POLAR CAPITAL GLOBAL FINANCIALS TRUST: Make money with the big banks

The Polar Capital Global Financials investment fund offers investors the opportunity to make money with some of the world’s top financial brands, including JPMorgan, Mastercard, Visa and Warren Buffett’s Berkshire Hathaway.

Although this is a specialized fund that should make up only a small portion of a diverse investment portfolio, its appeal is obvious. With more than half of its assets in the United States, it offers an alternative route to the country’s booming stock market.

Its financial focus means it does not own any of the so-called ‘magnificent seven’ US growth stocks (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla) that have been largely responsible for boosting the US stock market each time. higher.

According to the fund managers, the relative valuations of many US financial stocks remain compelling compared to the broader US stock market, despite the recent rally. In other words, they are relatively cheap and have the potential to rise in price.

Additionally, the Global Financials investment team believes that incoming US President Donald Trump will help create a conducive economic and fiscal environment for finance-oriented companies (banks, consumer finance providers and asset managers). alternatives) obtain good results.

Lower business taxes, falling interest rates, lighter regulation of banks, modest inflation and an economy staying away from recession should mean higher revenues and profits for financial companies.

The trust, with a market capitalization of just under £600m, has more than half of its assets in the United States. It is run by a triumvirate of trustees (Nick Brind, George Barrow and Tom Dorner) brimming with experience in managing financial funds.

Brind says: ‘Stocks in the US are definitely in a sweet spot. Now it looks like the US economy will have a soft landing. If that’s the case, and all the other parts of Trump’s economic and financial puzzle come together, it bodes well for finances.”

The UK stock market-listed trust has 60 equity stakes plus a small exposure to fixed income shares (7 per cent) and two stakes in unlisted UK companies, Atom Bank and Moneybox.

Financial stocks are not homogeneous. Although the US bias dominates, the trust has a healthy collection of banks both in the UK (such as Barclays and NatWest) and in Europe (the Bank of Cyprus, Austrian bank Erste Group and Italy-based acquisitive UniCredit). Among its top 10 holdings is Indian bank ICICI.

This diversity is complemented by key positions in different parts of the financial sector.

Alternative asset managers – such as US-based Ares Management (which is active in the private equity, credit and real estate markets) – and payments companies are micro sectors where Brind and his team have an attitude positive.

The trust’s recent performance figures are strong. Over the past year, it generated a total return of 46 percent, above the average of its peer group in finance and financial innovation (28 percent).

However, it hasn’t always been easy. The trust suffered badly when the pandemic brought the global economy to a near standstill in early 2020. Its size was also reduced as a result of a scheme that allowed investors to sell their holdings at a value close to the value of the trust’s assets.

A similar process will take place next June, although investor appetite is unlikely to be as voracious given the trust’s performance figures look better and shares are trading at just a 4 per cent discount.

The trust pays a dividend equal to 2.3 per cent per annum and annual charges total 0.84 per cent (source: Hargreaves Lansdown). The stock market identification code is B9XQT11 and the symbol is PCFT.