Thank you all for joining us this morning, for taking the time. As I said, I'm Iain Evans, newly appointed Chief Executive Officer at Polar Capital. Together with our CFO, Samir Ayub, we'll take you through the interim results for the six months to the end of September. Beginning with the highlights, please handle on page two. A supportive, a volatile start actually to the period in equity markets, but a positive end to the period led to assets being up 25% over that period, a record high of GBP 26.7 billion, despite outflows over the period. Those outflows, and please report, were concentrated in the first quarter, and redemptions slowed materially in the second quarter. We saw broad demand across a good number of our strategies and improving performance over the period.
As you can see on the screen there, adjusted diluted total EPS of GBP 0.219, and we are maintaining the dividend, the interim dividend at GBP 0.14, payable next January. I will start with business and strategy, talk briefly through performance and flows, and then I will pass to Samir, who's going to talk to the financials. Onto page four, please, Hannah. Continuity, cl arity, and growth. The leadership transition has been completed now over the summer. After 21 years at Polar Capital, I as far as having a deep understanding of our people, our clients, and our culture, which has enabled me to hit the ground running. We have already put in a focused leadership structure, and that is primarily to speed faster decision-making and increase accountability.
As you see on the slide there, middle of the slide, the vision is a very straightforward one, which is to be the active fund manager of choice, knowingly recognized for our distinctive high- conviction strategies. We do that through our distinct culture, which empowers independent thinking and high performance. Our ambition is to deliver diversified growth, and that's through differentiation and focus. We want to do that without diluting who we are. To the next page, please, Hannah, next slide, page five. We are coming from a position of strength. We start from a position of strength. We have a strong brand and reputation. We have a very strong culture and talent within the business, deep investment expertise, and specialist products. We have long-standing trusted client partnerships.
All of that is backed by a strong balance sheet, which gives us flexibility and optionality through the cycle. Stepping into the role, having stepped into the role, priorities, I think about two priorities here. One is to amplify our core strengths. When we think about our core strengths, I think about that across three things. Firstly, the product. From a product perspective, we need to scale our winners, take targeted action where improvement is needed through support, and then really focus and allocate our resources where we have capacity and a proven edge. In distribution, we are quite unique as a boutique in that we have an international footprint, and we look to grow in priority markets globally, deepen relationships where we are well established, and defend our market share, which is important to get sort of scalable net inflows over time.
Our culture, very briefly, we have a very special culture. I'm incredibly proud of it, having worked with the firm for 21 years. It's absolutely critical to me that we protect that culture. It's entrepreneurial, it's vibrant, it's collegiate, where people are empowered, trusted, and accountable. It's absolutely imperative that we maintain that. Secondly, we will continue to diversify the business selectively. We can do that through adding complementary differentiated investment teams. We can add strategies and vehicles to existing teams. It's absolutely critical that we have a compelling investment case where we do that and that there's clear client demand. Over the page, briefly now, I think we can't be complacent. We cannot afford to be complacent. We are well placed for the cycle ahead. As I've said already, we have those differentiated specialist strategies.
We have a boutique advantage. We are specialist, entrepreneurial. We can make fast decisions, which enables us to be agile. We do not have to be first mover, but we can be a fast follower. We have strong distribution footprint, particularly strong in the U.K. and Europe. Again, we are quite unique as a boutique in that nearly 40% of our total assets are from international clients, and we can continue to build on that. We have a strong base in the U.K. and Europe. I see a step change opportunity in the U.S., and we can build on our foothold in Asia. The digitalization of the business means that we can extend our reach very efficiently and actually compete with the larger groups. It levels the playing field. I have already mentioned culture and talent. It is very strong. It enables us to hire and retain high conviction teams.
On brand strength, we do have a very strong, trusted specialist brand, and that is recognized and valued by clients. Turning briefly to performance on slide eight, you can see here the performance of our UCITS product, which represents three-quarters of our total AuM. As you can see, relative to their respective Lipper Peer Groups, over one and three years, 2/3 of our funds are in the top two quartiles. Over five years, that rises to 85% of total funds. Since inception, 100% of our funds are in the top two quartiles. To report again on slide nine, please, Hannah, that performance, we saw a strong rebound over the six-month reporting period. That was led by Technology and their high conviction AI exposure. Healthcare and Biotechnology also bounced back strongly after a softer Q1, and we saw strong performance from our Smart Energy team.
Not all areas performed as strongly, though, with the exception of Japan, which was a strong performer. Our single country and regional funds are behind benchmark year to date. Our priority remains across all teams to deliver outperformance through the cycle, so targeted support and fixes where needed. What does that mean for flows over the period? If we take on slide 11, please, Hannah, a quick step back, it's worth highlighting, as I'm sure many of you are aware, that it continues to be a tough environment for active fund managers, particularly active equity. You can see in that chart on the top left, Active Equity globally has been in net outflow for seven of the last eight years, 2021 being the only exception, and 2025 looks to be tracking in a similar way.
In that context, Polar Capital has been relatively resilient, as you can see, and pleasingly, the run rate has been improving since 2023. With dispersion and volatility picking up in markets, which has historically benefited active high conviction strategies, we hope that the backdrop is improving. Over the page, or next slide, AuM, as I mentioned at the outset in highlights, all-time high of GBP 26.7 billion at the end of the period. With investment performance and strong markets, particularly in tech, we have had that technology tailwind that has continued to rise since. You can see there just over GBP 28 billion as at the 7th of November. Average AuM, which Samir will talk about, was up 4% over the period.
It is worth noting that following the Liberation Day announcements back in April and the sell-off in equities, we did see AuM trough at GBP 19.9 billion during the period. Samir will cover that in more detail. In terms of flows, onto the next slide. For the six-month period, we recorded net outflows of GBP 690 million, with the addition of a GBP 280 million one-off return of capital following an investment trust corporate action, which was related to our Global Financials Trust. The outflows were concentrated in healthcare, European and U.K. equity, which remained out of favor with investors. We also had outflows in emerging markets, which was driven largely by a separately managed account from an overseas investor closing. The run rate, though, improved significantly through the period.
The net outflows in Q1 were GBP 632 million and fell to GBP 58 million in the second quarter. That is an encouraging positive trend. I should highlight that visibility remains limited with volatility that we see. Redemptions are too volatile and concentrated in nature. Turning briefly to gross and net flows, what you can see on this slide is that, as I mentioned at the beginning, we have seen broad demand across our strategies, particularly strong in technology, healthcare, insurance, and emerging market stars. That strong gross interest has been muted by net outflows. Pleasingly, in the U.S., our International Small Company Fund, which we launched just over a year ago, has continued to see net inflow. That is really on renewed U.S. appetite for international equities, something that we have not seen probably for a decade.
In the U.K., and U.K. equities specifically, sentiment does appear to be improving, but caution is definitely persisting ahead of the November budget. We've seen that in, I do not know if you may have seen the data, record outflows in October in the U.K. In the current quarter, our flows are marginally negative, but we are seeing a rising level of investor interest and strengthening pipeline for potential inflows. Our focus simply is on turning that gross interest, which you see on the chart there, into durable net inflows. With that, I'll pass over to Samir to take you through the financials.
Thank you, Iain. Good morning, everyone. Usual set of slides covering our financial review for those of us that have followed us for a while. I'll spend a bit of time just explaining the P&L for anyone that is new to Polar.
First of all, average AuM over the six-month period, as Iain explained, up 4%. Underneath that, it's really been a story of two halves, really. Tariff and huge volatility in the market over Q1. It meant that average AuM was GBP 21.9 billion, so below both the second half of the last financial year, but also the first half of the comparative interim period. Really starting from a low base. The rebound in markets, but also good relative performance for our underlying funds, meant that we ended up with a Q2 average AuM of GBP 25 billion. That is very important because that is the average AuM that we're carrying into the second half of the financial year. I would explain some of the journey underneath that overall average AuM for the six-month period, up 4%, as I explained. Net management fee revenue was relatively flat at GBP 86 million.
The reason for that was net management fee yield coming in at 75 basis points at the end of the six months ended September. That was for exactly the reasons that we flagged at the start of the financial year. It was entirely anticipated, and we had signaled that we expected to do at least the 2 basis points that we have signaled to be the long-term run rate for fee compression. The reasons that we signaled were that we had renegotiated the fees on Polar Capital Technology Trust, which is a GBP 6 billion closed-ended vehicle. That comprises a good 50% of that 3 basis points margin contraction. The other dynamic that played out over the first half of this calendar year really was a sharp weakness in the US dollar, which has fed through to the top revenue line.
Obviously, there is ongoing underlying product mix changes, as we've signaled for a while. What does that mean for the fee yield over the full financial year through to March 2026? We expect that to be 75 basis points. This is not an acceleration. Over the medium to long term, we expect the fee margin contraction to continue at the 1-2 basis points that we've signaled for a while now. For the full year, we're expecting 75 basis points to be the number. As I've explained before, there are three key lines of profitability to the business. Core operating profit is net management fee revenue, less all direct costs. That core operating profit number was roughly GBP 25 million for the first six months of the year, down 8% period -on -period.
I'll spend a bit of time explaining why, but really two key factors. One is the fee yield compression that I just talked to. The other is doing a little bit more on operating costs, which I'll cover when we get to the cost slide. Core operating profit margin, 29% for the first half. As average AuM increases over the second half of the year and rises for the full financial year, all else being equal, we expect core operating profit margin for the full year to be around 30%-31%. Climbing back to where it was last year. The other line of profitability that we have for the business is a number of our underlying funds do carry performance fees. We have a line that is performance fee profits, which is performance fee-related revenues minus staff interests.
It is not unusual for that line to be nil at the end of the interim period because most of the, in fact, all of the performance fees crystallize at the end of December each year. Therefore, performance fee profits are a line and revenue that is effectively earned over the second half of each financial year. We signaled in early October with our Q2 release that performance fee profits in our underlying funds were tracking at roughly GBP 15 million. Where we stand today, that number still holds. We have done a little bit more through October and lost a little bit in early November. The GBP 15 million that we signaled at the start of October is still the number currently accrued. Obviously, performance fees are not crystallized until the end of December.
With just over a month and a bit to go, the final figure for that line will be released early January 2026 when we come out with our Q3 release. The final line on profitability is other income. That includes a component of bank interest income, which is fairly flat year on year. The bigger component is mark-to-market gains and losses sometimes on our seed portfolio, net of hedging costs. That is where we have done GBP 4 million through the first six months of this financial year. No exceptional items this year. Looking at the chart on the right-hand side, that is the spike under the exceptional items. When you compare period-on-period movements in profitability, there were GBP 6 million of impairment-related write-downs last year. No exceptional items this year, hence the slight spike year on year.
Putting everything together, adjusted, diluted total EPS of GBP 0.219. The dividend, as Iain explained, the board has maintained the first interim dividend at GBP 0.14, reflecting the confidence in the business and the strength of the balance sheet. Moving on to the next slide, we will take a look at the cost base in slightly more detail. As we have explained before, we try and manage the cost base over the long term and try and manage it sensibly. Starting with total operating and finance costs, they were down period-on-period 6%. A big component of that decrease was the fact that we had exceptional items last year, the impairment charges that I referred to. No exceptional items this year, hence that 6% decrease. Excluding exceptional items, total operating costs increased 3% period-on-period.
Unpacking that increase, looking at the biggest component of our costs, staff compensation costs, we are a people business ultimately, staff costs increased roughly 2% period-on-period. Not a large increase given the fact that actually the current six-month period includes the full cost of the International Small Company team that arrived over the second half of last year. Those comparative numbers are not in the comparative period there. We are obviously also carrying higher NIC costs given the changes announced recently. In effect, 2% increase period-on-period is a fairly well-managed increase to the overall compensation line we feel. The bit that we have done slightly more is other operating costs. I will come on to that on the next slide. Hannah, if you move on to the next slide, please. These are the non-compensation other operating costs.
These are fairly tightly controlled over the long term. GBP 1 million increase period-on-period, not significant given the overall mix of costs. A third of that GBP 1 million reflects the increase across professional fees, as stated on that slide there. That is effectively just keeping a bit of focus on the risk management framework of the business as it matures and increases and reflects an outsource move to internal audit services there. The remainder of the increase, 50% of that, reflects continued investment in digital content and U.S. marketing, which are really key in terms of growing the business over the short to medium term. Therefore, really important to continue investing in that. That covers the P&L. Moving on, we take a quick look at the balance sheet. Over the next two slides, please, Hannah.
First of all, cash and seed investments, roughly GBP 121 million combined. We do have a strategic streaming program, as I flagged before, which is really the R&D side of the business. We were supporting eight funds. As I flagged before, we do look to protect shareholders' funds in the seed portfolio by looking to hedge market risk wherever possible. Eight funds seeded and maintained at the end of that first interim period. The next slide shows a different view of that balance sheet strength. It sort of looks at our regulatory capital requirement. I'd be pleased to move on to the next slide for me. We take a look on that slide at regulatory capital, which is static period-on-period. The surplus capital, GBP 74 million over that regulatory requirement of GBP 26 million. A healthy and comfortable position to be in.
The framework for our use of capital, as I've explained before, four key components to our thinking. We will continue to see new product ideas, both as extension ideas of existing teams. Whenever we look to take on new teams and launch new products for them, that R&D side of the business will continue to absorb some capital as needed. We will continue to return funds to shareholders through our ordinary dividends. We will continue to maintain some of that balance sheet strength for difficult market cycles and to underpin confidence in the business. We will continue to look opportunistically, using the EBT, to dampen the dilutive impact of share incentive plans by buying into the EBT as and when. The mix of those four key areas of use of capital will change over time as the business grows and continues to mature.
We will look at other avenues of either returning capital or using that surplus as and when needed. That probably takes me on to that final piece, Hannah, moving on to that final slide. In terms of talking about the dividends, that slide really captures what has come before. To signal that the first interim dividend announced of GBP 0.14 at the half-year mark represents a payout ratio of 77% of adjusted core earnings. Effectively, as we look out to the end of the full financial year, really, we know that we have a good contribution coming, hopefully, from performance fee profits. Those crystallize at the end of December, as I say. We will know the final quantum in early January. Therefore, we expect to be in a position where earnings for this financial year are covered and that cover provides cover over that dividend.
That is a first order of priority as we think about dividends going forward. Achieve and maintain good line of visibility of earnings cover. Then look at other avenues of enhancing returns to shareholders by looking at that balance sheet strength and seeing if we need to add anything to the mix. In terms of summarizing the financial position, really, higher average AuM of GBP 25 billion as a starting point, as Iain flagged, absolute AuM of roughly GBP 28 billion early November going into that second half of the year provides a good underpin to core earnings. Good contribution coming through from performance fees, hopefully, over the second half of the financial year. That strong balance sheet really gives us confidence and security to ride through market cycles.
The financials of the business are in a good place and set us up nicely to think about the outlook and carry on that conversation with Iain.
Thank you, Samir. In terms of outlook, moving to slide 23, please, Hannah. I saw this talk about three of our key strategies where we've seen a resurgence in outperformance over the last, over the reporting period and rising investor interest and demand, early inflows. Firstly, Global Technology. As you can see on the chart here, as at the end of September, the fund had returned 42.2% well ahead of its benchmark. That momentum has continued since the end of the reporting period. That team is now currently almost 25% ahead of benchmark. That has really been based on them maintaining a very high conviction, AI-centric stance in the portfolio.
We believe we're at the end of the beginning of a multi-year cycle. Leadership is broadening beyond the Mag 7, as you will have seen. We strongly believe that now is when you need a more selective, active approach in the technology space. We've noted there are pockets of exuberance and investor views are bifurcating. We see that daily almost in the press. We do not see classic bubble signs. We do expect volatility. We do expect drawdowns. Overall, we remain very constructive. We're focused on earnings and cash flow back to winners in that sector. Similarly, in Healthcare, there have been several overhangs that have weighed on the next slide. Thank you, Hannah. There have been several overhangs that have weighed on the sector since November last year. In our view, all but drug pricing have largely cleared now.
There is tangible progress on drug pricing. After a sharp drop in sentiment, investors are reassessing valuations and fundamentals. As I said, we are all seeing rising interest and early inflows. We have gone away from a position of net outflows during the reporting period to net inflows in the current quarter, which bodes well. Thirdly, we went on to Smart Energy. Having been, I think, in the barren for some months, twelve months, interest in alternative energy is returning as AI systems scale and energy requirements rise dramatically. I think with hyperscale, CapEx high, and on-site power adoption rising, we see a multi-year power infrastructure cycle. The team's performed strongly this year, as you can see on the chart, up 34% year to date. Just as a reminder, the team joined us in September 2021, so three years ago from Robeco. Highly experienced team led by Thiemo Lang.
He is one of the most experienced investors in the sector. We are very constructive on the fund's themes and optimistic about the long-term potential within that portfolio. To go on to the final slide, please, Hannah. Just to summarize, the leadership transition has completed seamlessly. I am delighted to be in the position as CEO and to deliver a strong set of solid set of results. We closed the half, as Samir said, at record GBP 26.7 billion AuM. That has continued to rise. We are maintaining the dividend at GBP 0.14. As an active interest in active management returns, we are seeing that rising level of engagement and a strengthening pipeline for potential inflows. In the interim, I should re-emphasize that we do have low visibility on potential outflows. That is a headwind faced by the entire industry. Our plan is very clear.
We're going to scale where we're strongest, apply targeted fixes where needed, and diversify selectively and leverage our distribution. The environment is unpredictable. Our focus should be and remains on converting those healthy gross demand for our funds across the piece into durable net inflows. I think we're well positioned to scale through differentiation and to deliver long-term value for both our clients and for our shareholders. With that, I thank you very much for joining us. Thank you for your time. Happy to take any questions. Thank you both for that helpful presentation.
Yes, over to Q&A. How safe is the dividend in the next few years?
That's a very good question. I suppose I will answer that by saying we are just coming out of a period of the last two years where the dividend was uncovered, but marginally so.
Uncovered by roughly GBP 0.02 each of the last two financial years. Most of you will have heard me say before, as an indication, every GBP 0.01 of dividend that is declared and paid is roughly GBP 1 million in cash outlay. That gives you some sort of sense of balance sheet strength and what we would need to do if we were to look to maintain the dividend at any point in time. Ultimately, we recognize that the dividend is an important source of returns for a number of our shareholders. A number of them are that dividend is very, very important. In summary, it is front of our minds whenever the boards sit down and think about the dividend payout for any given financial year.
That is why having that balance sheet strength is handy during tough periods, where we can look to use it to support it. We have shown the ability and the intention to use that balance sheet to support the dividend if needed, as long as the numbers work. If that provides comfort, actually we have the ability to do it, we have the intention, and we have the history to do it as long as we can manage it sensibly. Sorry, Hannah.
Thank you. Can you elaborate on the low visibility for outflows and why that is a headwind for the entire industry?
I think if we go back to that chart, Hannah, where we showed outflows, particularly in active equity for seven of the last eight years, that has been a significant headwind.
I think that looks to be tracking in a very similar way this year. Those headwinds do not seem to have abated. I think it is that with uncertainties or macro uncertainty, you cannot have that visibility on flows or potential redemptions. I do think we are in a strong position because we are a niche provider. We have differentiated thematic strategies. We are seeing that demand coming back slowly. The greatest pressures are in, I think, regional strategies, where we are competing much more strongly with passive alternatives, cheaper passive alternatives. In terms of building long-term robust net flows, we have to deliver on performance.
Yeah. Okay. Are you seeing a drop in interest in the AI portfolio with recent strong contrarian views?
Great question. It is bifurcated. I mentioned the outflows being more acute in the U.K. I think that is symptomatic of budget uncertainty.
We have, as your clients may know, two core flagship funds in our technology team. One is an open-ended UCITS, and the other is a closed-ended investment trust. They are a similar size. The investment trust faces the U.K. market. The open-ended fund we sell globally. Interestingly, the open-ended fund has gone from net outflow in Q1 of the reporting period to net inflow in Q2. That demand has been coming from European and Asian clients. Interestingly, we have been consistently buying back stock in the investment trust, which I think is reflective of the greater caution amongst U.K. investors. We are being very clear with all of our existing clients and prospective clients saying we are constructive. We do not see classic signs of a bubble. Yes, expect volatility. We think this is the beginning of a multi-year AI cycle.
We acknowledge that views are bifurcating at this point.
They certainly are. Perhaps picking up on that point you made there around more outflows in the U.K., you said repeatedly in your statement about the opportunity that you see ahead in the U.S. Can you talk a little bit more about how you're going to evolve your distribution strategy and what the potential is for how meaningful is a step change in the U.S.?
Yeah, thank you, Hannah. If we look at our current international clients' exposure, as I said at the beginning, it's close to 40%. Now, 30% of that is continental European investors. About 6% is Asian. And only just shy of 2% is represented by U.S. investors currently. It is the largest market globally by magnitude. The opportunity is very clear.
The challenge for us, we've been building our distribution team there for five years now. We have a specialist, highly experienced team of five. The challenge has been the product that we've been selling into the U.S., international smaller company, globally emerging markets. Up until very recently, the demand for overseas equity has been very muted. U.S. investors have been very focused on their domestic market, equity market. Why wouldn't they be? The returns have been so strong relative to the rest of the world. I think the change of policy in the U.S., weakening dollar, U.S. investors are finally looking beyond their own shores. That plays to the product set that we are selling into that market. I'll give you one anecdote. I was at a conference in the U.S. in March 2024.
They asked the poll of the investor audience, what percentage of or where are you going to be putting client money from an equity perspective in the next 12 months? 100% was U.S. equity. Same conference in March this year, pretty much the same audience, same poll, 52% international equity. A real change in sentiment. We've not yet seen that sentiment turn into net fund flows. The engagement is rising, which is very encouraging.
Brilliant. Thank you. What is your exposure to crypto-focused shares, directly or indirectly?
Very minimal, yes. Very minimal, Hannah. Yes.
Thank you. Are there any trends in the commissions and fees payable that you can share with us?
Say that again, Hannah.
Any trends in the fee payables?
Yeah. Commissions and fees that you are currently paying.
I assume that's a reference to the line on the P&L. The relationship as a percentage of those commissions and fees payable, which effectively rebates in all money, are consistent with the revenue line period -on -period. The important number to look at and flag is what is the net management fee yield, which is 75 basis points for the six months. As I sort of said during the presentation, we expect that to be the number for the full financial year ending March 2026. Going forward, we expect the contraction to be no more than 1-2 basis points if we execute well and manage things well over the medium term. Obviously, there will be periods such as the one that we have just seen where we do a little bit more. Equally, there might be periods where actually that compression is lower because of the product mix changes.
Okay. Continuing on that theme, so you removed performance fees from the U.K. Value Opportunities Fund. Are you committed to maintaining performance fees on other strategies?
Yeah. I think the U.K. was quite specific. We are keen to, we have to acknowledge the market pressures, the specific market pressures. And they've been particularly acute in the U.K. and in U.K. equity. We want to maintain competitiveness for existing clients as well as prospective new clients. That was behind the decision to remove that from the U.K. Value Fund. Where we have only specialist strategies that are genuinely capacity constrained, we will maintain those performance fees.
Okay. Thank you. You've touched on the U.S. and the opportunities there, but you also mentioned Asia in your statement. Can you talk a little bit more about which strategies clients are looking at in that region?
The demand we've seen in Asia actually is for growth strategies and for thematics specifically. We've had presence on the ground in Asia now since the end of 2022. Yeah. Initially, our client base there was our global client base. It was the global financial institutions that you'll be familiar with, the UBSs, the JP Morgans. That business has built over time to encompass and include some of the regional banks, specifically in Singapore and Hong Kong. Yeah, the demand we see is just very aligned with our product set, which has enabled us to grow up to 6% of our assets now from that region.
Okay. Thank you. Share buybacks. Obviously, it's a successful strategy utilized by your investment trusts when trading at a discount. At what point does Polar consider it alongside in preference to dividends?
We are very much of the view that actually, when we look at what is happening in the U.K. landscape, they are becoming more of a feature in terms of returns to shareholders. There is absolutely a place for them. As I said a few moments ago, I think for us, though, coming out of two years of a slightly, albeit slightly uncovered dividend, which we felt we sort of managed the situation well. As a Board, the first order of priority is build earnings, cover back on the dividend. As this year, we expect to have slightly more cash flow from, say, performance fees. That will crystallize at the end of December. We can take stock and say, is there something interesting that we can do and add a buyback component? How meaningful can we make that? What are the right parameters?
Because ultimately, you need to make sure that you are delivering value for shareholders. Every price point is not the right price point. Arguably, the shares are undervalued at this moment in time. I think there is a place for them. The first priority is build earnings, cover back in, and then look to see whether we can introduce buybacks in a sensible fashion.
Thank you. A follow-up on redemptions, I think. Is there an opportunity to move more of your AuM into investment trusts, protecting you from UCITS net redemption risk?
That's a great question, Hannah. It's not mine.
I think many people are aware that the investment trust sector has been under increasing scrutiny and pressure in the last 12-18 months with the likes of Saber and other activist investors coming in. I think that's focused. It's definitely focused.
The sector has focused the minds of boards. We've seen the number of investment trusts drop in the last 12 months. We remain very much committed to the sector. Yes, I think we can grow. Three things I think you need in the investment trust sector. You need a relevant investment strategy mandate. You need performance always. You need scale. If I look at our technology trusts, that's nearly GBP 6 billion AuM, puts you 100 company. It has all three of those things. Our two other investment trusts in healthcare and financials have two out of the three because, arguably, we would like them to be bigger. Over GBP 500 million is minimum. We are actively looking where we can if there are opportunities to scale those, whether it's through share issuance or looking at other vehicles that we could potentially merge with.
There's been a recent corporate action for the BBH Healthcare Trust. We participated in that pitch. We weren't successful on this occasion. We are very open to those opportunities. We will pursue those opportunities where they're appropriate.
Okay. Another follow-up. How does the net fee yield on investment trusts compare to open-ended? How does that impact your appetite to pursue both?
Of course. Remember again that by far, as Iain's explained, the largest trust is our technology trust. The fee yield, quite simply on the trust combined, is bang in line with effectively our overall fee margin. They are not too dissimilar.
Okay. Thank you. Do you have investment in any military equipment, particularly drones or anti-drone defense companies? If so, which strategies would they occur in?
No overt sort of sub-strategies within our product range. The thinking on defense spending has changed over the last recent years. Not long ago, defense spending was not really very acceptable. There is some indirect linkage. They are not close to the details of the underlying tech portfolio, but there may be some exposure there. It is not significant enough to pop up on the largest holdings, etc. It is not an overt sleeve of the overall tech view.
Thank you. Circling back on to AI, if you see that bifurcation of views that you mentioned, are there other opportunities for additional more focused strategies within tech?
Yes. I think, Hannah, we will always look at those. Thematic investing is here to stay. The demand is clearly there. Demand for underlying themes is cyclical.
I think the more specialist you go, the more cyclical that demand can become. When we think about what we could do, extension strategies in tech, what is that cyclicality? What is the demand? Again, that's my earlier point. It's critical that there's a strong investment case. What we do not want to do is to launch a strategy because we're top of a cycle and we can raise $1 billion. We want to launch strategies because we genuinely believe there's an investment case and that we can make investors money. I mean, one which I think we have talked about, are talking about, is cybersecurity. It's front and center of everyone's mind, every business's mind. There's probably the number one risk. Beyond that, I think it very much is driven by the investment case.
Thank you. Given the demand for and performance of Polar's Asian growth strategies, is this a sector that could potentially tick the three boxes for an investment trust strategy?
Potentially, yes, I think. The challenge with investment trusts, there have been not sure I could even name a successful IPO in recent times. What you need to be sure again is there's sufficient investor demand because I don't think we wouldn't want to launch a new investment trust with less than GBP 500 million because you need that liquidity, particularly for the private wealth channel, the consolidation there, the growth there. Unless you are confident that you can raise at least that in capital, I don't think it's something we'd want to do.
That is it from questions from our audience today. That just leaves me to say thank you to them for attending. Thank you to you both for your time and presenting today.
Thank you, Hannah.
Thank you to the rest of the roadshow. We look forward to hearing an update in six months' time.
Thank you, Hannah. Thank you. Thank you to everyone for your continued support and questions. Yes. Thank you.