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 31 March 2025
Market review
Markets saw a further rotation out of the US in March on the back of mixed economic data, while uncertainty around the US administration’s trade policy has led investors to question the notion of US exceptionalism. This has combined with a shift in fiscal stance by European governments which has improved sentiment towards the region, leading to a reallocation out of the US. History suggests it may be premature to view this as a reordering of global financial markets but, given the valuation premium that many US companies trade on, there was scope for a pullback following the post-election rally in the US.
While the sector gave back some of the previous months’ gains, global financials outperformed in March, continuing a trend seen over one, three and five years. Against this backdrop, which included the headwind of a 2.5% depreciation of the US dollar versus sterling, the Trust’s net asset value (NAV) fell 4%, broadly in line with its benchmark, the MSCI All Country World Financials Net Total Return Index.
European financials
Despite weakness towards the end of the month on tariff concerns, European financials (an overweight position for the Trust) continued to outperform in March with our holdings in the region’s banks, non-life insurers and diversified financials subsectors representing the largest positive contributors. A combination of factors has supported European financials, leading to a reassessment of the outlook for the sector. The recent fiscal policy shift in the EU (including the €800bn rearmament plan) is significant and supportive for the economic outlook, with higher interest rate expectations and a steeper yield curve (that shows the yield on bonds over different terms to maturity) feeding through into earnings upgrades. This has combined with positive operating trends and supportive commentary from governments and central banks around regulatory easing for European banks (in part, a response to comments from US regulators). While the discount to US peers has narrowed, European banks continue to trade at attractive valuations (8x12m forward earnings per share (EPS1) and a wide discount to the broader market (41%).
FlatexDEGIRO and Deutsche Boerse were among the largest relative contributors to performance during the month, reflecting the positive shift in sentiment in Germany.
FlatexDEGIRO is a leading online broker with a dominant position in its German domestic market. The business is well placed to capture the upswing in trading activity (February data showed an acceleration in daily average revenue trades to 22% year-on-year (y/y) with customers up 14% y/y to 3.2 million) while new product launches support the company’s medium-term growth ambitions (implying 21% net income compound annual growth rate (CAGR2) to 2027). On a longer-term basis, the potential for legislation to encourage private pension planning as part of German pension reform would provide a material support to growth that is not currently captured in management targets or consensus estimates.
European banks were broadly flat during March (in local foreign exchange rates) with PKO Bank, a Polish bank, a relatively strong performer. PKO Bank reported positive Q4 results (underlying returns on equity3 of 27.6%) during the month which led to upgrades to consensus earnings on stronger core revenues. A higher-for-longer interest rate environment is supportive of earnings while a pickup in investment activity is expected to feed through into stronger loan demand suggesting current guidance (+6% y/y loan growth in 2025) is conservative. An expected fade in litigation costs also supports the earnings outlook with a strong balance sheet that should translate into attractive capital returns (8-9% yield per annum for the next two years).
Investment banking
Optimism on the potential for a pickup in merger and acquisition (M&A) activity after the US election has faded as economic uncertainty linked to US trade policy has led to delays in decision-making until clarity emerges. A weaker-than-expected start to the year weighed on our investment bank holdings during the month while the associated delay in realisations also led to underperformance by alternative asset managers. Jefferies* saw selling pressure following its results, which missed expectations, albeit commentary highlighted a strong pipeline with deals postponed rather than cancelled. As Jefferies’ CEO Richard Handler noted: “There remains strong dialogue around potential investment banking transactions (capital raising and advisory) and our high-quality backlog continues to build. Its realisation depends on confidence and visibility reemerging, which may be beginning”.
Outlook
We have been encouraged by our holdings’ resilient operating trends as highlighted during Q4 results and management commentary at recent conferences. The combination of a higher-for-longer interest rate environment, the increased likelihood of regulatory easing and a shift in Europe’s fiscal framework (including an amendment to the rules on Germany’s constitutional debt brake) represent a marked change in the underlying investment environment within which the Financials sector looks relatively well placed.
However, events after month-end, with the reciprocal tariffs announced by President Trump on ‘Liberation Day’, have overshadowed any positive underlying operating trends for the sector, leading to a sharp fall in equity markets. The potential permutations are significant and unknowable in the short term but range from hope that common sense will prevent further self-harm and that a relatively quick conclusion to trade negotiations will occur, to a sharper slowdown and recession as other countries respond and corporates and consumers cut back materially on spending.
If the latter, then as we have highlighted previously, the financial sector remains well positioned, especially as we have not seen the excesses we saw in the buildup to the global financial crisis. Arguably we have the opposite, with household and corporate balance sheets being very strong. It is against this background that the sector has outperformed wider equity markets since the end of 2019, despite a global pandemic which led to a massive spike in unemployment, huge increases in inflation and interest rates and a war in Europe for the past three years.
* not held
1 Earnings per share; measures a company’s value by assessing how much money a company makes for each of its shares; earnings growth is not a measure of future performance
2 Compound annual growth rate shows the average rate at which an investment has grown over a specified period
3 A measure of financial performance calculated by dividing a company’s net income by the value of shareholders' equity
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
Historical Fact Sheets