Polar Capital Global Financials Trust plc (the "Company"): The Company is an investment company with investment trust status and its shares are excluded from the Financial Conduct Authority’s (“FCA”) restrictions on the promotion of non-mainstream investment products. The Company conducts its affairs, and intends to continue to conduct its affairs, so that the exemption will apply.
The Company is an Alternative Investment Fund under the EU's Alternative Investment Fund Managers Directive 2011/61/EU as it forms part of UK law by virtue of the European Union (Withdrawal) Act 2018.
The Investment Manager: Polar Capital LLP is the investment manager of the Company (the "Investment Manager"). The Investment Manager is authorised and regulated by the FCA and is a registered investment adviser with the United States' Securities and Exchange Commission.
Key Risks
- Investors' capital is at risk and there is no guarantee the Company will achieve its objective.
- Past performance is not a reliable guide to future performance.
- The value of investments may go down as well as up.
- Investors might get back less than they originally invested.
- The value of an investment’s assets may be affected by a variety of uncertainties such as (but not limited to): (i) international political developments; (ii) market sentiment; and (iii) economic conditions.
- The shares of the Company may trade at a discount or a premium to Net Asset Value.
- The Company may use derivatives which carry the risk of reduced liquidity, substantial loss and increased volatility in adverse market conditions.
- The Company invests in assets denominated in currencies other than the Company's base currency and changes in exchange rates may have a negative impact on the value of the Company's investments.
- The Company invests in a concentrated number of companies based in one sector. This focused strategy can lead to significant losses. The Company may be less diversified than other investment companies.
- The Company may invest in emerging markets where there is a greater risk of volatility than developed economies, for example due to political and economic uncertainties and restrictions on foreign investment. Emerging markets are typically less liquid than developed economies which may result in large price movements to the Company.
Important Information
Not an offer to buy or sell: This document is not an offer to buy or sell or a solicitation of an offer to buy or sell any security, and under no circumstances is it to be construed as a prospectus or an advertisement. This document does not constitute, and may not be used for the purposes of, an offer of the securities of, or any interests in, the Company by any person in any jurisdiction in which such offer or invitation is not authorised.
Information subject to change: Any opinions expressed in this document may change.
Not Investment Advice: This document does not contain information material to the investment objectives or financial needs of the recipient. This document is not advice on legal, taxation or investment matters. Prospective investors must rely on their own examination of the consequences of an investment in the Company. Investors are advised to consult their own professional advisors concerning the investment.
No reliance: No reliance should be placed upon the contents of this document by any person for any purposes whatsoever. None of the Company, the Investment Manager or any of their respective affiliates accepts any responsibility for providing any investor with access to additional information, for revising or for correcting any inaccuracy in this document.
Performance and Holdings: All data is as at the document date unless indicated otherwise. Company holdings and performance are likely to have changed since the report date. Company information is provided by the Investment Manager.
Benchmark:The Company is actively managed and uses the MSCI ACWI Financials Net TR Index as a performance target and to calculate the performance fee. The benchmark has been chosen as it is generally considered to be representative of the investment universe in which the Company invests. The performance of the Company is likely to differ from the performance of the benchmark as the holdings, weightings and asset allocation will be different. Investors should carefully consider these differences when making comparisons. Further information about the benchmark can be found www.mscibarra.com.
Third-party Data: Some information contained in this document has been obtained from third party sources and has not been independently verified. Neither the Company nor any other party involved in compiling, computing or creating the data makes any warranties or representations with respect to such data, and all such parties expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any data contained within this document.
Country Specific Disclaimers
United States: The information contained within this document does not constitute or form a part of any offer to sell or issue, or the solicitation of any offer to purchase, subscribe for or otherwise acquire, any securities in the United States or in any jurisdiction in which such an offer or solicitation would be unlawful. The Company has not been and will not be registered under the United States Investment Company Act of 1940, as amended (the “Investment Company Act”) and, as such, the holders of its shares will not be entitled to the benefits of the Investment Company Act. In addition, the offer and sale of the Securities have not been, and will not be, registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”). No Securities may be offered or sold or otherwise transacted within the United States or to, or for the account or benefit of U.S. Persons (as defined in Regulation S of the Securities Act). In connection with the transaction referred to in this document the shares of the Company will be offered and sold only outside the United States to, and for the account or benefit of non-U.S. Persons in “offshore- transactions” within the meaning of, and in reliance on the exemption from registration provided by Regulation S under the Securities Act. No money, securities or other consideration is being solicited and, if sent in response to the information contained in this document, will not be accepted. Any failure to comply with the above restrictions may constitute a violation of such securities laws.
Further Information about the Company: Investment in the Company is an investment in the shares of the Company and not in the underlying investments of the Company. Further information about the Company and any risks can be found in the Company’s Key Information Document, the Annual Report and Financial Statements and the Investor Disclosure Document which are available on the Company's website, found at: https://www.polarcapitalglobalfinancialstrust.com
Fund Manager Commentary As at 28 February 2025
Market review
European financials led the sector higher in February as they rose 6.7% on the back of strong results and better economic data. The region continued to benefit from being seen as the major beneficiary of any easing in the Russia/Ukraine war, notwithstanding the impact of the spat between Presidents Zelensky and Trump in the White House. Conversely, US financials were lower over the month with economic data softer and sentiment impacted by the uncertainty around any effect of proposed tariffs by the US on major trading partners and their likely response. Asian financials fell slightly despite China bucking the trend and seeing modest gains. Against that background, the Trust’s net asset value rose 0.9% outperforming the benchmark, the MSCI All Country World Financials Index, which rose 0.4%.
European banks and Italian bank M&A
AIB Group, Ireland’s largest bank, and UniCredit, Italy’s second largest bank, were the biggest relative contributors to performance over the month as European bank shares were the driver of the very strong performance of European financials. Results continued to show that the sector has been much more resilient to interest rate cuts while the anaemic growth in the likes of France and Germany has not led to banks needing to raise provisions for potential loan losses. Consequently, the sector has continued to see further positive earnings revisions. Unsurprisingly, capital remains strong which, coupled with very positive profitability metrics, underpins our view that the capital return story via share buybacks and dividends is well underpinned.
Chuck Prince, the former CEO and Chairman of Citigroup, gained infamy for his 2007 quote in an interview that, “When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.” Albeit against a background very different to that witnessed in the years preceding the global financial crisis and backed up by very strong balance sheets, Italian banking executives have been frantically looking for dance partners to join the party.
Consequently, BPER Banca*, Italy’s fourth largest bank, with significant market share in the Emilia-Romagna region and total assets of €141bn, is the latest to join the M&A fray. In February, it announced an all-share offer for Banca Popolare di Sondrio*, the Lombardy-based lender with total assets of €57bn. This deal follows a flurry of recent activity in Italy, with Monte dei Paschi di Siena’s* all-share offer for Mediobanca* and UniCredit’s offer for Banco BPM*. With UniCredit also announcing that it had taken a stake in Generali*, we believe we are still in the early stages of a large wave of consolidation in the Italian financial sector.
US alternative asset managers
Our holdings in US alternative asset managers, Ares Management and Blackstone, were a drag on performance during the month as they suffered a sharp fall in their share price as the combination of very full valuations and an expectation that the flywheel of M&A activity, and therefore higher realisations (the conversion of assets into cash) were being pushed back given the uncertainty in markets, would pressure earnings. We significantly reduced our exposure to the sector at the end of 2024, selling our holding in KKR while reducing our holding in Blackstone. Nevertheless, we continue to like the sector as we believe it has compelling structural tailwinds, but felt there was a risk of a pullback in share prices in the short term and there would be a better opportunity to increase exposure.
Ares Management, which is predominantly a private credit asset manager so does not benefit from the tailwind of higher equity markets that a traditional asset manager benefits from, grew assets under management by 15.7% in 2024, highlighting the strength of those tailwinds. However, in the short term other factors come into play. CEO Michael Arougheti, highlighted the key one on the company’s earnings call: “We believe that there is a meaningful amount of pent-up demand to transact, driven by the need for private equity exits. As an illustration, there's over $3trn of unrealised value across 28,000 global unsold companies in global buyout portfolios and more than 40% of these investments are four years or older". As and when this is unlocked, it will be a big boost for not only alternative asset managers but investment banking activity to which we are also exposed.
Fidelity National Information Services
Fidelity National Information Services (FIS) was the biggest drag on absolute performance during the month. FIS is one of the largest providers of critical banking software to banks globally and fell sharply on disappointing earnings reflecting a delay in a number of key contracts starting testing, weaker cashflow and the reversal of a termination fee due to the failed takeover of a client, a positive as the client will now not be lost. We had a call with management on a US public holiday which highlighted their willingness to reach out to shareholders and repair the damage. With very little impact on earnings expectations, we have for now decided that it was a confluence of factors outside the control of management and the share price fall was an overreaction so have retained a holding.
Enhanced dividend
The Trust’s results were announced in February and in them the Board proposed the adoption of an “enhanced dividend” policy under which it will aim to pay, in the absence of unforeseen circumstances, a regular dividend equivalent to approximately 4% of its net asset value in a given year, with dividends paid quarterly as opposed to the current policy of semi-annually. Dividends will be paid from available revenue and topped up, if necessary, from distributable capital reserves. This compares to the dividend yield on the Trust’s ordinary share, over the past year, of 2.3%.
The proposal is subject to shareholder approval at the forthcoming Annual General Meeting in April, further details of which can be found in the Annual Report available on the Trust’s website. While the underlying dividend yield of the sector is around 2.8%, if share buybacks of the underlying companies in the sector were taken into account the total yield being returned to shareholders would be well in excess of the 4% proposed. Furthermore, we see this as increasing the flexibility of managing the portfolio to maximise total return.
* not held
Nick Brind
Nick’s experience comes from running specialist and generalist funds with UK and global mandates for the past 25+ years
George Barrow
George is a specialist financials fund manager as well as an analyst across Europe, Asia and emerging markets
Tom Dorner
Tom joined Polar Capital in 2023 and is the analyst responsible for the global insurance sector
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