1) PCFT is a distinct proposition, managed by a well-resourced and experienced team.
Launched on 1 July 2013, Polar Capital Global Financials Trust (PCFT) is the only UK-listed investment trust solely invested in financials. PCFT has three co-managers: Nick Brind, George Barrow and Tom Dorner, who along with other team members Jack Deegan and Nabeel Siddiqui, have a combined 100 years of investment experience. The team aims to generate a growing dividend income and capital appreciation from an actively managed portfolio of financial stocks that is diversified by size, subsector and geography. Typically, 90% of the portfolio is invested in non-UK equities, and the managers can hold up to 10% of the portfolio both in unlisted companies and other closed-ended investment companies. The trust also maintains a fixed income allocation with no set minimum limit, allowing for a more unconstrained mandate. Performance is measured against the MSCI ACWI Financials Net Total Return Index.
2) The financials sector offers exposure to a wide range of businesses.
The sector is diversified across three main sub-sectors: diversified financials, banks and insurance. Companies range from those that have very limited sensitivity to economic events, such as insurance and payments, to those that are much more sensitive like banks. The financial sector provides exposure to well-known businesses, such as JPMorgan Chase & Co, American Express, MasterCard and Berkshire Hathaway in the US, and UniCredit, NatWest Group, London Stock Exchange Group, Deutsche Boerse and unlisted Lloyds of London in Europe. It is also exposed to faster-growing companies in emerging markets like ICICI Bank in India, Grupo Financiero Banorte in Mexico and Mercado Libre and Nu Holdings in Brazil.
PCFT is currently overweight US and European stock exchanges, insurance and online trading platforms as well as Indian, Latin American and European banks, with an in-line weighting to payments.
3) Financials offer diversification and exposure to secular themes.
Financial stocks offer diversification versus growth stocks, which outperformed during the extended period of ultra-low interest rates following the global financial crisis. As evidenced during COVID-19, balance sheets across the financial sector are extremely strong, which has facilitated a significant return of capital to shareholders via buybacks and dividends. However, PCFT’s team believes that the increase in profitability over the last few years is not reflected in valuations. There are also very attractive long-term growth trends within the financial sector including: increasing penetration of financial services in emerging markets, shifts in payment trends, deregulation and AI, which should lead to lower costs, the rise of FinTech and the democratisation of investing.
4) There are upcoming enhancements to the trust’s offering.
PCFT initially had a seven-year life but, in April 2020, shareholders voted to extend its life indefinitely subject to regular tender offers every five years at NAV minus costs. Following a review of the trust’s fee arrangements, a more attractive tiered structure will be introduced, with effect from 1 July 2025. The management fee will be 0.70% per annum up to £500m and 0.65% above £500m (the current fee is a flat 0.70% of NAV). Fees will be lower if PCFT trades at a discount to NAV as, for both tiers, the basis of calculation will be 50% of NAV and 50% of the lower of market capitalisation or NAV. The performance fee will be removed.
Also, at the April 2025 AGM, PCFT’s shareholders approved the board’s proposals for an enhanced dividend policy – in the absence of unforeseen circumstances, a regular dividend equivalent to approximately 4% of NAV per year (vs the current c 2.5% yield) will be paid quarterly. Dividends will be paid from revenue and distributable capital reserves when required, and the new policy is effective from the start of FY26 (1 December 2025).
