First Pacific Advisers, the adviser to the FPA funds, has reached an agreement with London-based Polar Capital. Under the agreement, FPA’s International Value and World Value teams – headlined by Pierre Py and Greg Herr – will operate as Phaeacian Partners, an independent subsidiary of Polar Capital. The transition from FPA to Polar would play out over six to nine months.
Phaeacian? Mysterious race, much discussed in Homer’s works. Highly advanced, great seafarers, generally hospitable. Their king was a grandson of Poseidon, Greek god of the seas.
The most visible manifestation of the agreement will be the move of FPA International Value (FPIVX) and FPA Paramount (FPRAX) to Polar. In sum, about a billion in assets will make the transition: three pooled vehicles and three institutional segregated accounts.
Two questions: why the sale? And, what does it mean to you?
Why? In a word, growth. FPA’s absolute value strategy makes a world of sense to a world of investors – folks from western Europe to Asia – while being only modestly attractive to US investors. FPA recognized that it did not have the global network necessary to promote and distribute it widely in those markets. Polar did.
FPA has faith in both the team and the strategy. Under the terms of the agreement, FPA will continue to benefit from a revenue-sharing agreement so that the team’s Polar success will help strengthen FPA.
So? Polar’s emphasis is on the institutional marketplace, so future Polar products are not likely to be accessible to individual investors. As an illustration, Polar is bringing its successful emerging markets strategy to the US in the form of Polar Capital Emerging Market Stars Fund which will have a $1 million minimum. The folks at FPA anticipate that International Value and Paramount will continue to be accessible to US retail investors, albeit with new names and tickers. They also anticipate that AUM growth would translate into lower expense ratios for the funds.
Bottom Line. We agree with FPA’s core conclusions: very good strategy, very good team. We wish the guys well in their new domicile and continue to recommend the funds to value investors with an interest in global exposure.
