Although it was the banks that triggered the financial crisis in 2008 and put the equity markets in a downward spiral, a diversified portfolio of financial stocks has proved a smart investment over the past decade.
According to experts, global financial stocks would continue to yield good investment returns as interest rates rise and profit margins rise.
A financial fund that entered the financial crisis of 2008 and was relatively unharmed – the need to change the man at the helm of the fund – is Jupiter Financial Opportunities.
In the past ten years it has yielded a return of more than 150 percent, more than that of the FTSE All Share Index.
Rival fund Polar Capital Global Financials Trust was not there when the banking crisis sent shock waves through the equity markets. Yet the investment credit, managed from offices within the screaming distance of Buckingham Palace, has grown in the same way.
Since the share price in the market has shifted in July 2013, its share price has risen more than 50 percent – and co-manager Nick Brind is convinced that more return on the investment can be made from a portfolio that sharply distorts banks and the US.
He says: Of course there are always concerns that markets are not going in the direction you expect. But fundamentally, the banking system of the world is better capitalized than ten years ago when the collapse of investment bank Lehman Brothers brought the financial systems of the world to its knees.
Optimistic: Nick Brind says the banking system of the world is now better capitalized
Whatever financial matrix you use, the financial sector is less risky than it was and therefore more attractive as an investment proposition. & # 39;
The initial launch of confidence was driven by the demand from asset managers for an investment vehicle that offered exposure to the shares of banks and insurance companies outside the UK.
Unlike most investment houses that offer all things to all investors, Polar Capital specializes in a number of important investment themes such as technology, healthcare and financial services. In addition to Polar Capital Global Financials, the £ 14 billion investment house also manages Financial Opportunities and Global Insurance plus Asian opportunities and income opportunities that all have a strong financial inclination.
Global Financials currently has more than half its assets, spread over 70 companies, in banks – with the largest geographical spread in the United States with just over 40 percent.
The trust has a few distinctive features.
Firstly, UK exposure to shares is limited to ten percent – mainly because that is what wannabe demanded of trust – as well as interests in unquoted companies. HSBC, OneSavings Bank and Standard Chartered are among the UK holding companies as well as Atom, the only unlisted shares.
Secondly, the confidence has an initial lifetime of seven years, which means that it could be liquidated in June 2020. A similar strategy was applied to Polar's Global Healthcare trust, which could be liquidated last year. But investors voted to continue it.
John Regnier-Wilson, head of selling investment funds at Polar Capital, says that the use of a predetermined fixed term is meant to ensure that those investors who want to sell after seven years can sell their shares close to the value of assets. – instead of selling when trading with a significant discount.
He adds: & # 39; We try to do the right thing by investors. The seven-year jubilee can be seen as a valve for the safety of the shareholders. & # 39;
With a further 19 months to go, the shares in Global Financials are currently traded at a discount of four percent.