James Carthew: Give this financials trust another five years (at least)
The Polar Capital Global Financials investment trust is revving up for its latest unlimited tender offer.
Last November, when I wrote a few articles speculating on the impact of a Trump presidency, one focused on the outlook for the financials sector. As Polar Capital Global Financials (PCFT) revs up for its latest 100% exit opportunity, I thought it might be worth looking at how things have played out and what the prospects are today.
Financials is one of those sectors that is too big for investors to ignore but comes with complexities that make it difficult for many of us to get to grips with. Fortunately, there are some expert teams out there that you can outsource the job to. The Polar team is one of these.
PCFT started life in 2013 and at that time it was billed as a recovery play. Financials stocks, banks in particular (which make up almost half the sector), had struggled in the wake of the global financial crisis. Much tougher regulations were restricting their ability to drive loan growth. However, balance sheets had been rebuilt and there was a good prospect of rising returns to shareholders.
Given the premise, built into the structure was an opportunity for shareholders to cash in their shares at NAV after seven years. Accordingly, on 12 March 2020, PCFT published a circular convening the meetings necessary to enable that. However, that coincided with the depths of the market panic around COVID. Worries about what lockdowns would do to economies and the knock-on effect that would have on debt defaults had wiped out any sector recovery. The PCFT board proposed adopting regular five-yearly 100% tender offers. My take at the time was that existing investors in PCFT should hold on for at least another five years to catch the eventual recovery.
That recovery came through quite quickly… read more here