During the six months to 31 May 2016 Polar Capital Global Financials generated a fully diluted Net Asset Value total return of -0.59%. The portfolio’s benchmark, the MSCI World Financials Index (Total Return with dividends reinvested), returned -0.84% over the same period. The price of the ordinary shares closed the period at 97.75p, a decline of 6.0% since the end of the last financial year on 30 November 2015. The Company’s share price total return (at -4.51%) lagged the portfolio’s net asset value performance as the share price discount widened from 6.7% to 10.5% at the end of the period. The Board has declared an interim dividend of 1.95p per share, payable on 25 August 2016 to shareholders on the register on 5 August 2016. This represents an increase of 5.4% over last year’s interim dividend of 1.85p.
The managers’ report says the performance of financial shares mirrored that of underlying equity markets with European and Japanese financials suffering sharp falls, the latter particularly so. Stock selection was a positive contributor to performance as were holdings in Asia and underweight positions in Japan versus their benchmark. Conversely an overweight position in European financials and underweight in real-estate investment trusts were a drag on performance.
Banks with significant investment banking operations, asset managers and other similar business, suffered sharp falls in share prices. Non-life insurance and real-estate investment trusts performed much better reflecting their lower sensitivity to the volatility but also in the latter instance as they are seen as beneficiaries of lower interest rates. Reflecting this four of the five best performing shares in the portfolio were stocks from these sectors, namely Chubb, Marsh & McLennan, Fortune Real Estate Investment Trust and Frasers Centrepoint Trust.
In Italy, four banks in particular performed quite badly – on fears about their non-performing loans. While PCFT didn’t hold these they do hold Intesa Sanpaolo and Banca Sistema both of which suffered not insubstantial falls in their share prices in part over concerns that they would be required to contribute to a bail-out fund for weaker banks. This concern subsequently proved well founded in respect of Intesa.
PCFT : Polar Capital Global Financials just ahead of benchmark