Polar Capital Financials Trust beats benchmark as banks do well – Polar Capital Financials Trust has published results for the year ended 30 November 2017. Over the period, the benchmark, the MSCI World Financials + Real Estate (RE) Index, rose by 14.2% but the fund beat this, delivering an NAV total return of 16.4%. The total dividend paid for the financial year under review was 3.9, an increase of 9.9%.
MiFID II
One of the primary requirements of MiFID II is the unbundling of research costs previously included in transaction commissions. To this end negotiations have been underway with the manager to ensure the Trust receives the best value from the manager and the performance of the Trust is not hindered by the reduction or removal of essential research. The board has agreed with the manager that bespoke, specialist research will be paid for by the Trust, subject to an agreed cap, while generic, waterfront research will be paid for in full by the manager.
Manager’s assessment of drivers of performance
At a sector level a larger weighting in banks was helpful but conversely overweight holdings in consumer finance stocks were a drag on performance. A large underweight to real estate investment trusts relative to our benchmark index was helpful to performance as real estate stocks lagged underlying equity markets. Our holdings in fixed income securities were also a positive contributor to performance, as yields fell sharply, despite the strong performance of underlying equity markets against which fixed income securities would normally lag.
At a stock level, the biggest contributors to performance were the Trust’s holdings in JPMorgan and Bank of America, both US banks, and ING Groep, BNP Paribas and KBC Groep, Dutch, French and Belgian banks respectively. However, we also benefitted from some of our emerging market holdings including Indiabulls Housing Finance, an Indian non-bank finance company, and Tisco Financial, a Thai bank focused on auto lending.
Conversely, the biggest detractors to performance were Novae Group, a property & casualty insurer, Synchrony Financial and Discover Financial Services, the latter two both US credit card lending businesses. Novae, where shares fell after reporting disappointing results at the beginning of the period, was taken over by Axis Capital, a US insurer, in October which reduced the negative impact from the fall. Small holdings in Alpha Bank, a Greek bank, and Cielo, a Brazilian payments business, also weighed on performance.
PCFT : Polar Capital Financials Trust beats benchmark as banks do well