Polar Capital Global Financials returned 22.2% over the year ended 30 November 2016 in NAV terms, a bit behind the benchmark (MSCI World Financials Index to 31 August 2016, and the MSCI World Financials Index + Real Estate, for the period 1 September to 30 November 2016) which returned 24.5%. Shareholders made 21.4% as the discount widened. The total dividend paid for the financial year was 3.55p, an increase of 9.9%.
The reasoning behind the apparent change in benchmark is that, at the end of August 2016 MSCI made a significant change to the structure of the MSCI World Financials Index by removing real estate from the universe of stocks comprising the index. At that time, real estate accounted for 18.3% of the MSCI World Financials Index.
They say that the performance of the Trust is disappointing in relative terms reflecting an underweight position versus the US (which represents approximately 50.0% of the index) and a number of their European smaller companies not performing well. The income requirement of the Trust means that the portfolio has always been underweight the US due to the lower payout ratios of US financials relative to, for example, UK and European financials. Performance was also impacted by a conscious decision since launch not to hedge currency risk where it deviates from the benchmark. Sterling’s weakness was a problem for a fund overweight the UK.
PCFT : Polar Capital Global Financials held back by US underweight