2025 Investment Outlooks
Increasing geopolitical tensions, more recently in the Middle East, dominated the macro picture last year along with the path of interest rates and inflation. The Federal Reserve seems to have guided the US to a soft economic landing while China, which contributed to heightened market volatility, saw its economic growth stutter. Once again, the markets were monopolised, either directly or indirectly, by the Magnificent Seven stocks and their own outlook, with their direction of travel in 2024 still northwards. Polar Capital’s autonomous investment teams have put together their views on what they believe will lead the macro, micro and market discussions as we move through 2025. The strategies they run cover single country, regional and global mandates, as well as more specialist, thematic strategies that include technology, healthcare, financials and sustainable equities.
Emerging Markets
Convertible Bonds
European Income
China
European Opportunities
Financials
Healthcare
Insurance
Japan
Smart Energy
Smart Mobility
Technology
UK
North America
Artificial Intelligence
Asia
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We believe artificial intelligence (AI) is the next general-purpose technology and a rare example of discontinuous technology change around which all industries will be reshaped. After a breakout year for AI investment, corporate adoption is rapidly accelerating as companies are already realising incremental profit-generation through AI usage. Infrastructure investment looks to remain robust into 2025 given this strength in corporate adoption, also supported by accelerating deployment of NVIDIA’s next-generation Blackwell chips and further development in the newer class of reasoning AI following the launch of Open AI’s o1 model. Opportunity exists beyond simply semiconductors and data centres, with continued strong and inflecting demand for areas of power and grid-related infrastructure too. We are conscious that the early stages of technology change see periods of volatility in markets, however with real profits being generated across the ecosystem we remain constructive into 2025. The initial market reaction to a Donald Trump Republican government has been largely favourable given its pro-business policies, but we remain conscious of risks as policy direction emerges, particularly with regard to trade restrictions that could induce inflation. At the same time, we expect the US to remain at the forefront of AI development with a supportive government and regulatory framework. Companies are beginning to realise real productivity and cost gains through their AI usage; we are excited by the growing recognition that AI is far more transformational than a typical technological development, hence companies are beginning to earmark much larger budgets for AI investment. AI adoption is accelerating across all sectors and companies will face disruption much more quickly than many investors appreciate. An investing blueprint built for technology-enabled change and deep understanding of AI will be critical in avoiding AI losers and capturing the beneficiaries.
AI now contributing to productivity increases, cost gains and revenue growth
Polar Capital Global Technology Team December 2024
All opinions and estimates constitute the best judgement of Polar Capital as of the date hereof, but are subject to change without notice, and do not necessarily represent the views of Polar Capital. Polar Capital is not rendering legal or accounting advice through this material; viewers should contact their legal and accounting professionals for such information. This does not constitute a prospectus, offer, invitation or solicitation to buy or sell securities and is not intended to provide the sole basis for any evaluation of the securities or any other instruments, which may be discussed in it. Past performance is not indicative of future results. A list of all recommendations made within the immediately preceding 12 months is available upon request. This is not a personal recommendation and you should consider whether you can rely upon any opinion or statement contained in this document without seeking further advice tailored for your own circumstances. This is only made available to professional clients and eligible counterparties. Shares in the strategy should only be purchased by professional investors. The law restricts distribution of this content in certain jurisdictions; therefore, persons into whose possession this content comes should inform themselves about and to observe, all applicable laws and regulations of any relevant jurisdiction.
Xuesong joined Polar Capital in May 2012. He is lead manager of the Polar Capital Artificial Intelligence strategy and a Portfolio Manager on the Polar Capital Global Technology strategy. Prior to joining Polar Capital, he spent four years working as an investment analyst within the emerging markets & Asia team at Aviva Investors, where he was responsible for the technology, media and telecom sectors. Prior to that, he worked as a quantitative analyst and risk manager for the emerging market debt team at Pictet Asset Management. He started his career as a financial engineer at Algorithmics, now owned by IBM, in 2005.
Xuesong Zhao, CFA Partner
Nick joined Polar Capital in June 2019 as an analyst on the Polar Capital Global Technology Team. Prior to joining Polar Capital, Nick worked at Neptune Investment Management as the Assistant Fund Manager on the US Opportunities growth fund. Prior to that he worked in academia at the University of Oxford.
Nick Dumas-Williams Analyst
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Many of our companies delivered good operational results in 2024 and invested well to position themselves for future growth opportunities. We feel this has not been fully appreciated by the market and see significant mispricing relative to fundamentals. Therefore, we believe 2025 could be a period where some of this upside potential is released to shareholders in the form of attractive returns. We believe nerves around China’s economic growth and politics, Fed policy (given inflation is stickier than expected) and the relatively strong dollar have all hindered stronger returns from emerging markets. These trends have not abated in the short time since Trump’s election victory and the top-down drivers for Asian equity markets in 2025 will, to our mind, come from clarity on the US political direction. As well as Trump bringing inflation and, in the medium term, even stagflation risk, to the US economy we also see a pro-growth and pro-technology agenda that should benefit our Fund. We expect the odds to favour inflation trending downwards, though acknowledge that while Trump’s increased spending plans will likely drive inflation upwards, there are also plans for strong supply-side reforms that could drive inflation down. There is also added US/China risk from Trump being in power, though he may try to cut a deal with President Xi which would likely be seen as very positive for the market. This is almost irrespective of the structure of the deal as, if nothing else, it will take away the uncertainty that the market is reacting to. We are still very strong believers in our longer-term ‘New Multipolar World’, where manufacturing and investment move out of China into countries like India, Vietnam and Indonesia, adding to already strong underlying growth drivers. We feel it is highly likely that Trump 2.0 will fast-track the evolution of a New Multipolar World in which a number of key countries – and companies – stand to enjoy high growth. We also remain very positive about the opportunities our technology companies offer for the 2025 and beyond, though we do expect it to be volatile. The underlying portfolio companies are well exposed to strong growth dynamics. We believe they are high quality and mispriced so we have a strong outlook for 2025 for both Asian equity markets and our strategy.
Strong underlying fundamentals help take advantage of the valuation gap
Polar Capital Emerging Markets & Asia Team December 2024
Jorry joined Polar Capital in June 2018 to set up the Polar Capital emerging markets growth franchise. Prior to joining Polar Capital, Jorry worked at various firms including Nordea Investment Management, Danske Capital, F&C Investment Management, New Star Asset Management and BankInvest Asset Management.
Jorry Nøddekaer Portfolio Manager
Naomi Waistell Portfolio Manager
Naomi joined Polar Capital in August 2020 as a fund manager on the Polar Capital Emerging Market Stars strategy, launched in July 2018. From February 2010, she worked at Newton Investment Management where, since September 2014, she was an investment manager on the emerging markets and Asian equity team. Before this, she was an investment manager on their European and global equity teams. Naomi began her career as an associate at Praefinium Partners Investment Management in 2007 before moving to the financial consultancy arm of the Capita Group in 2009. Her specific area of interest and expertise is managing portfolios with an ESG focus.
Portfolio Manager
Naomi Waistell
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Trump's re-election brings the trade war narrative back to the forefront of many investors' minds. 2025 in China is going to be is a tug-of-war between domestic policy stimulus and a trade war which will bring plenty of good investment opportunities that may come with (manageable) volatility. In our opinion, how policymakers apply stimulus policy tools to boost consumer confidence to fight deflationary pressures and respond to the trade war and its impact on export growth will be the most critical driver of equity market returns in China. The policy pivot at the end of September 2024 was a critical turning point, signalling that at long last policymakers acknowledge the long-term damage of the deflationary pressure and poor consumer confidence, showing their willingness to fight. In essence, this put a floor under economic growth and asset prices. What remains to be seen is whether the policy goal is to merely to arrest the downturn or to get the economic engine humming again. A trade war would undoubtedly put pressure on external demand growth, but it also could serve as a much-needed final kick that policymakers need to overcome unorthodox and bolder reflationary stimulus policies, which in our opinion is a more important driver for asset prices in China. At the investment level, our portfolio is anchored around three key themes: domestic consumption recovery, structural winners in high-end manufacturing and Chinese multinationals going global. We are constructive on these cheaply valued, high-quality, structural growth companies in China heading into 2025.
Domestic stimulus policy is more important than trade war
Jerry joined Polar Capital in June 2018. Prior to joining Polar Capital, Jerry was the fund manager of the Nordea Chinese Equity Fund and prior to his tenure at Nordea, Jerry was an equity analyst at Generation Investment Management specialising in China. Jerry has also worked for BlackRock as a fundamental equity research analyst based in London and the US, specialising in the global consumer and technology sectors. Further to this, Jerry is a native speaker of Mandarin and fluent in English.
Jerry Wu Portfolio Manager
Surveying the current backdrop, we continue to see competing crosscurrents. In Japan and Europe there is very real political uncertainty. While we may now have political certainty in the US with the Republican clean sweep, it would be a brave person to predict the road ahead will be a certain one given the experience of the first Trump presidential term. Economically, the US picture appears robust, although deglobalisation and the introduction of trade tariffs will ultimately slow growth and be inflationary. It remains to be seen how China will react to the introduction of tariffs, but we can be certain they will react. In the meantime, Chinese growth and the latest Chinese stimulus package has so far underwhelmed. Despite these very clear headwinds the market marched strongly forward in 2024, making new equity highs and breaching historic valuation metrics. At some point a pause, consolidation, correction or worse seems inevitable. As we take a step back, investors are asking: ‘Where do we go from here?’. For many, this is a difficult question to answer and consequently makes positioning a particularly difficult dilemma. We believe convertibles offer investors caught in this investment dilemma an alternative asset class to consider. It is an asset class that is enjoying a renaissance of issuance and hence more opportunities for investors, increasingly benefiting from greater uncertainty with a positive corelation to increased equity volatility. Finally, it is an asset class that offers both the ability to mitigate downside risk and maintain upside participation.
The ability to mitigate downside risk and maintain upside participation
Polar Capital Global Convertible Team December 2024
David joined Polar Capital in October 2010 to establish the Global Convertibles team. David is an experienced convertible bond specialist, having spent 36 years in the asset class in both investment banking and investment management. Before joining Polar Capital in October 2010 to establish the Convertible team, he was joint CEO of Vicis Capital (UK) Ltd which he joined in 2006 to set up and manage the international convertible portfolio of the New York-based hedge fund. David started his career at Salomon Brothers International and moved to Baii (a subsidiary of BNP Paribas) in 1987, where he first started managing convertibles. He joined Schroders in 1996 and Citigroup in 2000 following the Citi takeover of Schroder Investment Bank.
David Keetley Portfolio Manager
Stephen McCormick Portfolio Manager
David Sugarman Portfolio Manager, Head of Credit and Convertible Research
Stephen joined Polar Capital in October 2010 and is co-manager of the Global Convertibles strategy. Prior to moving into convertible trading, Stephen was a research analyst at Tucker Anthony. In 1993 he became a partner in Forum Capital Markets, eventually joining Paine Webber in 1994 where he went on to manage their convertible department until 1998. He was a senior member of the convertible sales team at Morgan Stanley before establishing and managing Valmiki Capital Management in 2005. The following year, he moved to Moore Capital where he, as a member of a three-person team, managed a $1bn global long/short equity portfolio before joining Vicis Capital to manage the US convertible bond portfolio in 2008.
David joined Polar Capital in 2011 and is a Portfolio Manager on the Global Convertible and Global Absolute Return strategies as well as the Head of Convertible & Credit Research. David began his career at Barclays Capital in London where he set up and ran their US convertible bond proprietary trading book. In 2007 he moved to CQS, then a US$7bn multi-asset hedge fund, to co-run their US convertible bond positions before leaving to joining Polar Capital. David has also worked as an economic policy researcher for the United Nations and as an economic policy consultant for the US Environmental Protection Agency.
Many of our companies delivered good operational results in 2024 and invested well to position themselves for future growth opportunities. We feel this has not been fully appreciated by the market and see significant mispricing relative to fundamentals. Therefore, we believe 2025 could be a period in which some of this upside potential is released to shareholders in the form of attractive returns. We believe nerves around China’s economic growth and politics, Fed policy given inflation is stickier than expected and the relatively strong dollar have all hindered stronger returns from emerging markets. These trends have not abated in the short time since Trump’s election victory and the top-down drivers for emerging markets in 2025 will, to our mind, come from clarity on the US political direction. As well as Trump bringing inflation and, in the medium term, even stagflation risk, to the US economy we also see a pro-growth and pro-technology agenda that should benefit our Fund. We expect the odds to favour inflation trending downwards though acknowledge that, while Trump’s increased spending plans will likely drive inflation upwards, there are also plans for strong supply-side reforms that could drive inflation down. There is also added US/China risk from Trump being in power, though he may try to cut a deal with President Xi which would likely be seen as very positive for the market. This is almost irrespective of the structure of the deal as, if nothing else, it will take away the uncertainty that the market is reacting to. We are still very strong believers in our longer-term ‘New Multipolar World’ view for emerging markets, in which manufacturing and investment move out of China into countries like India, Vietnam, Indonesia and Mexico, adding to already strong underlying growth drivers. We feel it is highly likely that Trump 2.0 will fast-track the evolution of a New Multipolar World in which a number of key countries – and companies – stand to enjoy high growth. We also remain very positive about the opportunities our technology companies offer for the 2025 and beyond, though we expect it to be volatile. We believe the underlying portfolio companies are well exposed to strong growth dynamics. In our opinion, they are high quality and mispriced so we have a strong outlook for 2025 for both emerging markets and our strategy.
Taking advantage of the valuation gap
Jorry Nøddekaer Lead Portfolio Manager
Naomi joined Polar Capital in August 2020 as a portfolio manager on the Polar Capital Emerging Market Stars strategy, launched in July 2018. From February 2010, she worked at Newton Investment Management where, since September 2014, she was an investment manager on the emerging markets and Asian equity team. Before this, she was an investment manager on their European and global equity teams. Naomi began her career as an associate at Praefinium Partners Investment Management in 2007 before moving to the financial consultancy arm of the Capita Group in 2009. Her specific area of interest and expertise is managing portfolios with an ESG focus.
Naomi Waistell Senior Portfolio Manager
Defensive dividends help navigate volatile markets and macros
Polar Capital European ex-UK Income Team December 2024
Nick joined Polar Capital in September 2014 to set up the European Income team. Prior to this, he was with Threadneedle where he managed the Threadneedle European Fund and Pan European Equity Dividend Fund, both of which were top quartile performers since inception. Nick was also deputy fund manager of the Threadneedle European Select Fund. Previously, he was a sell-side analyst at Sanford Bernstein and a chartered accountant with Deloitte.
Nick Davis, CFA Portfolio Manager
Defensive dividend strategies are well regarded for delivering attractive, long-term, risk-adjusted performance. This reputation stems from their defensive qualities, which typically result in reduced downside volatility during weaker market periods. The European market offers strong dividend characteristics, featuring mature and blue-chip companies that provide growth and generate significant cashflow to support attractive dividends. Investors should recognise the importance of dividends as a component of total returns, especially in volatile markets in which capital gains may be harder to achieve. The post-Covid landscape has prompted many firms to adopt cash return policies, balancing generous ordinary dividends with additional share buybacks. Despite the impacts of the Russia/Ukraine conflict and rapid interest rate hikes from the European Central Bank, Europe has demonstrated remarkable resilience, successfully navigating the Covid crisis. However, the outlook for a second Trump US presidential term looks uncertain to us. The 2024 landscape looks very different from when his first presidency started in 2017 in terms of dangerous geopolitical escalations, the US fiscal position, global inflation and bond yields. From a European equity perspective, the three key channels for Trump effects are what happens to global bond yields, the Russia/Ukraine conflict and how far his tariff policies go. Therefore, we continue to emphasise the importance of evaluating both valuation and cyclical risks. With no expectation of a return to ultra-low bond yields, overvalued equities may face downward pressure after a brief respite in 2023. Quality growth investors may experience a prolonged derating of crowded stocks, while a higher cost of capital environment will favour our core skills in valuation discipline and risk management.
“Should investors just give up on stocks outside America?” asked the recent headline of a long-established column in The Economist. As the consensus around US exceptionalism has grown, so has pessimism on Europe, reinforced by the malaise and political paralysis in Germany and France, and by the challenge of a new Trump administration in the US wielding the threat of tariffs. Against this backdrop, European equities head into 2025 unloved and out of favour, with the European discount to US equities rising to a record 45%. The upcoming federal election in Germany in February 2025 will be an important litmus test for policy change. Germany has the means to invest much more, but does it have the political mandate and the will? Nevertheless, amid the prevailing gloom we see chinks of light. With inflation coming down and largely under control in Europe, we expect the policy response to shift from inflation to growth. Real consumer incomes are rising; what is needed is the confidence to start spending again. The combination of pressing internal and external challenges will likely result in a more dovish stance by the ECB over the next 12 months, with interest rates set to fall significantly over the same time period. This will not resolve Europe’s structural challenges, but easing monetary conditions should become a tailwind for the economy and we are already seeing some signs of life in a number of housing markets. We believe it should also be a more conducive environment for European equities, in particular for small and mid-caps which have borne the brunt of the derating over the past three years.
Tailwinds show positive signals for distinct parts of Europe to rerate
Polar Capital Melchior European Opportunities Team December 2024
David joined Dalton Strategic Partnership, which was acquired by Polar Capital in 2021, in 2005 and has managed the Melchior European Opportunities strategy since its launch in May 2010. Prior to this, he was an analyst on the Melchior European Absolute Return strategy and managed a long-only segregated account from 2008.
David Robinson Lead Portfolio Manager
We believe smaller European companies are at an inflection point and well positioned to deliver strong performance in 2025. Despite lagging large caps in recent years and their US small-cap peers more recently, the valuation disconnect within this area is stark, creating what we feel is a compelling opportunity for investors. We believe the macroeconomic backdrop is becoming increasingly supportive. Inflationary pressures have eased meaningfully and central banks across Europe have either paused or begun shifting towards more accommodative monetary policies. This stabilisation of monetary conditions, coupled with signs of a normalising economic cycle, typically creates fertile ground for smaller companies to thrive given their sensitivity to liquidity and improving growth trends. What stands out is the sector’s current valuation. Historically, smaller European companies have traded at a premium to their large-cap peers due to their higher growth potential. Since late 2021 however, coinciding with the start of the tightening cycle, they have traded at an ever-widening discount. This is a first in the post-global financial crisis era and has catalysed the longest and most severe relative underperformance of the asset class since the turn of the millennium. We believe this is unsustainable as financial conditions ease, the cycle normalises and earnings growth eventually resumes. Timing the exact point of an economic recovery across Europe remains challenging, but what gives us confidence is what we believe is the resilience and quality of our portfolio. Also, we feel the companies we own are not only well-managed but also high-return, highly cash-generative with defensive business models and superior through-cycle earnings growth potential. Importantly, they are trading at valuations that in our view provide a strong margin of safety. As we look ahead to 2025 and beyond, we expect smaller European companies to close the performance gap with their larger peers and US counterparts, with the potential to offer significant upside for long-term investors.
Attractive opportunities in Europe from positive macros and near decade-low earnings
Polar Capital European Small Cap Team December 2024
Ali joined Polar Capital in 2007 as part of the Operations team and subsequently from 2009 worked as a Macro Analyst for the Discovery Fund, responsible for global macroeconomic research and analysis with a particular focus on the G10 currency space. He then joined the European team in 2012 as an Investment Analyst with a focus on company research and financial modelling. Prior to joining Polar Capital, he was with HSBC as a graduate recruit in their Corporate, Investment Banking and Markets division. Ali graduated from the University of Nottingham in 2004 with a BA Hons in Economics and is a CFA charterholder.
Ali Amiri-Garroussi, CFA Portfolio Manager
Michael Vise, ACA, CFA Portfolio Manager
Michael joined Polar Capital in April 2003 as Operations Manager where he further developed and managed the trade support, investment compliance, performance and risk management functions. He joined the European team in October 2005 where he has focused on company research and idea generation. Prior to joining Polar Capital he gained five years’ audit and accounting experience with Deloitte & Touche in the Cape Town, San Francisco and Dublin offices. Michael has a Bachelor of Commerce degree and completed a postgraduate diploma in Accounting in 1996 from the University of Cape Town. He is a chartered accountant and CFA charterholder.
Financials materially outperformed wider equity markets in 2024 thanks to the combination of an increased expectation of a soft economic landing in the US and lower interest rates. As a result, this led to stronger earnings than expected and the discount at which the sector trades to the wider equity market shrinking back to levels last seen in 2019. Looking forwards, we expect lower returns for equity markets in 2025, with valuations having risen towards historically high levels. Consequently, we expect performance to be more nuanced. The election of Donald Trump is positive for US financials; it is expected to lead to stronger growth and will also result in a reduction in regulation, increased M&A activity and potentially lower tax rates. Conversely, it will likely lead to increased volatility from the imposition of tariffs. We are overweight the US, more selective on Europe where the outlook for interest rates and growth is more uncertain, and underweight Asia and emerging markets, with non-US markets likely to be impacted by US-imposed tariffs. At a sector level, while we are overweight US banks we are underweight banks globally. We remain positive on alternative asset managers, payments companies and the reinsurance sector. With the increase in M&A and significant underperformance over recent years, we would expect smaller companies to outperform larger companies. Finally, following a strong year for financial credit as spreads narrowed relative to government bond yields, we expect returns to be similarly lower but still offer attractive returns for their level of risk.
A strong outlook for risk-adjusted returns across multiple sectors in 2025
Polar Capital Global Financials Team December 2024
Nick joined Polar Capital in September 2010 following the acquisition of HIM Capital, and is Portfolio Manager on the Polar Capital Global Financials strategy. Prior to joining HIM Capital, Nick worked at New Star Asset Management. While there he managed the New Star Financial Opportunities Fund, a high-income financials fund investing in the equity and fixed-income securities of European financials companies, which outperformed its benchmark index in all six years that Nick managed it. Previously, Nick worked at Exeter Asset Management and Capel-Cure Myers.
Nick Brind Portfolio Manager
George Barrow Portfolio Manager
George joined Polar Capital in September 2010 and is a Portfolio Manager on the Polar Capital Global Financials strategy. He has over 10 years’ experience analysing Europe, Asia and emerging markets. Prior to joining Polar Capital, he was an analyst at HIM Capital from 2008 where he completed his IMC.
Tom Dorner Portfolio Manager
Tom joined Polar Capital as a Fund Manager in the Financials team in December 2023. He is a co-manager on the Polar Capital Global Financials Trust, with Nick Brind and George Barrow. He joined from abrdn where he was a Senior Investment Director in the Developed Markets team and managed the abrdn Europe ex UK Income Equity Fund. He was responsible for analytical coverage of European financials and managed a number of other European investment funds during his nine years there. Prior to this, he was an analyst specialising in the European Insurance sector at Citi and Lehman Brothers in London.
Jack Deegan Portfolio Manager
Jack joined as an analyst in October 2017 working closely with Nick Brind on the Income Opportunities Strategy. He is a Portfolio Manager on the Financial Credit Strategy. Prior to this, he worked at DBRS Ratings, covering the Swiss market as a lead analyst, as well as UK, Dutch, Japanese and Australian banks. Before DBRS, Jack worked in the Markets Division of the Bank of England for four years, assessing financial institutions with a view to determining access to the Bank's Sterling Monetary Framework (SMF) facilities, and internal counterparty trading limits.
For the most part, 2024 was a rewarding one for healthcare investors on an absolute basis, although the sector underperformed the broader market, which favoured more consumer-driven sectors such as information technology and communication services. With sentiment towards healthcare weak, as illustrated by exchange-traded fund outflows, the contrarian setup feels incredibly compelling. Why? The sector continues to design and develop innovative medicines and technologies that are generating attractive commercial rewards, the demand for products and services continues unabated and the industry’s global reach should offer multiple avenues of long-term, durable growth. In terms of interesting, near-term opportunities, access and affordability, the reimbursement of value-added technologies and a potential recovery in China, all pique interest. The healthcare industry is incredibly innovative; however innovation without access is not sufficient, so addressing the challenges of access and affordability are of equal importance. The manufacture, approval and launch of safe and effective biosimilars will not only yield material savings and expand access to care, but also could offer durable growth prospects for the leading protagonists. Similarly, with artificial intelligence-enabled technologies, healthcare systems need to become comfortable with the quality of the data outputs and then introduce appropriate levels of reimbursement to drive broad utility. Emerging markets, especially China which could benefit from economic stimulus, are another area of potential growth and could see a renaissance in the coming months and years as the healthcare system finds the right balance between cost control, compliance and attracting innovative, best-in-class medicines. In conclusion, while the healthcare sector currently appears to be somewhat out of favour relative to the broader market, it is delivering high levels of innovation and has consistently shown the ability to generate strong revenue and earnings growth, regardless of the economic, political and regulatory environment.
Unloved maybe; under-appreciated, almost definitely
Polar Capital Global Healthcare Team December 2024
Gareth joined Polar Capital in 2007 to set up the Healthcare team. Prior to Polar Capital, Gareth worked at Framlington, where he began his career in investment management in 1999. Soon afterwards, he joined the Healthcare Team in 2001 and helped launch the Framlington Biotech Fund, which he managed from 2004 until his departure. Gareth studied biochemistry at Oxford, during which time he worked at Yamanouchi, a leading Japanese pharmaceutical company (later to become Astellas). As well as this, Gareth worked for the Oxford Business School and various academic laboratories including the Sir William Dunn School of Pathology and the Wolfson Institute for Biomedical Research.
Gareth Powell, CFA Head of Healthcare
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James Douglas, PhD Portfolio Manager
James joined Polar Capital in September 2015 and is a Portfolio Manager for the Healthcare team. Prior to joining Polar Capital, James worked in equity sales specialising in global healthcare at Morgan Stanley, RBS and HSBC. James also has equity research experience garnered from his time at UBS, where he worked as an analyst in the European pharmaceutical and biotechnology team. Before moving across to the financial sector, he worked as a consultant for EvaluatePharma.
Defensive qualities in an uncertain world
Polar Capital Global Insurance Team December 2024
Nick joined Polar Capital in September 2010 and is Portfolio Manager of the Polar Capital Global Insurance strategy (previously the Hiscox Insurance Portfolio strategy). Nick has worked on the strategy since 2001 when he joined Hiscox plc. He participated in the management buyout of Hiscox Investment Management in 2007 when the business was renamed HIM Capital Ltd. He has developed a broad knowledge of the insurance sector during this time and from working for the chartered accountants, Mazars Neville Russell, where he specialised in audit and consultancy work for insurance companies and brokers.
Nick Martin Lead Portfolio Manager
Overall, we believe our portfolio holdings are on track to deliver another excellent year of performance, posting a second consecutive year of book value growth of c20%. Looking ahead to 2025 we expect book value growth, the long-term driver of stock performance, to again be meaningfully higher than the c10-11% per annum historical average. Non-life insurers continue to benefit from the increase in bond yields since 2022 given their liquid and conservative investment portfolios. When combined with underwriting profitability, current earnings power continues to be the best we have seen for many years. After the sixth consecutive year of heightened catastrophe events, the reinsurance market had a hard reset at the 1 January 2023 renewals. Many capital providers reduced risk appetite at the same time as global inflationary pressure and rising catastrophe activity led to increased demand. Since then reinsurance pricing has risen substantially, particularly for catastrophe risk, with reinsurers materially increasing their retentions moving them away from the risk. This strong reinsurance pricing was maintained in 2024 and is expected to persist into 2025 given another year of significant catastrophes (e.g. Hurricane Milton). A tight reinsurance market further underpins underwriting discipline in the primary insurance markets. Non-life insurance remains a defensive sector in an increasingly uncertain world. The positive outlook for investment income combined with strong underwriting markets means our companies’ earnings power is materially above historical averages. We believe this is not properly recognised in company valuations. An expected mid/high-teen book value growth outlook implies cash-on-cash returns of c9.5%, materially higher than the c8% long-term average. We are excited about the Fund’s prospects for the years ahead.
Dominic Evans Portfolio Manager
Dominic joined Polar Capital as an investment analyst in October 2012 from KPMG and, since March 2022, is a Portfolio Manager on the Global Insurance strategy. Dominic previously worked as part of KPMG's insurance segment which he joined as a graduate trainee. At KPMG, he obtained broad experience working on a range of global insurance companies through roles within M&A and IPO due diligence, audit and markets. Prior to KPMG he worked for a year in corporate finance focusing on natural resource companies.
Global inflation has steadily declined over the past two years, with projections suggesting a return to target levels in 2025. The US, alongside other major economies, appears to have successfully navigated the path to a rare soft landing, balancing moderating growth and inflation without tipping into recession. However, uncertainty arising from the Trump administration’s return to power has heightened risks for international partners, including Japan, as trade policies and higher tariffs threaten global growth. Despite these external challenges, Japan’s 2025 outlook remains encouraging. Real wage growth is expected to turn positive over the year, boosting household purchasing power and reinforcing the economy’s ability to weather anticipated interest rate hikes early in the year. Domestically, Prime Minister Shigeru Ishiba faces significant hurdles, with the LDP (Liberal Democratic Party) losing its majority in October’s elections and its approval ratings at historic lows. To stabilise both the economy and his government, Ishiba has proposed a $141bn fiscal stimulus package, including raising income tax thresholds – a key concession to secure informal DPP (Democratic Party for the People) support. Japan’s stock market provides further grounds for optimism, underpinned by ongoing capital efficiency reforms that continue to deliver substantial shareholder benefits. Over the past two years, a weak yen and strong ETF demand have propelled large-cap equities. However, the primary beneficiary of improved capital efficiency is expected to be the more domestically-focused small-cap universe. We expect market leadership to rotate into this segment over the course of 2025. As corporate Japan prioritises shareholder returns and operational efficiency, our portfolio is strategically positioned to potentially capitalise on these transformative trends, underscoring our confidence in Japan’s long-term investment potential.
Strong corporate fundamentals and a resilient economy are key Japan strengths
Polar Capital Japan Value Team December 2024
Gerard joined Polar Capital in January 2005 and is Head of the Polar Capital Japan Team. He has been manager of the Polar Capital Japan Value strategy, formerly Japan Alpha strategy, since its launch in 2012. Prior to joining Polar Capital, Gerard worked in the Japanese equity team at Schroder Investment Management.
Gerard Cawley, CFA Portfolio Manager
Gerard Crawley, CFA Portfolio Manager
Chris Smith, CFA Co-manager
Chris Smith is Co-manager of the Japan Value strategy. He joined Polar Capital in January 2012 as a Japanese equity analyst, prior to which he gained five years’ experience working in accountancy. He holds a BSc (1st Class Hons) in applied accounting and is a chartered accountant and a CFA charter holder.
American businesses continued to demonstrate their ability to compound value for shareholders in 2024. We expect the portfolio to have grown underlying business value at a double-digit rate in 2024, continuing its record of double-digit compounding since launch. Although the higher level of interest rates has impacted – and will continue to impact – the economy, a peak in interest rates is a positive and the economic environment seems conducive enough for most businesses to continue to grow in 2025 and beyond. The political landscape has changed with a Trump clean sweep of all three arms of government. He brings some ‘tail risk’ but the election results will also more likely bring a tailwind for American businesses, at least in the short to medium term given the potential for lower taxes, fewer regulations and higher trade protection. On many measures, market concentration reached extreme levels in 2024, propelled by the exceptional operational and share price performance of a handful of very large world-beating American businesses. It is important to realise there is a lot more to investing in the US than the Magnificent Seven. We believe we can continue to identify many highly attractive compounding opportunities lower down the market-cap spectrum. Our active and focused multi-cap approach aims to take advantage of this diverse opportunity set. The vast home market, the number of high-quality companies, a spirit of entrepreneurialism and a business-friendly environment are just some of the enduring and positive features of investing in the many American companies that, in our opinion, make our investment universe so appealing. These foundations give us confidence that the portfolio will continue its record of double-digit compounding in business value long into the future.
Scale and breadth in the US point to continued compounding value for investors
Polar Capital North American Team December 2024
Andrew started his career in 1997 at Baillie Gifford, before spending seven years at Threadneedle where he managed the Threadneedle American Fund. He left to set up Polar Capital's North American team in 2011.
Andrew Holliman, CFA Lead Portfolio Manger
Andrew Holliman, CFA Lead Portfolio Manager
Richard Wilson, CFA Co-Portfolio Manager
Colm Friel, CFA Portfolio Manager
Richard started his career in 1999 at Mercury Asset Management, before working at Threadneedle for nine years managing institutional mandates on the North American equities team. He left to set up Polar Capital's North American team in 2011.
Richard Wilson, CFA Co-Portfolio Manger
Colm joined Polar Capital in June 2014 working on the North American Equities team. Prior to joining Polar Capital, Colm spent over 3 years as a global equity analyst at Seven Pillars Capital Management. Before that, he worked as an Economist for the Bank of England where he was responsible for analysis of banks and banking systems.
Colm Friel, CFA Portfolio Manger
The acceleration towards clean energy and electrification continues
Polar Capital Sustainable Thematic Equity Team December 2024
The energy transformation towards clean electricity provided a rather mixed picture in 2024. New deployments of renewable power saw delays due to higher interest rates and investors waiting for the US election result. In Europe, the electric vehicle (EV) and heat pump markets, having been strong growth drivers in previous years, suffered from the elimination of subsidies or inventory adjustments. On the other hand, the new power-intensive AI data centres have become a strong electricity growth driver in the US, resulting in significant activities for the buildout of grid infrastructure. The technology roadmaps of next-generation AI data centres foresee further strong increases in power needs for many years to come, which might become a serious bottleneck if not managed efficiently. Going into 2025, we expect a significant resumption of growth in EV sales in Europe against the backdrop of stricter CO₂ regulations. Albeit starting from a moderate level, we also expect the European electric heat pump sales to start growing again. At the same time, the buildout of the electrical grid including a massive deployment of battery storage solutions will continue unabated, with the order books of grid infrastructure suppliers filled for many years. A particular emphasis for us will remain technology companies helping to significantly reduce power consumption inside data centres. We also foresee a demand recovery for power semiconductors which could bode well for stocks next year as current valuations appear to be attractive on a mid- to long-term perspective. We therefore remain very constructive on the underlying themes reflected in the Fund’s investment strategy. Given the urge to accelerate the energy transition towards clean energy solutions and electrification, governments worldwide continue to explore the possibilities of reducing dependency on imported energy sources as well as fostering local manufacturing and power generation.
Thiemo is Head of the Sustainable Thematic Equity Team and Senior Portfolio Manager of the Polar Capital Smart Energy and Smart Mobility strategies. Before joining Polar Capital in September 2021, Thiemo was the Head of Thematic Investing Energy/Mobility/Materials of Robeco Switzerland Ltd, Zurich, being the lead manager of the RobecoSAM Smart Energy and the Smart Mobility strategies.
Thiemo Lang Senior Portfolio Manager
Strong fundamentals across the value chain
2024 was an inflection point for autonomous driving with, for the first time, robotaxi services being made available to the public and we expect the strong momentum to continue in 2025. The rollout of next-generation autonomous driving solutions based on end-to-end AI models promises to improve efficiency and responsiveness in handling ‘long tail’ scenarios. Furthermore, a federal framework for self-driving cars as planned by the new US administration could facilitate the introduction of more autonomous levels of automation as well as the broader penetration of robotaxi services. The growth of electric vehicles (EVs) in 2024 worldwide was nearly entirely driven by China, where EVs as a percentage of total cars sold reached 50%. This was in stark contrast to developments in Europe, where the sudden elimination of subsidies in certain countries significantly impacted EV sales. As a consequence, overall EV sales in Europe remained flat compared to the previous year, remaining at 22% of total cars sold. Against the backdrop of stricter CO₂ regulations, we expect a significant resumption of growth in 2025 in Europe in EVs. Combined with more moderate growth rates in China and the US, this should lead to a global EV market penetration of 31% in 2025, up from 25% in 2024. Overall, we remain very constructive on the Fund given the strong fundamentals of the smart mobility sector, with the entire transportation sector having engaged in an unprecedented transformation towards electrification. We will continue to invest across the entire smart mobility value chain, seeking exposure to market segments like EV manufacturers and suppliers, power semiconductors, batteries, hydrogen and EV charging infrastructure, sensor and data processing technologies for automated driving, shared mobility solutions or new developments in the area of driverless mobility.
Artificial intelligence will reshape the future
We believe artificial intelligence (AI) is the next general-purpose technology and a rare example of discontinuous technology change around which all industries will be reshaped. We have gained invaluable experience in AI having run a dedicated AI fund (more focused on beneficiaries in global equities) for the past seven years. An ‘AI lens’ framework for assessing the impact of AI is now central to our investment process and we believe understanding the impact of generative AI may become the most significant differentiating factor in fund performance for the next decade. Looking ahead to 2025, we expect strong demand for NVIDIA’s Blackwell processors, coupled with high-profile generative AI model upgrades and product releases, will drive further investor interest in AI-exposed stocks. Pro-business policies from a Trump/Republican/Musk government should ensure the US remains one of the stronger global economies and at the forefront of generative AI development, while regulation does not hinder AI progress. As AI adoption accelerates, supply constraints ease and the benefits of adopting generative AI likely become more obvious during the year, we expect to see a broadening in the technology market as a wider range of companies provide both the enabling technologies and benefit from the application of AI. As is typical during the early stages of new technology cycles, there will likely be periods of volatility as dramatic technology platform shifts of this magnitude ultimately drive significant changes in leadership (new winners built on new architectures) suggesting a positive tailwind for active management later in 2025. Our understanding of technology-enabled change and deep AI knowledge will be critical to navigating the considerable disruption ahead and unlocking the broader AI opportunity.
Ben joined Polar Capital in May 2003. He is Portfolio Manager on the Polar Capital Global Technology and Polar Capital Artificial Intelligence strategies. Prior to joining Polar Capital, Ben began his career in fund management at CMI, as a global technology analyst. He moved to Aberdeen Asset Managers in 1998 where he spent four years as a senior technology manager.
Ben Rogoff Partner
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Nick Evans Partner
Nick joined Polar Capital in September 2007. He was appointed Portfolio Manager of the Global Technology Strategy on 1 January 2008, and is also a Portfolio Manager on the Polar Capital Artificial Intelligence Strategy. Nick was previously head of technology at AXA Framlington where he was lead portfolio manager of the AXA Framlington Global Technology Fund and the AWF Framlington Global Technology Fund between August 2001 and July 2007. Both funds were rated five stars by S&P and received several S&P and Lipper performance awards. Nick graduated with a BSc (Hons) in Economics from University of Hull.
Ben joined Polar Capital in May 2003. He is lead manager on the Polar Capital Global Technology and Polar Capital Automation and Artificial Intelligence strategies. Prior to joining Polar Capital, Ben began his career in fund management at CMI, as a global technology analyst. He moved to Aberdeen Asset Managers in 1998 where he spent four years as a senior technology manager.
The outlook for the UK is turning more positive as we head into 2025. The UK is forecast to see continued interest rate cuts throughout next year, rates falling just below 4.25% from a peak forward rate of 6.5% in mid-2023. Also falling is the UK’s political risk premium that reduced gradually over 2024 thanks to a reasonably centrist government with a clear majority. This is at a time when many European peers face messy and polarised political elections. This combination of rate cuts and lower political risk premium should bring down the cost of capital throughout 2025, a prerequisite for the UK to rerate. There are risks, such as UK core inflation remaining elevated; however some forward-looking indicators point to waning wage pressures. The balance of probability suggests the UK will see a falling cost of capital throughout 2025, laying a much-needed foundation for a rerating. The UK is expected to be one of the fastest growing countries in the G7 in 2025, assuming the forecast UK income growth translates into spending growth rather than savings. With ONS data suggesting around half of excess savings are being used to reduce outstanding loans and debts, falling interest rates should naturally channel real income growth back into real income spending. In turn, this be positive for GDP growth and, more crucially, domestic corporate earnings in 2025. We will continue to seek to capitalise on mispricing across the UK market-cap spectrum investing in businesses that are not just cheap but also exhibit improving returns on invested capital and strong balance sheets.
UK set to rerate as cost of capital falls
Polar Capital UK Value Team December 2024
George joined Polar Capital in April 2017 to manage the Polar Capital UK Value strategy with Georgina Hamilton. Prior to this, George managed the CF Miton UK Value Opportunities Fund and the Miton Undervalued Assets Fund at Miton Group. Previously, George co-founded Matterley Asset Management in 2008 and was co-manager of the group’s Undervalued Assets Fund. Before founding Matterley, George was a Director of Equity Sales at Credit Suisse.
George Godber Portfolio Manager
Georgina Hamilton, CFA Portfolio Manager
Georgina joined Polar Capital in October 2016 to set up the UK Value Team. Prior to this, she was with Miton Group where she managed the CF Miton UK Value Opportunities Fund and the Miton Undervalued Assets Fund. Previously, Georgina was a lead analyst for the Undervalued Assets Fund at Matterley Asset Management. Georgina holds a double first in Biological Anthropology and Natural Sciences from Jesus College, Cambridge and is a CFA charterholder.
