Polar capital Global Financials Trust says that its NAV total return for the year ended 30 November 2023 was -2.8%. This compares to a return on the MSCI ACWI Financials Index of +0.3%. Unfortunately, investors were hit by a widening of the trust’s discount to 12%, leaving them with a return of -7.5%. The discount move was in common with the investment companies’ sector in general. Investment companies with large holdings of illiquid assets such as real estate, infrastructure and private equity saw the biggest widening in discounts, but many investment companies with highly liquid underlying assets were also impacted.
The total dividend paid for the financial year under review was 4.55p per ordinary share, a modest increase on the previous financial year.
The company bought back a total of 16,532,313 shares, equivalent to 5.1% of the shares in issue at the start of the financial year, at an average discount of 10.5%. These buybacks had an accretive effect on the NAV of 0.76p per share. Following the period end, a further 2,311,282 ordinary shares were repurchased into treasury.
As announced in early 2023, John Yakas retired on 30 June 2023 but remains available to the team in an advisory capacity. On 1 December 2023, the team was joined by senior fund manager, Tom Dorner, a highly experienced financials investor.
Extracts from the managers’ report
Performance in the first half of the year was largely satisfactory but the second half was disappointing. While we had no holdings in Credit Suisse, First Republic Bank or Signature Bank and only a very small holding in Silicon Valley Bank (SVB) an overweight position in US banks was a headwind to performance. Overall stock selection during the period and the negative impact of gearing were the main drivers of underperformance.
More specifically, our bias to higher quality companies hurt performance as they lagged peers and our overweight position in defensive names towards the end of the year led to some underperformance on a sharp rotation and market rally. We realised a loss on a holding in CAB Payments, a cross-border payments company which listed in the UK in July. In our view, the company has a significant opportunity to disrupt the existing correspondent banking model for cross-border transfers. However, shortly after listing, the company issued a profits warning following unexpected central bank action in a number of its key markets. The share price fell sharply as a result. We expect it will take some time for management to rebuild credibility given the earnings downgrade so soon after the IPO and consequently the holding was sold after the period end.
PCFT : Polar Capital Global Financials affected by sector selloff