. Once we have verified the investment product, you will be able to find more information here.

How can I invest in Polaris Global Equity Fund?

If you or your self managed super fund would like to invest in the Polaris Global Equity Fund please contact via phone or via email .

How do I get in contact with the Polaris Global Equity Fund?

If you would like to get in contact with the Polaris Global Equity Fund manager, please call .

Comments from SMSF Mates

SMSF Mate does not receive commissions or kickbacks from the Polaris Global Equity Fund. All data and commentary for this fund is provided free of charge for our readers general information.

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Historical Performance Commentary

Performance Commentary - August 31, 2023

• The Fund returned -0.67%, net of fees, in August 2023, compared with a return for the Benchmark of 1.60%, with market activity remaining resilient in the US but softening in Europe and China, as a result of weak macroeconomic conditions.

• The IT, Health Care and Energy sectors made the largest contributions to a positive month for the index in unhedged terms. For the Fund, the largest relative sector detractors included holdings in Financials, such as Capital One Financial and Webster Financial, and holdings in Consumer Discretionary, including Canadian Tire, Sally Beauty Holdings and Crocs. Notable relative contributors included holdings in Energy, led by Marathon Petroleum.

• Horizon Therapeutics and Marathon Petroleum were among the top individual contributors in August. Shares in Horizon, which develops and commercialises orphan drugs, rose during the month after the US Federal Trade Commission (FTC) approved its acquisition by Amgen. During 2022, Amgen announced its intention to acquire Horizon for US$27.8 billion, but was subsequently blocked by the FTC over anti-competition fears. Last month the FTC and Amgen reached a deal allowing the acquisition to go through. With Horizon trading close to the acquisition price with limited upside potential, Polaris sold its position during the month. Marathon Petroleum reported earnings in early August, beating EPS estimates, with reported crude capacity utilisation at 93%, above guidance of 91%.

• Lundin Mining and Canadian Tire were among the top individual detractors in August. Shares in Lundin Mining fell following leadership departures that have interrupted the Toronto-based miner as it navigates a return to its Vancouver home territory. Three senior vice presidents on the executive leadership team are stepping down as the company approaches a September deadline to relocate its headquarters to Canada’s west coast. Canadian Tire’s retail sales declined 0.1% in Q2 2023, impacted by softening consumer demand, particularly in Ontario, and a mix shift towards more essential and value offerings. Management withdrew its previous four-year (2022-2025) financial guidance, given the slowdown in retail.

• During the month, Polaris completed the final sales of Horizon Therapeutics, as noted above, and Carter’s Inc. Carter’s was sold on weaker infant population numbers and the shift in customer preferences regarding branded baby products.

Performance Commentary - July 31, 2023

• The Fund returned 3.66%, net of fees, in July 2023, compared with a return for the Benchmark of 2.09%, as value stocks outpaced their growth counterparts amid a rebound in Financials and Materials and relative slowdown in outsized technology sector gains.

• The Energy, Financials and Materials sectors led the market higher in July, amid a strong month for value investing. The largest relative sector contributors for the Fund included holdings in Financials, such as Webster Financial and Popular, and holdings in Materials, including Smurfit Kappa, Lundin Mining and Yara. Notable relative detractors included holdings in Communication Services, led by Interpublic Group.

• Webster Financial and Smurfit Kappa were among the top individual contributors in July. Despite seeing pressure on net interest margins and slight adjustments on guidance, Webster had robust growth in both loans and deposits. Investors were optimistic about the stock, positing even further improvement in the second half of 2023. Smurfit Kappa posted record first quarter earnings, driven by easing of input costs and resilient pricing levels, setting a positive outlook for the remainder of the year. The company is now setting its sights on wider expansion efforts in North Africa, after the launch of its first plant in Morocco. The market became bullish on Smurfit Kappa’s business cycle on the back of restocking demand projections over the next twelve months.

• Teleperformance and Interpublic Group were among the top individual detractors in July. Teleperformance scaled back guidance on top-line expectations for the second consecutive quarter. Margins held up, but the company noted a pullback in client spending, as focus rotated to leaner operations and lower fixed costs. Interpublic Group reversed full-year organic revenue guidance from 2-4% to 1-2%. The advertising holding companies saw spending drop among its notable technology and telecommunications clients, overshadowing net new business gains among other industry players.

• During the month, Polaris completed the final sale of Brookline Bancorp. Brookline had one of the highest loan-to-deposit ratios in the portfolio and, due to recent acquisitions, had more commercial real estate exposure than Polaris deemed appropriate. Polaris’ recent addition of Cullen Frost provided the opportunity to sell Brookline while maintaining the portfolio’s exposure to banks.

Performance Commentary - May 31, 2023

• The Fund returned -2.13%, net of fees, in May 2023, compared with a return for the Benchmark of 1.18%, as investor enthusiasm for technology drove further disparity between growth and value performance year-to-date.

• The growth-oriented IT sector saw the only significant gains in May; most index sectors, led by Energy and Materials, moved lower. For the Fund, the largest relative detractors were an underweight to IT and holdings in Consumer Discretionary, such as Sally Beauty Holdings and Crocs. Relative contributors included underweights to Consumer Staples, Utilities and Real Estate.

• SK Hynix and MKS Instruments were among the top individual contributors in May. SK Hynix benefited from a number of tailwinds, including new investment powering the AI infrastructure buildout, troughing of the semiconductor cycle and market share leverage, as competitor Micron was banned as a supplier to the Chinese government. Despite a ransomware attack in February, MKS reported better than anticipated first quarter results with decent revenues from its electronics, packaging, and specialty industrial divisions. MKS also announced progress in the integration of Atotech, a chemical consumables company acquired in July 2021.

• Tyson Foods and Sally Beauty Holdings were among the top individual detractors in May. Tyson struggled with high input costs, primarily labour, that could not be fully offset with higher prices. While the company’s prepared foods business remained steady, its pork, chicken and beef businesses came under pressure. US beauty supply/hair colour retailer Sally Beauty reported modestly positive sales growth but lower margins, as wages increased for in-store employees. Sally Beauty’s high-touch sales expertise is a competitive differentiator making these investments necessary. Concerns about weakening consumer spending also weighed on shares.

• During the month, Polaris completed the initial purchases of Cullen/Frost Bankers, Tecnoglass, Teleperformance, and TotalEnergies. San Antonio-based Cullen/Frost is a leading independent bank in Texas. Founded in 1868, the bank has had 29 straight years of dividend increases. Its conservative culture is evidenced by its low loan-to-deposit ratio and ample liquidity, positioning itself for further profitable growth as peers pull back on lending. Tecnoglass is a US-listed Colombian architectural glass supplier for commercial and residential construction, primarily servicing the attractive US southeast market, including Florida and Texas. The company has a sizeable cost advantage on labour and energy, resulting in significant market share gains and sector-leading margins. Teleperformance is a global leader in customer interaction management, serving thousands of customers in 170 markets globally. Healthcare and financial services are their two largest verticals. TotalEnergies is adeptly navigating the transition from a traditional oil and gas company to an integrated energy company, comprising an upstream business that branches out into an LNG business with global reach and an enviable renewable energy portfolio. TotalEnergies recognised the opportunity to transition earlier than peers and is well positioned to serve the growing needs of the electric economy.

Performance Commentary - April 30, 2023

The Fund returned 1.68%, net of fees, in April 2023, compared with a return for the Benchmark of 3.16%, with a benign month for global markets reflecting an environment of countervailing forces, including persistent inflation, tightening liquidity, and ongoing geopolitical risks, alongside a resilient labour market and surprisingly good corporate earnings.

• A rising market tide lifted all sectors in April, with Health Care and Financials contributing most to index returns. For the Fund, the largest relative detractors were holdings in Energy, led by Marathon Petroleum, and holdings in Health Care, which lagged the rise of the broader sector. These results were partially offset by holdings in Consumer Discretionary, including Bellway and Taylor Wimpey.

• Sallie Mae (SLM), Bellway and Vinci were among the top individual contributors in April. SLM reported a strong first quarter, following a disappointing Q4 where weakening credit trends led to an outsized provision. Credit performance has improved, loan growth was 12% and the company’s floating rate assets resulted in margin expansion. The UK housing market has seen a slight improvement as the spring selling season has progressed with prices remaining relatively steady, and in this environment, Bellway confirmed guidance for the full year with the expectation of lower volumes, but within market expectations. While most of the attention for Vinci is focused on their toll road concession business, the strength of its construction and electrical contracting segments was a positive surprise in the first quarter.

• Marathon Petroleum and Northern Trust were among the top individual detractors in April. Marathon Petroleum is producing record earnings due to wide refining margins, but concern about weaker gasoline and diesel demand led to profit taking by investors. Results at Northern Trust were pressured by expense growth and the expectation that its net interest margin will be pressured by higher deposit costs.

• There were no initial purchases or final sales within the portfolio during the month.

Performance Commentary - February 28, 2023

• The Fund returned 2.52%, net of fees, in February 2023, compared with a return for the Benchmark of 2.09%, as the US Federal Reserve signalled its intention to keep interest rates higher for longer.

• Cyclical sectors including IT, Industrials and Financials supported the market in February, while Real Estate, Energy and Utilities lagged. The largest relative contributors to the Fund were holdings in Industrials, including SKF and Allison Transmission, and in Communication Services, led by Publicis Groupe. Holdings in IT, such as Intel and Samsung Electronics, and an underweight to the sector were the largest relative detractors.

• Publicis Groupe and SKF were among the top individual contributors in February. French advertising company Publicis released fullyear earnings, highlighting 2022 organic growth backed by its productive Epsilon and Sapient divisions. Seemingly resistant to macroeconomic concerns, the company laid out upbeat full year 2023 organic growth guidance, pointing to continued client investment in non-traditional marketing venues, such as data, technology, and digital transformation. Swedish bearing and seal manufacturer SKF reported strong fourth quarter 2022 results, signalling that the company caught up on the cost curve and is set to benefit from organic growth on pricing, mix, and volume. The company noted solid industrial and auto sector demand, specifically highlighting their ball bearing applications in the burgeoning electric vehicle (EV) marketplace.

• Lundin Mining and SLM were among the top individual detractors in February. Lundin Mining declined in lockstep with the overall mining industry. The downward trend was further aggravated by news that the Canadian firm’s copper reserves decreased, excluding the recently acquired Josemaria Resources project. SLM, a provider of education loans, reported lacklustre earnings with higherthan-expected provisions, elevated net charge-offs and a weak 2023 outlook.

• There were no initial purchases or final sales within the portfolio during the month.

Performance Commentary - December 31, 2022

The Fund returned -3.18%, net of fees, in December 2022, compared with a return for the Benchmark of -5.49%, with geopolitical conflicts and inflation proving to be the most pressing economic risks during the month.

Defensive sectors including Utilities and Consumer Staples outperformed in a month in which all market sectors moved lower. For the Fund, the largest relative contributors were holdings in Consumer Discretionary, including Crocs and Sally Beauty Holdings, and in IT, including OpenText and MKS Instruments, as well as an underweight to the latter. Holdings in Financials, led by Webster Financial, International Bancshares and M&T Bank, and an underweight to Utilities were the largest relative detractors.

Horizon Therapeutics and Crocs were among the top individual contributors in December. Shares in Horizon gained after Amgen announced its intent to acquire the company. The deal is valued at US$27.8 billion, which represented a 48% premium to Horizon’s stock price closing on 29 November 2022. Shoe and sportswear retailers, including Crocs, benefitted from NIKE’s upbeat guidance referencing better inventory controls. Concerns about post-pandemic sales and higher shipping costs have weighed on Crocs’ share price in recent months, yet the company’s most recent earnings report outlined robust sales both domestically and abroad.

Webster Financial, International Bancshares and M&T Bank were among the top individual detractors in December. Each company was among a handful of US banks that languished on lower-than-expected net interest margins and banking fees, while costs increased.

During the month, Polaris completed the initial purchases of MKS Instruments and Northern Trust, and the final sale of Brother Industries. MKS Instruments is a semiconductor equipment manufacturer dominant in material and photonic solutions. Northern Trust is a US trust and custodian bank with a sizeable wealth and investment management business. Brother Industries, a Japanese print manufacturer, was sold following supply chain challenges and slower retail/home ink sales as professionals transitioned back to commercial offices.

Performance Commentary - November 30, 2022

The Fund returned 4.62%, net of fees, in November 2022, compared with a return for the Benchmark of 2.02%, with investor risk appetite returning despite a weakening European economy and consumers across the world feeling the pinch of high inflation.

Most market sectors, with the exception of Energy, moved higher in November. For the Fund, the largest relative contributors were holdings in Consumer Discretionary, such as Crocs and Next, and in Health Care, including United Therapeutics and newly purchased Horizon Therapeutics. Holdings in Financials, led by Capital One Financial, were the largest relative detractors, partially offset by an overweight to the sector.

Crocs and Weichai Power were among the top individual contributors in November. Crocs recovered strongly following a significant de-rating due to concerns that pandemic tailwinds for their unique shoes had waned. While growth in core Crocs brand is slowing from its rapid pace, the recent acquisition of Hey Dude, a casual, lightweight shoe, is expected to drive the company’s next leg of growth. Chinese diesel engine manufacturer Weichai rallied after releasing its Q3 results and benefitted from investor expectations that orders for heavy duty trucks in China have reached a cyclical low.

Brother Industries and Sally Beauty Holdings were among the top individual detractors in November. Shares in Japanese printer manufacturer Brother Industries were weaker as supply chain challenges impacted profits and demand for consumable ink fell. The weakness in ink demand can be attributed to the work-from-home phenomenon moderating to some extent. Quarterly same-store sales at haircare product retailer Sally Beauty were flat, with the company citing “inflationary pressures and supply chain headwinds”. The company plans to close about 10% of their Sally Beauty locations as they continue to shift to the omnichannel retail model.

During the month, Polaris completed the initial purchases of Horizon Therapeutics and Interpublic Group. Global biotechnology company Horizon manufactures Tepezza, targeting thyroid eye disease, and Krystexxa for the treatment for gout. Tepezza is already a multi-billion-dollar product and Krystexxa has the potential to be meaningful as well. Interpublic, which provides advertising and marketing services, has historically been too expensive for Polaris’ value discipline, but recent significant share price falls presented a good entry point.

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